Singapore has also announced the further expansion of its vaccinated travel lane (VTL) scheme.
The VTL scheme will extend to more cities in Malaysia, Indonesia and India to improve Singapore’s air hub connectivity.
There are also plans to launch new VTLs with Greece and Vietnam.
This news must come as a breath of fresh air to the troubled tourism and hotel sectors.
The hospitality REIT sub-sector should enjoy not just higher occupancy rates, but also report better revenue per available room (RevPAR), a key metric that measures hotel room rates.
We scoured the REIT landscape and found two hospitality REITs that recently upped their distribution per unit (DPU).
Both are also paying out a dividend yield above 4%.
Ascott Residence Trust (SGX: HMN)
Ascott Residence Trust, or ART, is the largest hospitality trust in Southeast Asia with total assets under management (AUM) of S$7.7 billion as of 31 December 2021.
The trust’s portfolio consists of 93 properties housing more than 17,000 units in 43 cities across 15 countries.
ART is anchored by a strong sponsor in CapitaLand Investment Limited (SGX: 9CI).
The trust posted a respectable set of earnings for its fiscal 2021 (FY2021).
Revenue increased by 7% year on year to S$394.4 million while distributable income surged by 46% year on year to S$137.3 million.
The better performance can be attributed to higher revenue from its existing portfolio and contributions from the acquisition of student accommodation assets in the US as well as rental housing properties in Japan.
Distribution per stapled security (DPSS) jumped by 43% year on year to S$0.0432.
At ART’s last traded price of S$1.06, the trailing distribution yield stood at 4.1%.
Revenue per available unit (RevPAU) has been increasing over six consecutive quarters, with the latest fiscal 2021’s fourth quarter seeing a 24% quarter on quarter RevPAU rise.
For FY2021, RevPAU was up 17% year on year to S$69.
ART has been busy reconstituting its portfolio since January 2021 to make it more resilient to economic swings.
It has made S$780 million worth of acquisitions in housing and student accommodation last year, and its medium-term target allocation in longer-stay accommodation assets has been raised from 15% to 20% of the portfolio to 25% to 30%.
As of 31 December 2021, ART’s gearing stood at 37.1% with a low effective cost of debt of just 1.6% per annum.
Including cash on hand and available credit facilities, the trust has around S$1 billion in available funds for further acquisitions.
Far East Hospitality Trust (SGX: Q5T)
Far East Hospitality Trust, or FEHT, owns a portfolio of 13 properties comprising 3,143 hotel rooms and serviced residence units valued at S$2.6 billion as of 31 December 2021.
For FY2021, FEHT reported flat year on year gross revenue of S$83.2 million.
Net property income inched up 4.1% year on year to S$75.2 million while DPSS rose by 9.1% year on year to S$0.0263.
FEHT’s units provide a trailing distribution yield of around 4.5%.
Similar to ART, FEHT saw its hotel RevPAR jump by 28.8% quarter on quarter to S$67 in the fourth quarter of 2021.
The rise was due to the loosening of travel restrictions and an increase in domestic staycations.
The serviced residences RevPAU surged by 23.4% quarter on quarter to S$158.
During FY2021, the REIT divested Central Square at a more than 70% premium to its purchase price and will recognise a net gain of between S$112 million to S$130 million (dependent on whether FEHT will receive an incentive fee by end-2023).
The trust’s aggregate leverage stood at 38.3% with an average cost of debt of 1.9%.
FEHT believes that its high fixed rent component within its master leases provides god downside protection and the trust is also well-supported by its sponsor, Far East Organisation.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
