Occupancy at the 240-room hotel has reached up to 60-65 per cent on Fridays and Saturdays.

 

LAST November, when CDL Hospitality Trusts (CDLHT) unveiled its plan to acquire the W Singapore - Sentosa Cove, its top brass could never have imagined the blow to international travel and tourism that was to come just a few months later with the outbreak of Covid-19.

 

However, a silver lining from that acquisition is currently in play. The completion of the acquisition on July 16 this year has proven to be well timed to tap the staycation business.

 

On July 3, the Singapore authorities announced that hotels here may apply to reopen for staycation bookings. On July 9, the W Singapore received the official nod to do so a week later, CDLHT completed its purchase of the hotel and has since been welcoming holiday-starved Singapore residents.

 

" From the level of bookings which the hotel has received, there is pent-up demand for a getaway retreat. For many living in Singapore, the entire setting for Sentosa is the closest emulation of the feeling of being away from Singapore on a vacation," said Vincent Yeo, chief executive of the managers of CDLHT, in a recent interview with The Business Times.

 

Since the re-start of the staycation business, occupancy at the 240-room hotel has reached up to 60-65 per cent on Fridays and Saturdays. Strong demand for rooms on these popular days among staycationers would allow the hotel to push for a higher occupancy but it has decided to cap the figure - to manage staggered arrivals, breakfast booking and seating capacity as well as social distancing restrictions in public areas.

 

Overall room rates at the hotel are comparable to pre-Covid levels due to strong pent-up demand, said Mr Yeo. The price of the entry-level category - Wonderful Room, at 40 square metres - starts from about S$400 per night on Sundays to Thursdays. On Fridays and Saturdays, the rate is higher, from S$480.

 

Demand for suites at W Singapore is elevated, including those with a private plunge pool these suites (with plunge pools) are generally priced from S$1,500 a night.

 

" It is encouraging to see this pent-up demand and the tremendous support from the local market as well as demand from the expat community due to the international school holidays," said Mr Yeo.

 

CDLHT is a stapled group comprising a Reit and a business trust that was floated on the Singapore Exchange in July 2006. It owns 16 hotels and two resorts (totalling 4,926 rooms) as well as the Claymore Connect mall adjoining Orchard Hotel here. The group' s properties are in Singapore, Auckland, Australia, Tokyo, the UK, Munich, Florence and Maldives. In its biggest market, Singapore, it has six hotels. Besides the recently acquired W Singapore, the others are: Orchard, Grand Copthorne Waterfront, M, Copthorne King' s and Studio M hotels.

 

" The W Singapore - Sentosa Cove, which is riding on the staycation wave, is busiest on Fridays and Saturdays, school holidays and public holidays. Local residents are also interested to experience the hotel on Sundays to Thursdays when pricing is usually more competitive," said Mr Yeo.

 

Other than couples and groups of friends, the hotel' s extensive facilities and location on Sentosa appeal strongly to families as well. " W" is one of the hotel brands under Marriott and the strength of the Marriott distribution network and loyalty programmes have also drawn guests.

 

W Singapore' s facilities include a spa with a decompression area and a large pool with a 2,000 sq m outdoor area. The hotel has three F& B outlets. " Certain guest profiles such as families also choose the hotel due to the numerous attractions available on Sentosa," said Mr Yeo.

 

On mainland Singapore, CDLHT' s Orchard Hotel, near the Singapore Botanic Gardens, has also been serving staycation guests since receiving the official nod in mid-July. The hotel has undergone an extensive revamp in the past few years.

 

For the first-half ended June 30, 2020, CDLHT' s distribution per stapled security shrank to 1.51 Singapore cents from 4.16 Singapore cents in the year-ago period. Most of its properties - with the exception of its New Zealand and Singapore hotels - were either closed on a temporary basis, or were operating at low occupancies from March onwards due to strict travel restrictions amid the Covid-19 pandemic.

 

All but one of the group' s properties are now open. The exception is Raffles Maldives Meradhoo, which will reopen in the fourth quarter of this year.

