This week, another few real estate investment trusts (REITs) will be releasing results for the first quarter of 2019. REIT prices have shot up this year, in part due to the United States Federal Reserve’s more dovish stance on interest rates. With that in mind, I will be keeping an eye on two REITs, in particular, that will be releasing results soon – CDL Hospitality Trust (SGX: J85) and Ascott Residence Trust (SGX: A68U).
Turnaround on the cards?
CDL Hospitality Trust owns 19 properties across eight countries. The hospitality-focused trust reported slightly disappointing numbers in the fourth quarter of 2018 with net property income and distribution per security falling 5.4% and 2.1% respectively. The drop was partly due to divestments of two hotels in Australia and the closure of Dhevanafushi Maldives Luxury Resort for renovations.
Source: CDL Hospitality Trust Q4 2018 Earnings Presentation
However, the first quarter of 2019 could sing a different tune. The quarter marks the first full year rental contribution from Hotel Cerretani Florence, MGallery by Sofitel, which CDL Hospitality Trust acquired in mid-November 2018.
In addition, the Singapore hospitality market is also experiencing a turnaround. In the fourth quarter of 2018, the occupancy rate at its Singapore properties increased by 2.3 percentage points to 85.8%, while revenue per available room rose 2.6%. While rates remain competitive due to the emergence of new supply over the last 15 months, limited pipeline supply is expected to lend support to the sector recovery.
The completion of renovation works at Dhevanafushi in the second quarter of 2019 should also be an additional boost to the bottom line.
Uplift from refurbishments?
Listed in 2006, Ascott Residence Trust has grown to become one of the largest residential trusts in Singapore. It currently has a portfolio of 73 properties spanning 14 countries and 37 cities.
It recently acquired land in Singapore to develop a property comprising 322 studios and loft units with opening targets in 2021. This is the trust’s first development project in Singapore.
In 2018, revenue and distribution per unit increased by 4% and 1% respectively, largely due to acquisitions and higher rental income from its existing portfolio.
Ascott Residence Trust has completed refurbishment works at two of its properties in 2018 and is expecting a 10 to 20% uplift in average daily rates following the refurbishment. The full impact of these renovations will be felt this year.
In addition, the trust has divested Ascott Raffles Place for S$353.3 million, at a cool 64.3% above book value. This should provide the trust with funds for more acquisitions in the future or to pay off some of its higher cost debt.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.