ARA H-Trust posts US$2m H1 net property loss amid Covid-19 pandemic

ARA US Hospitality Trust (ARA H-Trust) on Wednesday posted a net property loss of US$2 million and no distributable income for the half year ended June 30, 2020 as earnings took a hit due to the impact of the Covid-19 pandemic.

Listed on the Singapore Exchange on May 9, 2019, the stapled group had expected a half-year net property income of US$29.5 million in its initial public offering (IPO) forecast. It also anticipated distributable income of US$19.7 million and distribution per stapled security of 3.47 US cents a year earlier.

Gross revenue came in at US$39.3 million for the half-year period, 58.4 per cent lower than its IPO forecast of US$94.5 million a year ago. Portfolio performance in H1 2020 was adversely affected by the Covid-19 pandemic, with a drop in hotel occupancies and temporary hotel closures resulting in significant revenue decline, the managers said.

Meanwhile, gross operating profit stood at US$5.8 million for the half year, falling 84.7 per cent short of its forecast of US$38.1 million.

"The Covid-19 outbreak has upended the growth trajectory of the economy and hospitality industry in the US since mid-March 2020," the managers said, adding that travel restrictions and social distancing measures adopted by the government authorities and corporations resulted in significant decline in hotel demand and occupancies.

In response, the managers implemented plans to reduce operating cost, leveraging the flexible cost structure of the portfolio's select-service hotels, they said.

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These measures included the temporary suspension and consolidation of hotel operations, and cost and labour reductions. Consequently, ARA H-Trust reported positive gross revenue and gross operating profit for H1 2020. However, after taking into account fixed costs, the stapled group posted a net property loss and no distributable income for the six-month period, the managers said.

As part of its cost mitigation measures, the managers announced in March this year the temporary closure of 30 properties. These properties have reopened as of July 1, in view of a gradual improvement in hotel demand from the domestic leisure segment, the managers said.

ARA H-Trust is a stapled group comprising ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust.

Stapled securities in ARA H-Trust closed at US$0.38 on Tuesday, up US$0.01 or 2.7 per cent.