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CDL Hospitality Trusts takes long-term view of Singapore

Jihye Lee
Jihye Lee • 8 min read
CDL Hospitality Trusts takes long-term view of Singapore
CDL Hospitality Trusts’ W Hotel is a luxury hotel located at the Sentosa waterfront / Photo: Samuel Isaac Chua
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CDL Hospitality Trusts (CDLHT) is a stapled group comprising CDL Hospitality Real Estate Investment Trust, the first hotel real estate investment trust in Singapore, and CDL Hospitality Business Trust, a business trust. As one of Asia’s leading hospitality trusts, CDLHT has assets under management of $3.1 billion as at Sept 30. This comprises 19 operational properties across Singapore, Australia, New Zealand, Japan, the Maldives, the United Kingdom, Germany and Italy. CDLHT also has a Build-to-Rent (BTR) project, The Castings, in the UK, which will add 352 residential apartment units to the portfolio after its practical completion, expected to be in mid-2024.

1. Describe CDLHT’s business segments and revenue streams.

CDLHT’s portfolio comprises 16 hotels in Singapore, Australia, New Zealand, Japan, the UK, Germany and Italy; two resorts in the Maldives; a mall in Singapore; and a build-to-rent (BTR) development in the UK. The operating structure of its properties consists of External leases, management contracts or self-operated. About 66.3% of its total portfolio valuation is concentrated in central locations of Singapore. The Singapore portfolio also contributed approximately 62.7% of net property income (NPI) in the year to September.

2. How much has CDLHT’s portfolio benefitted thanks to a global recovery in tourism and a rebound in business travel?

In Singapore, CDLHT’s core market, a swift recovery in leisure travel was further boosted by the return of major events. Singapore’s robust lineup of major concerts and events will further enhance the country’s appeal as a tourism destination, attracting travellers from neighbouring countries. On the back of the global recovery in tourism, seven hotels in CDLHT’s portfolio recorded their highest 3Q revenue per available room (RevPAR) in 2023 — Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, W Singapore–Sentosa Cove (W Hotel), Hilton Cambridge City Centre, The Lowry Hotel and Hotel Cerretani Firenze.

3. What are some key highlights of CDLHT’s recent financial performance?

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In the recent 3QFY2023 ended September, CDLHT achieved a strong y-o-y improvement in operational performance of RevPAR growth seen across most portfolio markets, with seven hotels marking the highest 3QFY2023 RevPAR. Overall NPI increased by 23.3%, or $7.4 million, y-o-y to $39.0 million for 3QFY2023. Against 3QFY2019 (on a pro-forma basis, assuming CDLHT owns W Hotel from Jan 1, 2019), CDLHT’s Singapore hotels’ RevPAR grew 32.6% on a same-store basis on an increase in average rate of 37.5%. CDLHT’s Japan hotels’ RevPAR rose 17.2% against 3QFY2019, as tourists returned to Japan in 3QFY2023. Hotel Cerretani Firenze reported a record 3QFY2023 RevPAR, or +40.4% y-o-y and +52.6% against 3QFY2019.

4. Describe the structure of CDLHT and how it differs from a standard S-REIT.

CDLHT is a stapled group comprising CDL Hospitality Real Estate Investment Trust (H-REIT), Singapore’s first hotel real estate investment trust and CDL Hospitality Business Trust (HBT), a business trust. Hospitality REITs are usually stapled to a business trust and they trade as stapled units due to regulatory reasons.

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According to the CIS Code (the Property Fund Guidelines), REITs are generally expected to receive rental income that is fairly stable. In a situation when a hotel lease expires and no hotel operator is willing to underwrite a lease for the hotel but is only willing to contract based on a hotel management agreement, the business trust can then step in and act as master lessee of last resort and take on the lease and appoint a professional hotel manager to manage the hotel. HBT can also carry out activities that may be unsuitable for the REIT.

All properties in CDLHT’s portfolio are held under H-REIT, except three properties, namely Hilton Cambridge City Centre, The Lowry Hotel and the UK residential BTR under development, which are held under HBT. HBT currently acts as the master lessee to six of the properties held under H-REIT, namely W Hotel, Mercure Perth, Ibis Perth, Raffles Maldives Meradhoo, Hotel MyStays Asakusabashi and Hotel MyStays Kamata. These properties are managed by third-party hotel management companies.