 

Like many other hotel owners in Singapore trying to make up for the loss of revenue during the pandemic, CDLHT has secured the isolation accommodation business from the Singapore government for some of its hotels here. " In the absence of international travel, corporate or MICE (meetings, incentives, conferences and exhibitions) demand, this alternative source of revenue enables hotels to remain operational, secure some level of revenue and retain as many jobs as possible," said Mr Yeo.

 

That said, nearly a fortnight ago, CDLHT' s sponsor, Millennium & Copthorne Hotels (M& C) - which leases and manages five of the stapled group' s Singapore hotels - retrenched 159 employees or 15.2 per cent of its Singapore-based workforce after reviewing its Singapore corporate office and hotel operations.

 

Of CDLHT' s overseas hotels, only the Grand Millennium Auckland is being used as an isolation facility.

 

Orchard Hotel' s occupancy has also been supported by it providing accommodation to foreign workers affected by border closures. These are mostly Malaysians, although the hotel has also been a temporary home to corporate guests of other nationalities.

 

Besides tapping alternative sources of revenue, another factor that has shielded CDLHT from the full impact of the pandemic is fixed rental income to the tune of S$36.7 million annually from the lessees of five of its six Singapore hotels (the exception being W Singapore) and the Auckland hotel. This rental income is paid to CDLHT by the respective lessees of the hotels, which are all subsidiaries of M& C.

 

M& C, a wholly-owned subsidiary of City Developments, owns a stake of about 38 per cent in CDLHT. Having a strong sponsor owned by a blue-chip group has its advantages.

 

While the operating climate in the short term is still uncertain, Mr Yeo is confident about the long-term fundamentals of the Singapore hotel market, the city state' s status as a regional hub for many business activities, and its well-established reputation as a top international MICE destination.

 

" For our overseas (locations) with a domestic tourism market - for example, Japan, UK, Europe and Australia - business from domestic travel should resume first, followed by MICE and overseas travel."

 

On the broader macro front, a positive factor Mr Yeo highlights is that following the large demand shock to the global hotel market from the pandemic, future hotel rooms supply increases in most markets are likely to be less than previously projected.

 

Mr Yeo, who is a nephew of City Developments' executive chairman Kwek Leng Beng, also noted that those in the hotel business have never seen a situation where hotels have had to be closed for a protracted period of time.

 

" To compound matters, hotel groups with diversification have also never come across a situation where no geographic region has been spared." The lesson from this for CDLHT is that to mitigate risk, " we will also look at demand diversity throughout the hospitality and accommodation spectrum to further create sustainable value&rdquo .

CDL Hospitality Trusts' (CDLHT) distribution per stapled security (DPS) sank 63.7 per cent to 1.51 Singapore cents for the six months ended June 30, 2020, from 4.16 Singapore cents a year ago.

 

Gross revenue was down 44.5 per cent to S$52.1 million for the half year, from S$93.8 million a year ago.

 

The stapled group' s managers said in a regulatory filing on Wednesday that most of its properties - with the exception of its New Zealand and Singapore hotels - were either closed on a temporary basis, or operating at low occupancies from March onwards due to strict travel restrictions and social distancing measures as a result of the Covid-19 pandemic.

 

Occupancies for the New Zealand and Singapore hotels were bolstered by demand for accommodation facilities for isolation purposes, while occupancy for the Singapore hotels was also supported by demand from foreign workers affected by border closures.

 

The managers added that a " substantive" S$32.1 million contribution to portfolio rental income from its Singapore, New Zealand and Australia hotels had partially insulated CDLHT from the " severe effects of the pandemic" .

 

Net property income (NPI) fell 56 per cent on the year to S$29.7 million for the half year, from S$67.5 million.

 

Distributable income declined 63.6 per cent year on year to S$18.4 million, from S$50.4 million.

 

The distribution will be paid out on Aug 27, after books close on Aug 7.

 

Chief executive of CDLHT' s managers Vincent Yeo said the managers were " preparing ourselves for an eventual recovery in global tourism, and keeping faith with the long-term growth prospects of our markets even though there is significant short-term uncertainty" .

