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Business Times
25-05-2025
- Business
- Business Times
Will more S-Reits soon exit the local market?
WHEN the proposed privatisation of Frasers Hospitality Trust (FHT) was unveiled on May 14, I couldn't help feeling rather disheartened – not with the terms of the transaction but with the stated rationale for the deal. The decision to take FHT private, which came after a strategic review announced on Apr 23, seems to be based on a strong conviction on the part of its managers that the hospitality trust will face great difficulty growing its distributions per stapled security (DPS) and net asset value (NAV) in the face of a number of macroeconomic trends and structural factors. In particular, higher interest rates since the Covid-19 pandemic have increased FHT's debt costs, and weighed on the market value of its stapled securities. The relative strength of the Singapore dollar has also adversely affected FHT's DPS and NAV, as 59 per cent of its nearly S$2 billion property portfolio is located outside of Singapore – in Australia, Japan, Malaysia and the United Kingdom. Then, there is the general volatility of the hospitality sector, and periodic capital expenditure necessary to maintain the attractiveness of its hotel properties. Since FHT was listed in July 2014 up to the day before the strategic review was announced in April this year, Singapore-listed hospitality trusts achieved an average annualised total return of just 0.79 per cent, according to a presentation deck provided by FHT's managers. In the wake of this weak performance, the market valuations of hospitality trusts have naturally eroded. FHT traded at an average of 0.95 times NAV during the period spanning its listing in July 2014 until March 2020. Its peers – namely, CapitaLand Ascott Trust, CDL Hospitality Trusts, and Far East Hospitality Trust – traded at an average of 0.89 times NAV during the same period. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up During the Covid-19 pandemic period, from March 2020 to May 2023, FHT traded at an average of 0.76 times NAV while its peer group traded at 0.81 times NAV. Subsequently, from May 2023 until the strategic review was announced in April 2025, FHT traded at an average of 0.73 times NAV while its peers traded at an average of 0.72 times NAV. Are Singapore-listed hospitality trusts still useful securitisation platforms for their respective sponsor groups given their weak market valuations? Is it just a matter of time before we see more of them going private? Sagging performance, valuations Here's the thing: FHT and its peers aren't the only Singapore-listed real estate investment trusts (S-Reits) under pressure. Higher interest rates have weighed on the performance and market valuations of all S-Reits; and the strength of the Singapore dollar has been a drag on the returns of every S-Reit with significant overseas exposure. While the annualised total return of 0.79 per cent that FHT and its peers delivered between July 2014 and April this year was certainly weak, many other S-Reits didn't perform all that much better. According to the presentation deck provided by FHT's managers, S-Reits focused on commercial properties returned an average of just 3.61 per cent per year during the same period, while industrial and logistics S-Reits returned 4.92 per cent a year. The best performance came from 'specialised' S-Reits – such as Parkway Life Reit and Keppel DC Reit – which achieved an average annualised total return of 10.07 per cent during the period. Against this backdrop, it is perhaps not surprising that the crop of S-Reits reportedly coming to market are focused on burgeoning new sectors such as data centres, healthcare assets and student accommodation. Meanwhile, managers of S-Reits focused on traditional sectors and struggling to garner decent market valuations may have to rethink their business plans, and whether it makes sense to maintain their listings. This isn't exactly a new trend. Several S-Reits have been acquired or subsumed over the years as their sponsor groups adjusted their strategies and reached for scale. For instance, CapitaLand Integrated Commercial Trust is the result of the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust. Mapletree Pan Asia Commercial Trust came about through the amalgamation of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT). These deals did not always go smoothly. The merger of MCT and MNACT, for instance, faced minority shareholder resistance on both sides of the transaction. Mapletree Investments, the sponsor group behind the two Reits, eventually stumped up S$2.2 billion in cash to push the deal through. Is going private the next big trend for S-Reits as their managers and sponsor groups try to deliver value? FHT's managers said on May 14 that a number of options were considered to unlock value for investors. These included boosting the yields and valuations of FHT's existing properties through asset enhancement initiatives (AEIs), and scaling up FHT through a big merger or acquisition. In the end, however, it was decided that exiting the public market made the most sense. FHT's bid to go private comes on the heels of a similar move at Paragon Reit. In February, Paragon Reit's manager said privatisation would facilitate a major AEI at its flagship property, which accounts for 72 per cent of the value of its property portfolio. The manager said the AEI could cost as much as 21 per cent of the property's appraised value, and is necessary to defend its competitiveness amid growing competition from nearby properties and softer spending on luxury goods. Paragon Reit's privatisation deal, which will see investors receiving S$0.98 per unit, equivalent to 1.07 times NAV, was given the green light last month. Privatisations may boost sentiment While the privatisation of FHT and Paragon Reit might raise questions about the future of the S-Reit sector, the expectation of more such deals could well boost investor sentiment. The big question is whether investors are adequately compensated by the offerors. In the case of FHT, investors are being offered S$0.71 per stapled security by a unit of Frasers Property (FPL). This is 1.11 times FHT's adjusted NAV – higher than the average 1.04 times NAV at which precedent S-Reit privatisations since 2020 were priced; and well above the 0.62 times NAV at which hospitality trusts trade in the market. The offer price of S$0.71 also implies a total return of 27.8 per cent for investors who bought FHT at its initial public offering in 2014. FHT's peers delivered total returns over the same period ranging from minus 6.3 per cent to 24.5 per cent. One sticking point for some investors is that FPL narrowly failed to take FHT private at S$0.70 per share back in 2022, at a time when the hospitality sector was still reeling from the pandemic. It should be pointed out, however, that the previous offer price was only 1.07 times FHT's NAV. With the rise in interest rates since then, FPL could also be hard pressed to justify paying much more for FHT – especially with its own shares trading 65.5 per cent below NAV.