5. What are some challenges that CDLHT recently faced?

Inflationary cost pressures: We have implemented initiatives like improving efficiency by capitalising on building automation technologies, job redesign, and leveraging technology to affect payroll cost efficiencies. Elevated energy prices: Initiatives to monitor and reduce energy consumption include upgrading of building management systems, implementating innovative in-room technology system and installation of solar panels. High funding costs environment: Currently, around 50% of our total debt is on fixed interest rates. We are currently monitoring and will determine the appropriate levels of fixed-rate to floating-rate borrowings.

6. What are some key factors in the decision-making process for new property acquisitions?

What are some of CDLHT’s growth strategies? We continue to look for opportunities that can enhance income stability, such as more fixed rent or underlying longer stay component. In terms of geographical markets, we are focused on the regions in which we already have a presence. Micro location is also an important consideration. This is evident from our portfolio of hotels which are strategically located in or near major business districts in key cities or prime tourist destinations such as Hotel Cerretani Firenze in the historic city centre of Florence and near the Cathedral of Santa Maria del Fiore; W Hotel, a luxury lifestyle brand in front of the marina waterfront living enclave in Sentosa; The Lowry Hotel, which is near to the heart of Manchester city centre; Hilton Cambridge City Centre, one of the best-located and largest premium hotels in Cambridge City Centre; Pullman Hotel Munich, which is strategically located next to the commercial district of Parkstadt Schwabing; Ibis Perth, which is strategically located in the heart of Perth city, just a short stroll from the Swan River.

7. Elaborate on the opportunities CDLHT sees in its Build-toRent investments. 

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The BTR sector is experiencing strong structural demand growth and supply shortages which supports rental growth across major markets. Notably, residential rental growth in Manchester has been robust since our investment in the BTR forward funding scheme in August 2021. Given the sector’s attractiveness underscored by favourable demand and supply dynamics, we will continue to evaluate opportunities. Construction of The Castings remains on track to be practically completed in mid-2024. Works on the building facade, interior and amenity spaces are ongoing with completion on schedule. Mobilisation of the building has commenced to prepare the scheme for lease-up.

8. What geographical markets are you expecting to pick up pace?

Geographical markets that had a high proportion of Chinese tourists pre-pandemic such as Singapore (19.0% of total visitor arrivals in 2019) and the Maldives (16.7% of total visitor arrivals in 2019) could see a further pick-up. Year to September, Singapore saw just over a million Chinese tourists in 2023, about 35.3% of the same period in 2019. In 3Q2023, Singapore recorded 0.6 million Chinese tourists, approximately 56.2% of 3Q2019. Year to September, the Maldives received 145,986 Chinese tourists, approximately 63.4% of the same period in 2019. In 3Q2023, the Maldives recorded 82,559 Chinese tourists, approximately 91.6% of 3Q2019. Despite Chinese outbound travel picking up pace around 2Q2023, difficulties in getting visas and passports remain one key bottleneck — the recovery for Chinese outbound travellers is seen to pick up further around 3Q2024.

9. Tell us about CDLHT’s solar panel project in its Maldives resorts and what the company aims to achieve through this project.

Guided by our sustainability vision and mission, CDLHT continues to drive ESG best practices across the portfolio through various initiatives. We completed the first phase of the installation of solar panels at our resorts in the Maldives — Angsana Velavaru and Raffles Maldives Meradhoo — in March and May, respectively.

Due to the nature of the one-island-one-resort concept in the Maldives, energy is generated onsite using diesel as the primary source of fuel, which contributes to CDLHT’s greenhouse gas emissions. The solar panels currently supply between 15% and 20% of the resorts’ energy requirement and help to reduce overall diesel consumption.

10. Why should investors take a closer look at CDLHT?

Despite the pandemic, CDLHT’s portfolio has displayed resilience and continued commitment in investing its portfolio through asset enhancements to position the hotels strongly when the recovery takes place. Our hotels have also undergone transformation during the challenging environment and emerged with improved efficiency. CDLHT takes a long-term view and in particular for Singapore, our core market, we continue to see very positive tourism prospects in the medium to long term.

The forward purchase of a turnkey lifestyle hotel, Moxy Singapore Clarke Quay will add 475 keys to the portfolio and strengthen CDLHT’s positioning in the lifestyle hotel segment. While the unit price of S-REITs has been under pressure due to the high interest rate environment, CDLHT’s asset values remain stable supported by improved cashflows.

Notably, CDLHT’s units are trading at a yield of 6.4% as at early November, based on the trailing 12-month distribution per unit (DPU) of $0.061, with a P/E of 0.7x based on 1H 2023 net asset value (NAV) of $1.41. E Jihye Lee is an associate director at the Singapore Exchange S68 -


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