 

He added that CDLHT had utilised periods of low occupancy to carry out " critical" guest-related asset enhancement works, and fortified its financial position by conserving cash and securing a new S$100 million credit facility in June.

 

In July, CDLHT sold Novotel Singapore Clarke Quay and acquired W Singapore Sentosa Cove.

 

The two deals augmented its balance sheet with a net cash inflow of S$26.8 million, the managers said.

 

CDLHT comprises CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust.

 

THE managers of CDL Hospitality Trusts (CDLHT) on Friday night guided that the stapled group' s financial performance for fiscal 2020 will be " severely affected" , amid the unprecedented downturn in global tourism and travel as a result of the novel coronavirus pandemic. 

 

For the six months ended June 30, 2020, CDLHT' s distribution per stapled security after retention is expected to decline by 60 to 70 per cent, down from 4.16 Singapore cents a year earlier, the managers said.

 

This comes as distributable income after retention is expected to fall by the same proportion of 60 to 70 per cent, from S$50.4 million a year ago.

 

Based on preliminary estimates, CDLHT' s total return after tax for H1 2020 is expected to record a " marginal loss" , versus the S$30.6 million profit recorded for H1 2019. For the first half of this year, CDLHT will record one-off winding down costs arising from the divestment of Novotel Singapore Clarke Quay, which was completed on July 15. Excluding these one-off expenses, CDLHT' s total return may register a " slight" profit, the managers said.

 

As for property valuations, the managers said they will continue valuing CDLHT' s assets once a year at the end of the financial year, and any fair value gains or losses on properties will only be recorded in its full-year results.

 

However, the managers highlighted that there is uncertainty relating to the carrying amounts of CDLHT' s investment properties and fixed assets as at June 30, 2020, as these amounts are based on independent valuations as at Dec 31, 2019, and have not taken into account the impact of the Covid-19 pandemic, which " may be significant" .

 

The market uncertainty has resulted in challenges in providing accurate valuations for the properties, as there is a lack of visibility regarding future cash flows as well as insufficient market transactions available for benchmarking to adopt meaningful capitalisation rates in the current market, the managers said.

 

Their boards of directors are thus of the view that it may be inaccurate to quantify any impact on the carrying amounts, as the assumptions used to derive valuations would be " very subjective and arbitrary" , given that the situation is still highly fluid and evolving, the managers added.

 

International travel curbs largely remain in place, even though the markets which CDLHT has a presence in have seen their strict Covid-19 measures progressively relaxed since the middle of this year.

 

CDLHT' s overseas properties are either closed temporarily or operating at low occupancies, except for its New Zealand hotel, Grand Millennium Auckland.

 

Nonetheless, the occupancies of the Singapore and New Zealand hotels continue to be supported by the demand for accommodation facilities that can be used for isolation purposes, the managers said.

 

In addition, occupancies at CDLHT' s Singapore hotels are supported by demand from foreign workers affected by border closures.

 

Overall, revenue per available room across the portfolio " has been and will continue to be significantly affected" , the managers said.

 

" While sentiments point to a start of the recovery of international travel demand in 2021, the situation remains fluid, and there is much uncertainty on the recovery trajectory. A viable medical solution is vital to the pace of the pickup in international travel."  

 

The managers noted that CDLHT has sufficient liquidity and that there are no material concerns over its ability to fulfil its near-term debt obligations and operational needs.

 

In June 2020, CDLHT secured an additional S$100 million committed multi-currency revolving credit facility. The stapled group also registered net cash inflow of S$26.8 million from two completed transactions this month, namely the divestment of Novotel Singapore Clarke Quay and the acquisition of W Singapore in Sentosa Cove. 

 

The managers will release the unaudited financial results for H1 2020 before trading hours on July 29.

 

CDL Hospitality Trusts (CDLHT) has completed the sale of its entire stake in Novotel Singapore Clarke Quay, while Ascott Residence Trust (ART) has sold its interest in the land which includes Somerset Liang Court Singapore.

