OUE H-Trust posts 6.3% fall in Q1 DPS to 1.18 Singapore cents

OUE Hospitality Trust (OUE H-Trust) will pay out 1.18 Singapore cents in distribution per stapled security (DPS) for the first quarter, down 6.3 per cent on the year before.

Net property income was down by 2.2 per cent to S$27.7 million for the three months to March 31, the manager reported in unaudited financial statements on Thursday.

Gross revenue declined by 3 per cent to S$31.7 million, dragged down by lower master lease income from Mandarin Orchard Singapore, which was thrust into the spotlight in late-2018 when a string of severe food poisoning incidents forced the hotel's main ballroom to close.

The hotel "recorded lower food and beverage sales due to lower banquet sales following the suspension of services of the Grand Mandarin Ballroom and its attached kitchen, which was partially mitigated by compensation received", said the manager.

It added that other food and beverage outlets at the hotel also reported lower sales.

OUE H-Trust, a stapled group comprising OUE Hospitality Real Estate Investment Trust (OUE H-Reit) and the dormant OUE Hospitality Business Trust, is angling for a merger with OUE Commercial Reit, with plans for the move first announced on Apr 8.

The group was let down by its hospitality segment, which forms the bulk of the portfolio.

Revenue per available room (RevPAR) at the 1,077-room Mandarin Orchard was down to S$211 from S$232 before on lower average room rates and lower corporate and wholesale demand.

Master lease income for both hotels is pegged to a share of the operating revenue and profit, subject to minimum rent, with the Crowne Plaza Changi Airport hotel contributing only minimum rent to OUE H-Trust because its master lease income fell below the minimum rent.

The 563-room Crowne Plaza's RevPAR ticked up to S$185 against S$184 in the year prior.

Meanwhile, OUE H-Trust's retail segment, which pulls rental and other income from the Mandarin Gallery mall in Orchard Road, next to the Mandarin Orchard, posted mild increases in its contributions to turnover and net income, with help from higher average occupancy.

Mandarin Gallery reached full committed occupancy as at March 31 - up from 99.1 per cent as at Dec 31, 2018 - with weighted average lease expiry of 2.6 years by net lettable area.

Earnings per stapled security slipped to 0.94 Singapore cent apiece from 1.07 Singapore cents before.

Lee Yi Shyan, chairman of the manager, said in a statement that "intra-Asia travel is expected to benefit Singapore's tourist arrival", while new tourist offerings and investments in the integrated resorts will add to Singapore's attractiveness in the medium to long term.

These factors will support the hospitality sector in Singapore, said Mr Lee, who is also MP for East Coast GRC.

Isaac Chen, who is acting chief executive of the manager, noted that "the trading environment for the hospitality sector was soft in the beginning of 2019", but added: "The strategic location of Crowne Plaza Changi Airport places the hotel in a good position to benefit from the expansion and enhancement works at Changi Airport and the newly-opened Jewel."

OUE H-Trust closed at S$0.72 on Thursday, up half a cent or 0.7 per cent, before the results were announced.