Gross revenue fell by 1.8% y-o-y to $125.1 million due to softer performance across most of the trust’s portfolio markets except for UK, Japan and Australia. Net property income (NPI) fell by 11.9% y-o-y to $58.6 million as interest expense rose by 4.3% y-o-y, mainly due to the addition of CDLHT’s two new UK assets funded by borrowings. The higher interest expenses were also due to the commencement of expensing borrowing costs related to The Castings, CDLHT’s build-to-rent property (BTR) in Manchester, the UK.
The trust attributed the decline in DPS to The Castings’ ramp-up phase, lower overall NPI and higher total interest costs. Property expenses in the 1HFY2025 rose to $66.5 million from $60.8 million. Finance costs also rose to $39.2 million from $32.5 million.
Beyond the “general softness” in the 1HFY2025 due to the lack of major events this year as well as macroeconomic uncertainties, managing its funding costs is a “priority”, says Vincent Yeo, CEO of CDLHT’s managers.
CDLHT, which owns 22 operational properties across 11 cities in eight countries, also monitors its foreign exchange (forex) exposure closely, given the diversity of currencies in which its properties operate.
See also: SingPost reports 60% lower operating profit in 1QFY2026 business update
According to chief financial officer Annie Gan, the trust hedges its income stream across several markets. “For the UK and Europe, we hedge about 75%. For Australia, we hedge about two-thirds, and for the rest, roughly 50%,” she says. “Of course, we can hedge more [if needed].”
On the interest rate front, Yeo says the trust implemented eight interest rate hedges as Singapore dollar (SGD) rates began to trend down. “We took the view that there would be a continued form of falling, so those hedges were actually for quite short tenors, like one-and-a-half years,” he explains. “Now they've gotten down to a level that I think is very attractive. We're starting to do three year tenors, with the view that those that we did one and a half, we will also extend it at the right time at these much lower rates.”
Although higher interest costs weighed on 1HFY2025 distributions, the managers believe the worst is over. “We got hit because our fixed and float ratio, we were lower on the fixed comparatively relative to our peers,” says Mandy Koo, chief investment officer.
See also: SATS earnings up 9.1% y-o-y to $70.9 mil for 1QFY2025
Now that interest rates for some of the currencies within CDLHT’s portfolio have begun to come off, the trust is benefitting from the lower rates, she adds. “We can take advantage of all these lower fixed rates, especially when we fix them, we’re actually lower than the spot. So as you fix them and average them down, then where it's at low enough level, then we'll fix for [a] longer tenor.”
Thanks to recent refinancing and interest rate hedging strategies, CDLHT has already seen its all-in passing rate drop from 4.0% as at end-December 2024 to 3.6% currently.
Acquisitions and divestments
In line with its cost management strategy, Yeo says the trust is “quite open” to asset recycling and it is “taking a strategic view on that”. While the trust is “very positive” on its Singapore assets and intends to hold them for the long term, it takes a more flexible view when it comes to its overseas properties.
Divesting its overseas properties will depend on whether there is “potential upside” compared to where the trust is at now and whether there are better opportunities in the market place in that the trust will be able to invest the same funds and get better returns. “A lot of it depends on where we have in terms of the cycle and the pricing in those respective countries,” says Yeo.
He adds that Singapore remains an attractive and defensive market for hospitality assets. Given that transaction prices have been very high while cap rates have been low. Singapore is also still seen as a “safe haven destination” for investments, observes Yeo.
Divestments aside, the trust remains open to acquisitions.
For more stories about where money flows, click here for Capital Section
“One of the strategic moves we’ve made is in the living asset class” says Yeo. “The idea is that there is more income stability to these assets and they are newer asset classes where there’s still potential for growth and still attain stability.”
As at June 30, CDLHT has two assets within the sector, The Castings and Benson Yard, its purpose-built student accommodation (PBSA). The Castings is located in Manchester while Benson Yard is in Liverpool. Both are in the UK.
The Castings, which opened mid-last year, is about 74% physically occupied and on track to reach stabilisation between 3Q and 4Q. However, as the asset is still in its ramp-up phase, funding costs continue to outweigh income and are not yet contributing positively to its DPS.
Benson Yard, CDLHT’s student accommodation asset in Liverpool, is also performing well. The property, which the trust acquired below replacement cost from a receiver, has achieved over 90% in pre-leasing and a physical occupancy rate of 70% for the new academic year starting in September.
According to Yeo, Benson Yard, located within walking distance to the University of Liverpool and Liverpool John Moores University, is one of the newest and best-located PBSAs in the city. “I’d say it has the best facilities in Liverpool,” says Yeo.
Koo adds that the PBSA has strong physical attributes, given that 80% of the PBSAs in Liverpool were built before 2019. “It’s actually very expensive to build [PBSAs] in the UK. So the feasibility to build PBSAs [in Liverpool] is very, very low,” she says.
To this end, Koo notes that once The Castings stabilises, the living sector is expected to contribute around 8% of CDLHT’s NPI, providing a more stable revenue base. There’s definitely room to grow from there, she points out.
Looking ahead, the trust is also eyeing longer-term contributions from upcoming developments such as the Moxy Singapore, which is scheduled to open at the end of 2026 or early 2027. “That would be a very impressive asset in a fantastic location with amazing views and very good amenities… It’s lifestyle hotel and it’ll be a very good fit for the new generation of travellers,” says Yeo.