Independent Singapore
28-04-2025
- Business
- Independent Singapore
CLAS reports 4% YoY gross profit increase for Q1 FY2025
Photo: Agoda SINGAPORE: CapitaLand Ascott Trust (CLAS) reported a 4% year-on-year (YoY) gross profit increase for the first quarter of fiscal year 2025 (Q1 FY2025), ended March 31. This growth in profit comes as the trust successfully replaced the income lost from divestments in 2024 with new properties, The Edge Singapore reported. Excluding acquisitions and divestments between Q1 FY2024 and Q1 FY2025, gross profit increased by 1% YoY on a same-store basis. Gross profit refers to net property income. The trust's performance was helped by its acquisitions, which included Teriha Ocean Stage in January 2024, lyf Funan Singapore in December 2024, and ibis Styles Tokyo Ginza along with Chisun Budget Kanazawa Ekimae in January 2025. On the other hand, the trust sold several properties last year, including Courtyard by Marriott Sydney-North Ryde in January 2024, Citadines Mount Sophia Singapore, Hotel WBF Kitasemba East, Hotel WBF Kitasemba West, and Hotel WBF Honmachi in March 2024, Novotel Sydney Parramatta in September 2024, and Citadines Karasuma-Gojo Kyoto and Infini Garden in October 2024. Of the gross profit, 70% came from stable sources, which include master leases and management contracts. Of this, 51% came from minimum guaranteed income, and 19% was from management contracts related to student accommodation and rental housing. The rest (30%) was driven by growth income from management contracts for hospitality properties. As of March 31, CLAS' aggregate leverage increased to 39.9%, from 38.3% at the end of December last year, excluding the trust's perpetual securities, which are classified as equity. At the same time, the interest coverage ratio (ICR), which measures a company's ability to manage its outstanding debt and includes distributions to perpetual securityholders, increased 3.2 times in Q1 FY2025, up from just 3.1 times for FY2024. The ICR is based on a trailing 12-month period. /TISG Read also: CapitaLand Investment to launch first retail REIT in China's SSE with RMB2.8B of assets
Business Times
28-04-2025
- Business
- Business Times
CapitaLand Ascott Trust gross profit rises 4% in Q1
[SINGAPORE] CapitaLand Ascott Trust's (Clas) managers said on Monday (Apr 28) that the trust's gross profit rose 4 per cent year on year in the first quarter of 2025. Gross profits from new properties in the quarter had replaced the gross profit lost from divestments in 2024, the managers said, driven by stronger performance from properties the trust renovated in 2024. These new properties include lyf Funan Singapore acquired on Dec 31 in 2024, as well as Japan hotels ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, both acquired on Jan 31, 2025. 70 per cent of profits in the quarter were from stable income sources, the managers said, with the remaining 30 per cent from growth income sources. Such stable income sources included management contracts of longer-stay properties such as rental housing and student accommodation, as well as master leases and management contracts with minimum guaranteed income. Growth income was largely contributed by management contracts of hospitality properties. Excluding acquisitions and divestments, gross profit was 1 per cent higher on a same-store basis, said the managers. In most key markets in the trust's portfolio, Revenue per available unit (RevPAU) for Q1 2025 grew year on year, with its Australia, Singapore, United Kingdom and United States (US) portfolios registering growth of between one and 12 per cent. Its Japan portfolio, however, registered an 11 per cent contraction on the year. In the USA portfolio, making up 19 per cent of the trust's total assets, hotel RevPAU in the quarter climbed 11 per cent on the year to reach US$160, driven by strong leisure demand, an increased proportion of corporate bookings, as well as long weekends and major conventions. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While negative sentiments towards the US might dampen international leisure travel, the managers said that a higher proportion of domestic guests would mean the trust's hotels remain less affected. The trust's Singapore portfolio, which made up a further 19 per cent of total assets, saw serviced residences (SRs) and hotel RevPAU in the quarter inch upwards by 1 per cent year on year to S$183. On a same store basis, however, RevPAU fell 3 per cent year on year. This fall was due to fewer high-profile concerts, such as the one by Taylor Swift, or biennial events, such as the Singapore Airshow, under the meetings, incentives, conferences and exhibitions category that took place in Q1 2024,the trust managers said. The portfolio's performance was nevertheless mitigated by stronger operating performance from The Robertson House by The Crest Collection and long stays at SRs. The managers expect that demand for corporate and relocation stays for the Singapore portfolio will be subdued in the second quarter of 2025, while transient demand could see an uplift during concert and event periods. In Japan, the trust's managers noted that the acquisition of two Japan hotels, ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, would fully replace the income of four divested properties in the Japanese portfolio. The acquisitions would bring an accretive growth of 1.6 per cent to dividend per share on a pro forma basis from FY 2024, while raising blended net operating income by 4.3 per cent. The managers noted that these hotels would be supported by leisure and business demand drivers, with ibis Styles Ginza Tokyo located in Tokyo's shopping and entertainment district, while Chisun Budget Kanazawa Ekimae is situated in a popular site for domestic travel. The trust reported a gearing ratio of 39.9 per cent, with an interest coverage ratio of 3.2 times. The trust said it is monitoring recent volatility and reviewing options for its S$250 million perpetual securities, which reset on June 30, 2025, with a view towards managing its capital structure. Net asset value per stapled security was at S$1.11, with total available funds standing at S$1.43 billion, said the managers. The counter closed 1.8 per cent or S$0.015 higher on Friday to reach S$0.855.
