Recovery From Hospitality Assets; Office Portfolio Stays Resilient
OUECT completed enhancements for HSO in Jan 23 and CPCA in Jan 24, ready to receive the rising numbers of leisure and business travellers visiting Singapore. Its office portfolio is resilient, generating positive rental reversion at 18.4% and stable committed occupancy at 95.7% in 3Q23. OUECT trades at 2024 distribution yield of 7.1% based on consensus DPU of 2.0 S cents and P/NAV of 0.47x.
WHAT’S NEW
• Enhancing CPCA. Crowne Plaza Changi Airport (CPCA) has completed its S$22m Asset Enhancement Initiative (AEI) in Jan 24. The enhancement will add: a) 12 new guest rooms, comprising 10 Premier Pool Rooms and two Suites, to cater to higher-yielding long-stay guests and their families, b) new all-day dining restaurant Allora offering Italian cuisine at the ground floor with direct access to and from Changi Airport Terminal 3, c) 352sqm multifunction room to host a wide array of meetings and events, and d) the existing bar space will be transformed into a contemporary Club Lounge with modernised space for meetings. CPCA was crowned the World’s Best Airport Hotel for eight consecutive years by Skytrax.
• HSO is largest revenue contributor. Mandarin Orchard Singapore was re-branded as Hilton Singapore Orchard (HSO) in Feb 22. HSO was repositioned as a top luxury hotel in Singapore. It is Hilton brand’s flagship hotel in Singapore and its largest in Asia Pacific. It underwent three years of extensive refurbishment. The 634-room Mandarin Wing was relaunched in Feb 22. The 446-room Orchard Wing was reopened with a distinctive botanical-inspired interior design in Jan 23. HSO has operated with full inventory of 1,080 rooms since Jan 23. Contribution from HSO is expected to surpass the minimum rent of S$45.0m in 2023.
• Positive reversions for both the office and retail segments. OUECT achieved positive rental reversion of 18.4% for office lease renewals in 3Q23. Committed occupancy was healthy at 95.7%. The average passing rent had increased 1.3% qoq to S$10.35psf per month in Sep 23. Mandarin Gallery’s committed occupancy improved 0.7ppt qoq to 97.1%. The mall generated strong positive rental reversion of 31.1% due to recovery in retail sales and visitor arrivals.
• Riding on recovery in the hospitality sector. RevPAR for the hospitality segment increased 12.8% yoy to S$295 in 3Q23. RevPAR for HSO expanded 3.8% yoy to S$345 while RevPAR for CPCA jumped 9.6% yoy to S$199.