Better 2H expected
On the back of a “challenging” 1HFY2025, the managers expect to see a stronger 2HFY2025.
Yeo shares that July has been a “very strong month”, partly helped by the World Aquatics Championships. While the 3QFY2025 may see potentially softer numbers given that the Formula One Singapore Grand Prix has been moved from September to October this year, the managers expect a better 4QFY2025 on a y-o-y basis.
While CDLHT’s Singapore revenues per available room (RevPARs) are likely to be down on a full-year basis given the deficit in 1HFY2025, the managers are expecting to see a better FY2026 should event calendars be stronger and the AEIs complete for W Singapore.
Singapore’s lowered RevPARs were due to the new hotels that recently opened and can be “quite aggressive” in their promotions, explains Yeo. The slight increase in visitor arrival numbers also did not mitigate the new hotels’ “competitive behaviour”, which caused a “comprise” in terms of pricing power. Furthermore, the renovations conducted at the W Singapore also contributed to the lower RevPARs.
That said, the full contributions from The Castings along with its expected stabilisation is likely to contribute positively to CDLHT’s DPS after interest costs and other expenses, says Koo. Benson Yard is also tracking well and expected to stabilise over the next few weeks.”
CGSI and Maybank issue downgrades after ‘weak’ 1HFY2025
CGS International analysts Lock Mun Yee and Li Jialin have downgraded CDLHT to “hold” from “add” due to the trust’s uncertain near-term outlook and “muted” 1HFY2025 performance.
CDLHT’s 1HFY2025 DPS of 1.98 cents stood at 38% of both Lock and Li’s FY2025 forecast and the consensus’ forecast. The lower-than-expected DPS was attributed to continued weakness in the trust’s core Singapore portfolio.
“1HFY2025 NPI fell by 11.9% due to declining NPI for Singapore hotels (-20.9% y-o-y) as demand shrank and supply headwinds persisted, and softer performance in overseas (ex. UK) hotel portfolio (-24.2% y-o-y),” the analysts write in their Aug 1 report. “NPI from Singapore and overseas (ex.UK) hotels are shy of 1HFY2019 levels by 16%/33%.”
Given this, the analysts have lowered their FY2025 RevPAR assumption for its Singapore hotels by 13% to $171.
Overseas, the analysts note that the trust is “more downbeat” about Italy due to an increase in supply in the coming years and its over-reliance on the US as a source market.
While CDLHT’s managers expect to see 10 bps of savings from cost of debt in the 2HFY2025 based on the floating portion of its borrowings, this is likely to fully cushion its slow performance, say Lock and Li.
In addition to their downgrade, the analysts have lowered their target price to 75 cents from 87 cents previously. They have also cut their FY2025 and FY2026 revenue estimates by 8% and 18% respectively due to the delayed acquisition of Moxy and the underperformance in 1HFY2025. Their DPS estimates for FY2025 to FY2027 were cut by 17.3% to 21.1%.
Lock and Li’s FY2025 and FY2026 DPS estimates are now at 4.2 cents and 4.8 cents respectively.
Maybank Securities analyst Krishna Guha has maintained his “hold” call in a July 31 report but with a lower target price of 70 cents from 75 cents previously after CDLHT’s “weak” performance.
Guha has also cut his DPS estimates by 10% and 4% for the FY2025 and FY2026 respectively on CDLHT’s lower NPI, offset by lower borrowing costs.
Guha’s FY2025 and FY2026 DPS estimates are now at 4.8 cents and 5.4 cents.
DBS sees ‘recovery in sight’
Unlike their peers, DBS Group Research analysts Geraldine Wong and Derek Tan are more upbeat over CDLHT’s prospects with an unchanged “buy” call as they see a “recovery in sight”.
“While headline yields of [around] 5.4% - 5.7% are lower than the historical mean of c.6%, we are not turning negative as current valuations at 0.6 times P/B are below replacement costs,” they write in their July 31 report.
As the analysts expect CDLHT to turnaround in 2HFY2025 underpinned by travel momentum across its portfolio in 3QFY2025 and inorganic contributions from its UK acquisitions, investors should “stay the course”.
Wong and Tan also believe the incremental assets from CDLHT’s UK assets, signs of recovery from improving tourism numbers and strong event pipeline are likely to offset the flattish RevPAR for its Singapore hotels.
In addition, the analysts see CDLHT as one of the preferred interest rate proxies among the S-REITs.
“Notably, CDLHT recorded a 40bps q-o-q decline in borrowing costs in 1HFY2025 and is expected to continue to benefit,” they write. “With 34% of its loan book up for refinancing in FY2025, and a low fixed-rate hedge profile of 32%, we are optimistic that CDLHT will be a key beneficiary of lower interest rates once cuts materialise in 2HFY2025.”
Yet, despite the positives, Wong and Tan have lowered their target price to $1 from $1.10 previously, reflecting an earnings revision of 19% to 20%.
The analysts’ FY2025 and FY2026 DPS estimates are at 4.18 cents and 4.56 cents.
Units in CDLHT closed flat at 78.5 cents on Aug 8.
