CDL Hospitality Trusts 3Q 2025: Asset Enhancement, UK Expansion, and Strategic Positioning Signal Turning Point for Stapled Securities

Executive Summary

CDL Hospitality Trusts (“CDLHT”), one of Asia’s leading hospitality trusts, delivered a mixed set of operational results for the third quarter and nine months ended 30 September 2025. While headline revenue growth remained stable, the underlying portfolio dynamics, major asset enhancement initiatives, and transformative acquisitions across the UK signal strategic repositioning that could be price sensitive and may affect shareholder value.

Key Performance Highlights

• Gross Revenue: Q3 2025 gross revenue rose 2.5% year-on-year (yoy) to S\$69.2 million, supported primarily by the UK and Australia portfolios.
• Net Property Income (NPI): NPI declined 5.6% yoy to S\$34.3 million in Q3 and 9.7% yoy to S\$92.9 million for the nine months, mainly due to renovation-related disruptions at key Singapore and New Zealand assets and rising operating costs.
• Singapore Hotels: Q3 occupancy held strong at 88.3%, but RevPAR fell 5.9% yoy due to the Formula 1 Grand Prix shifting to October and ongoing room renovations at W Hotel. NPI for the Singapore portfolio dropped 8.1% yoy in Q3 and 15.1% yoy for the nine months.
• UK Expansion: The Castings (Manchester) and Benson Yard (Liverpool) contributed S\$2.2 million in inorganic NPI in Q3 and S\$5.9 million for YTD Sep 2025, with UK portfolio NPI soaring 70.1% yoy for the nine months. Hotel Indigo Exeter acquisition also boosted UK hotel performance.
• Asset Enhancement Works: Major renovations at W Hotel (Singapore), Grand Millennium Auckland (New Zealand), and Ibis Perth (Australia) weighed on near-term revenue and NPI but are expected to position these assets for improved market performance from 2026 onwards.
• Geographical Diversification: Portfolio includes assets in Singapore, UK, Australia, New Zealand, Japan, Maldives, Germany, and Italy, providing a hedge against regional volatility.
• Balance Sheet & Capital Management: Gearing increased to 42.4% (from 40.7% at end-2024), with S\$77.0 million cash reserves and significant undrawn facilities. Major refinancing completed, with most new loans structured as sustainability-linked facilities.

Shareholder-Sensitive and Price-Moving Developments

1. Asset Enhancement Initiatives May Depress Near-Term Earnings but Unlock Future Value

Renovations at W Hotel (Singapore), Grand Millennium Auckland (NZ), and Ibis Perth (Australia) are materially impacting reported NPI in 2025. For instance, the W Hotel and Grand Millennium Auckland alone accounted for 64% of the overall NPI decline, totaling S\$6.4 million for YTD Sep 2025. Excluding these, revenue and NPI trends are more favourable (gross revenue would have increased 5.2% yoy and NPI decline narrowed to 4.0%). The anticipated completion of these enhancement works by end-2025 positions these assets for a significant uplift in 2026, which could be highly price sensitive and affect share valuation.

2. UK Expansion Driving Inorganic Growth

The acquisition and ramp-up of The Castings (Build-to-Rent, Manchester) and Benson Yard (Purpose-Built Student Accommodation, Liverpool) have materially increased UK portfolio earnings, with Benson Yard achieving 97% committed occupancy for the new academic year and The Castings reaching 90.1% occupancy. The total UK portfolio (living and hotel assets) delivered a 70.1% yoy increase in NPI for YTD Sep 2025. The continued contribution of these assets, especially as they move past their gestation phase in 2026, could potentially drive further upside for CDLHT’s Stapled Securities.

3. Strategic Rebranding in the Maldives

Raffles Maldives Meradhoo will be rebranded as The Halcyon Private Isles Maldives, Autograph Collection under Marriott’s global platform from 1 November 2025. This move is expected to drive future bookings via Marriott’s Bonvoy network, although a typical gestation period is anticipated for brand awareness. This strategic repositioning could materially affect the resort’s long-term trading potential.

4. Capital Management and Sustainability-Linked Refinancing

CDLHT has proactively refinanced ¥3,100 million TMK bond and related term loans, extending maturities by five years and increasing sustainability-linked facilities to S\$937.7 million. Interest rate swaps totaling S\$358.0 million have been executed to hedge floating-rate debt. With S\$326.7 million in uncommitted bridge loans, CDLHT is well-positioned for opportunistic acquisitions, potentially impacting future share price.

Market Outlook and Near-Term Catalysts

• Singapore: STB’s Tourism 2040 roadmap, new attractions and MICE events, and infrastructure upgrades (Marina Bay Cruise Centre, Rapid Transit System Link) are expected to drive long-term demand. F1 Grand Prix uplift will reflect in Q4 2025 results.
• New Zealand: Market remains challenging due to supply overhang and slow recovery in international arrivals. The new convention centre and events package could be medium-term catalysts.
• Australia: Ibis Perth’s full refurbishment is set to drive performance in 2026 amid a supportive visitor economy strategy.
• Japan: Record tourist arrivals and robust trading conditions support positive outlook despite currency headwinds.
• Maldives: New airport terminal and rebranding of Meradhoo to Marriott’s Autograph Collection could bolster long-term growth.
• UK and Europe: Living sector assets in the UK are expected to deliver their first full-year of NPI in 2025. Regulatory pressures and economic uncertainty weigh on Europe, but event-driven demand and student accommodation remain resilient.

Other Noteworthy Updates

• Grand Millennium Auckland’s lease is currently on holdover, with new documentation pending finalisation.
• Benson Yard’s occupancy and performance are supported by the University of Liverpool’s rising global rankings, which could sustain demand.
• CDLHT continues to monitor debt profile and currency risks, with active hedging strategies in place.

Conclusion

While headline earnings have been impacted by major asset enhancement works, underlying portfolio diversification, strategic UK expansion, and proactive capital management signal a turning point for CDLHT. The completion of renovations and stabilisation of new assets in 2026 could unlock significant upside, making the current period a potential inflection point for Stapled Securities.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Forward-looking statements are subject to risks and uncertainties. Investors should conduct their own due diligence before making investment decisions. Past performance is not indicative of future results. The author does not hold any position in CDLHT and is not affiliated with CDLHT or its managers.

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