 

These form part of the transaction for the Liang Court site&rsquo s redevelopment - by a consortium comprising real estate heavyweights CapitaLand Limited, City Developments Limited (CDL) and ART - that was announced last November. On the site sits Liang Court mall, mid-scale hotel Novotel and serviced residence Somerset Liang Court Singapore.

 

CDLHT was to sell Novotel to the 50:50 CDL-CapitaLand joint ventures and CDL. At the same time, ART would sell 15,170 square metres (sq m) in gross floor area (GFA) of the serviced residence to CDL and retain 13,034 sq m of GFA.

 

In a filing on Wednesday evening, CDLHT said it completed the Novotel divestment for about S$375.9 million, to the redevelopment entities Gemini One Trust, Legend Quay and Legend Commercial Trust.

 

CDLHT said the total cost of the divestment was about S$5.5 million, which included winding down related costs from the closure of the hotel.

 

Net proceeds are about S$370.3 million. The CDLHT managers plan to use about S$342.2 million of this amount to fund its acquisition of the W Singapore luxury hotel in Sentosa Cove by paying down the short-term borrowings. The managers had announced in November that CDLHT would buy W Singapore from a CDL subsidiary.

 

About S$26.8 million of the net proceeds from the Novotel sale will go into repaying existing debt and/or to make distributions to CDLHT security holders, and S$1.4 million will be used to pay professional fees and other expenses for the forward purchase.

 

CDLHT, an associate of CDL, will own the new hotel on the redeveloped Liang Court site under a forward purchase agreement.

 

As for ART, it completed the sale of the interest in the serviced residence at 177 River Valley Road on Wednesday, and has received the sale price of about S$163.3 million in cash from the buyer, Gemini One Trust.

 

On the same day, the ultimate owners - ART&rsquo s trustee, Gemini One Trust and two associated companies of CapitaLand - signed a joint development deed to undertake, among other things, the development of the respective components of the project.

 

The upcoming mixed-use development will include a new serviced residence property with a hotel licence, which will be fully owned by ART.

: The managers of CDL Hospitality REIT and CDL Hospitality Business Trust says that the REIT&rsquo s trustee, DBS Trustee Limited, has completed its divestment to Gemini One Trust, Legend Quay Pte. Ltd. and Legend Commercial Trust for a total consideration of approximately $375.9 million. 

 

The divestment was first announced on Nov 21, 2019, which saw CDL, CDLHT, and CapitaLand leading a consortium to redevelop Liang Court site at Clarke Quay. 

 

The total cost of the divestment came up to some $5.5 million, which includes related costs in connection with the closure of the Novotel Singapore Clarke Quay, as well as the professional fees and other expenses in connection with the divestment.  

 

With the remaining amount of approximately $370.3 million, about $342.2 million will be used to fund the acquisition of W Singapore &ndash Sentosa Cove hotel by paying down the short term borrowings. 

 

Some $1.4 million will be used to pay the professional fees and other expenses in connection with the forward purchase of the hotel to be developed as part of an integrated development. 

 

The remaining $26.8 million will be used to repay existing debt and/or to make distributions to Security Holders.

TWO property bellwethers, City Developments Limited (CDL) and Ascott Residence Trust (ART), warned on Monday of dour performance in their first-half results for 2020, having been stung by lockdowns and other safe-distancing measures in various cities that were imposed as a result of the Covid-19 pandemic.

 

At the close of trading on Monday, stapled securities of ART ended at 99.5 Singapore cents, down 3.5 cents or 3.4 per cent, while shares of CDL closed at S$8.37, down S$0.34 or 3.9 per cent.

 

CDL said it expects the group' s pre-tax profit for the first half this year to reduce " substantially" from a year ago, dragged by its hotel operations segment amid the pandemic. It added that the near-term outlook " continues to remain highly challenging and uncertain until the pandemic situation abates together with the reopening of international borders" .

