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Ascott Residence Trust Reports Distributable Income Of S$32.6 Million In 1h 2020

July 29, 2020 Serviced Apartments No Comments Email Email

Ascott Residence Trust (ART) reported a distributable income of S$32.6 million in 1H 2020 amidst the COVID-19 pandemic. This was 56% lower compared to 1H 2019. It included a S$5.0 million top-up to mitigate the impact of COVID-19 on distributions and to share past divestment gains with stapled securityholders. Distribution per stapled security for 1H 2020 is 1.05 cents, a 69% year-on-year decrease compared to 3.43 cents in 1H 2019.

ART’s revenue declined by 16% to S$208.5 million while gross profit declined by 28% to S$88.6 million. This was mainly attributed to the decrease in contributions from the divestment of Ascott Raffles Place Singapore and Somerset West Lake Hanoi and lower revenue from the existing portfolio. The decrease was partially offset by the additional income contribution from ART’s successful combination with Ascendas Hospitality Trust in December 2019, and the acquisition of Quest Macquarie Park Sydney and Citadines Connect Sydney Airport in February 2020 and May 2019 respectively. In 1H 2020, ART’s revenue per available unit (RevPAU [1]) decreased by 52% to S$70.

In 1H 2020, 21 of ART’s properties were temporarily closed either due to government mandate or weak accommodation demand. However, lower operating costs from cost containment and government support measures further contributed to offset the decline in gross profit. While 12 properties have since reopened and seven more are scheduled to reopen in 3Q 2020, operators and lessees of ART’s properties continue to face operating challenges brought about by the COVID-19 pandemic.

Mr Bob Tan, Chairman of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART), said: “ART’s financial performance in 1H 2020 has been adversely impacted by global lockdowns and movement restrictions as a result of the COVID-19 pandemic. However, ART’s geographically diversified portfolio and focus on the long-stay segment have helped to buffer some of the impact. ART remains in a strong financial position. We will continue to strengthen ART’s financial position through active portfolio management and capital recycling, and exercise prudence in managing our capital and cashflow. ART’s inclusion in the FTSE EPRA Nareit Global Real Estate Index [2] (Global Developed Index) in June 2020 has also raised ART’s profile as the proxy hospitality trust in Asia Pacific, broadening ART’s reach amongst global investors and increase our trading liquidity. ART remains committed to delivering sustainable, long-term value to our stapled securityholders.”

Ms Beh Siew Kim, Chief Executive Officer of the Managers of ART, said: “We expect recovery of the hospitality industry to be led by the domestic, leisure and free independent travel segments and ART’s properties are well-placed to cater to the needs of these first travellers. Together with our partners, ART’s immediate focus is to capture accommodation demand from these segments and continue to source for alternative business opportunities. We are also taking steps to future-ready our properties. For example, leveraging the ‘work-from-home’ trend, we have redesigned some of our apartments and introduced daytime work-stay packages to cater to guests who need a productive and conducive environment to work remotely. We have also leveraged technologies to optimise operational efficiencies and minimise physical contact for the safety of our guests.”

“Given the risk of resurgence of COVID-19, we expect the RevPAU of our properties to remain under pressure in the near term. Nonetheless, ART remains well capitalised with sufficient liquidity to navigate through the crisis. We will assess the level of distribution payout to stapled securityholders holistically, taking into consideration market outlook and past divestment gains that ART has unlocked,” added Ms Beh.

ART has a total of approximately S$620 million in cash on-hand and unutilised credit facilities as at 30 June 2020. In mid-July 2020, ART received S$163.3 million from the completion of the sale of partial gross floor area of Somerset Liang Court Singapore and has also secured an additional S$60 million in credit facilities. Where applicable, loan covenant waivers have been granted by ART’s lenders, and steps have been taken to manage expenses, including implementing cost containment measures at ART’s properties and deferring all non-essential capital expenditure. Assuming a worst-case, zero-income scenario, ART has sufficient liquidity to cover approximately two years of fixed costs.

ART has entered into two conditional agreements in July 2020 to divest Ascott Guangzhou in China and Citadines Didot Montparnasse Paris in France for a total of about S$191.4 million, at 52% and 69% above their respective book values. These divestments have further strengthened ART’s financial position. ART is expected to realise total estimated net gains of about S$23.2 million upon the completion of both transactions. Redevelopment works at the site of Somerset Liang Court Singapore will commence soon. The brand new Somerset serviced residence with a fresh 99-year lease is expected to open in 1H 2025. lyf one-north Singapore, ART’s first coliving property, is also on track to open in 2021.

ART’s effective borrowing cost remains low at 1.8% per annum. ART’s gearing of 36.1% as at 30 June 2020 is well below the 50% gearing threshold set by the Monetary Authority of Singapore.

1H 2020 1H 2019 Variance
(%)
Revenue (S$ million)  208.5 248.4 -16
Gross Profit (S$ million) 88.6 122.3 -28
Income Available for Distribution to Stapled Securityholders

(S$ million)

 32.6 74.6 -56
Distributable Income

(S$ million)

32.6(a) 74.6 -56
Distribution Per Stapled Security (DPS) (cents) 1.05 3.43 -69
Revenue Per Available Unit

(RevPAU) S$/day

70 146 -52

(a) In view of the uncertainty surrounding the COVID-19 situation, ART has retained approximately 15% (S$5.0 million) of its income available for distribution to stapled securityholders, as rent negotiations are still on-going and ART may grant further rental deferment and/or waivers to support some tenants through this challenging period.

To mitigate the impact of COVID-19 on distributions and to share past divestment gains with stapled securityholders, ART has included a S$5.0 million top-up in the 1H 2020 distribution.

The eventual distribution of the 15% retained amount will depend on the final amount of income available for distribution based on the financial results for the full year ending 31 December 2020. For the avoidance of doubt, ART will maintain its distribution policy of distributing at least 90% of its income available for distribution to its stapled securityholders.

Distribution and Book Closure Date

  • ART’s distributions, made on a semi-annual basis, are as follows: 
Distribution For 1 January 2020 to 30 June 2020
Distribution Rate 1.047 cents per stapled security
Book Closure Date 6 August 2020
Payment Date 28 August 2020

For ART’s 1H 2020 financial statement and presentation, please visit: www.ascottresidencetrust.com.

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