CDLHTrust – BT
CDL Hospitality Trusts eyes Japan acquisitions
It’s considering sprucing up Orchard arcade or turning it into hotel rooms
CDL Hospitality Trusts (CDLHT), the biggest hotel owner in Singapore, is looking at the Japan market with ‘great interest’ for potential acquisitions as it now offers ‘pricing levels not seen for many years’.
CDLHT, a stapled group comprising CDL Hospitality Real Estate Investment Trust (H-Reit) and CDL Hospitality Business Trust (HBT), is also mulling whether to spruce up Orchard Hotel Shopping Arcade or convert it into hotel rooms.
If converted, the 53,000 sq ft facility could yield about 78 hotel rooms, which would add to Orchard Hotel’s existing 653 rooms.
‘We’re are still doing studies and to some extent waiting for construction costs to reach more reasonable levels,’ Vincent Yeo, CEO of M&C Reit Management, said yesterday in an interview with BT. M&C Reit Management is the manager of H-Reit.
CDLHT yesterday posted a 68.7 per cent jump in second-quarter distributable income to $25 million. For the first half ended June 30, 2008, distributable income jumped 79 per cent to $48.6 million, on the back of organic growth across the portfolio as well as a full period’s contribution from Novotel Clarke Quay, which was acquired on June 7, 2007.
‘I like the acquisition environment today much better than what we have experienced in the last couple of years. Because of the tight credit conditions today, there are more motivated sellers and there are more deals that we’re seeing now, and consequently this means that we can be a lot more selective in terms of location and strategic assets,’ Mr Yeo added.
‘Japan has also gone through a very adverse credit situation and there are a lot of deals. Assets as recently as last year used to trade at 4 per cent yield. We’re now seeing them gravitate above 6 per cent,’ he said.
CDLHT’s gearing level as at June 30, 2008, stood at 20.3 per cent.
Despite softness in Singapore visitor arrivals in June, CDLHT’s Singapore hotels posted average occupancy rate of 87.1 per cent in Q2 ended June 30, 2008, up 1.1 percentage points from 86 per cent for proforma Q2 2007 (assuming Novotel Clarke Quay had been acquired on April 1, 2007).
Revenue per available room increased 30.6 per cent year-on-year to $222 in Q2 2008. Mr Yeo noted that the dip in Singapore’s visitor arrivals in June was mitigated by the increase in the average length of stay per visitor.
CDLHT’s hotel portfolio comprises Orchard Hotel, Grand Copthorne Waterfront, M Hotel, Copthorne King’s Hotel and Novotel Clarke Quay in Singapore, and the Rendezvous Hotel Auckland in New Zealand.
CDLHT posted a 42.4 per cent year-on-year jump in Q2 gross revenue to $29.5 million. For the first-half, gross revenue increased 48.3 per cent to $57.4 million.
Unitholders will receive a total distribution per unit of 5.89 cents for the first half comprising 5.37 cents of taxable income and 0.52 cent of tax-exempt. The total payout works out to an annualised figure of 11.84 cents, reflecting an 8.2 per cent annualised distribution yield based on CDLHT’s closing price of $1.45 yesterday. The counter ended one cent lower from the Tuesday close.
CDLHT’s net asset value per stapled security stood at $1.61 as at June 30, unchanged from the Dec 31, 2007 figure.
‘While we are cautious over the outlook for the remainder of 2008 due to the weakness demonstrated in visitor arrivals in the month of June, we still expect to register growth for the next reporting period.
‘We believe that the general outlook for the hotel industry continues to be positive over the medium and long term,’ CDLHT said.