 

CDL' s hotel operations segment is mainly led by its wholly-owned subsidiary, Millennium & Copthorne Hotels (M& C). With the privatisation of M& C in late 2019, the company' s losses are fully accounted for in CDL' s results. Based on preliminary estimates, revenue per available room is expected to decline by about 50 to 60 per cent for H1 2020, CDL said on Monday. The hotel operations segment, for M& C as an entity, is anticipated to sink into the red with a pre-tax loss of about S$120 million to S$140 million for the six months ended June 30, 2020, versus a pre-tax profit of S$76 million a year earlier.

 

M& C as an entity includes the hotels it owns and operates, as well as CDL Hospitality Trusts, where the bulk of the hotels are on a master lease structure and hence accounted for under the investment properties segment, a CDL spokesperson said in response to The Business Times' queries. It also includes the share of results from First Sponsor and CDL New Zealand, where there are property development profits.

 

The " significant" losses for hotel operations come despite " aggressive" cost-containment measures that continue to be in place, CDL said. It added that the hotel operations segment was primarily weighed down by the prolonged Covid-19 pandemic, which has resulted in widespread travel restrictions, an unprecedented collapse in global tourism, and mass cancellations or postponement of events. In addition, many countries have imposed measures such as quarantines, strict social distancing and complete lockdowns of cities, which have adversely affected the group' s hotel operations, even with the receipt of government grants.

 

Meanwhile, the group' s property development segment is expected to see revenue declining about 10 per cent as the H1 2020 contributions will primarily be derived from projects including The Tapestry, Whistler Grand as well as Amber Park, compared with fully completed projects such as New Futura and Gramercy Park that yielded higher profit margins in the year-ago period.

 

CDL' s investment properties segment was also affected, taking into account over S$30 million of property tax and rental rebates given to tenants, especially for its malls in Singapore and overseas for the full year of 2020.

 

Notably, in H1 2019, there was a S$197 million pre-tax gain resulting from the closure of the group' s Profit Participation Securities 2 platform, following the sale of Manulife Centre and 7 & 9 Tampines Grande, which further widened the comparative gap for the investment properties segment.

 

In light of the above, CDL anticipates that its net attributable profit after tax and minority interests (Patmi) for the first half of this year will be " materially and adversely" affected.

 

To be clear, this has not taken into account the negative goodwill the group expects to record from acquiring a 51 per cent stake in Chinese real estate developer Sincere Property Group, which was announced in April 2020. CDL on Monday said it is finalising the valuations of all properties under the Sincere portfolio to assess Sincere' s fair value, so as to compute the negative goodwill, which will mitigate the decline in Patmi.

 

Similarly, ART' s distribution per stapled security for the six months ended June 30 is expected to fall by 65 per cent to 75 per cent from the 3.43 Singapore cents recorded in the first half of 2019, the managers said, reflecting a challenging global environment in the first half this year.

 

In exercising " prudence in capital and cash flow management" , the managers may review the level of distribution payout to stapled securityholders.

 

As the timing of a full recovery remains uncertain, the managers are expecting the revenue per available unit of ART' s properties to remain " under pressure" in the near term.

 

Signalling the adverse impact on its upcoming financial results, the managers said ART' s available income for distribution for the first half of 2020 is expected to be reduced by 55 per cent to 65 per cent from the S$74.6 million recorded a year ago for the same period.

 

The stapled group' s total return for H1 2020 is expected to decline by 80 per cent to 90 per cent from the S$212.5 million recorded a year ago for the same period. Excluding fair-value gains for H1 2019, total return for H1 2020 is expected to fall by 55 per cent to 65 per cent compared with H1 2019.

 

In H1 2019, ART recorded fair-value gains of S$140.6 million after tax and minority interest. This included a realised fair-value gain of S$135 million from the divestment of Ascott Raffles Place Singapore.

 

The managers said ART' s geographically diversified portfolio has provided resilience to its earnings under usual business conditions.

 

Both ART and CDL said they have " sufficient liquidity" to weather this crisis, with CDL noting that it has total cash and undrawn and committed credit facilities exceeding S$5 billion.

 

ART will report its H1 2020 unaudited financial results on July 28 before 8am, while CDL expects to release its unaudited half-year results in early August.