FDAIF Update – April 2022

Calendar Icon Wednesday, 13th April 2022

FDAIF Update – April 2022

It has been six months from the commencement of the Finexia Direct Accommodation Income Fund (“Fund”), and we provide the following update on some essential items in particular:

  • Financial performance
  • COVID impact
  • Balance of the Financial Year
  • Distribution update

Financial Performance

Since its inception, a very pleasing result is that the Fund has made gross distributions to FDAIF1 Unit Holders equivalent to 12.02% per annum. The trading results of StayCo (pre-tax) is summarised in the following table:

Income$2,499,579.49
COGS$(1,207,790.30)
Gross Profit $1,291,789.19
Expenses$(706,474.14)
Net Profit$585,315.05

It should be noted that the businesses did commence trade within the Trust at different times over the first 7 weeks of the Fund and disruptions to the Business did take place as described below.

The impact of COVID

StayCo has faced significant headwinds operationally and financially over the Christmas and New Year period. The travel restrictions and, more particularly, border announcements from the Queensland Government and the impact on staffing and costs have been the most significant factors.

Our short-stay accommodation businesses are seasonal and rely heavily on the Christmas and School Holiday periods to generate a significant portion of the annual profits. To achieve the annualised Return on Equity, we use these more profitable months to effectively ‘pay’ for and ‘carry’ the months when our revenue, occupancy, and room rates are naturally lower. Usually, we would outperform our annualised forecast of 12.02% per annum during December and January; however, this hasn’t been the case this year for the following reasons.

On the 6th of December 2021, the Queensland Government announced the border reopening. While bookings were strong after that announcement, it was too late to achieve a typical trading month for December. Many of our potential guests had already made plans for the Christmas period in their home states.

When the borders eventually opened on the 16th of December, bookings did step up again. However, most of December had passed, and it was too late to recover.

January bookings did recover markedly but still sat below our forecast. Many families usually make their plans for this period before the 6th of December, when the reopening was announced.

The timing of the announcements was the most significant driver of this, not the actual opening date. If Queensland had announced the 16th of December 2021 opening earlier in the year, our performance would have been considerably better.

Remaining Financial Year

The short-stay holiday accommodation businesses had a good February and March, and we are happy with the forward bookings in the critical Easter period.

The announcement of the opening of the international borders assists the tourism industry generally; however, the direct impact on StayCo is negligible as approximately 90% of our guests are domestic (NSW & VIC). The return of international tourists will absorb room nights in the larger hotel chains, reducing them from directly competing with StayCo, particularly on the Gold Coast.

Management has commenced a round of direct advertising and marketing for these properties, targeting the slower periods in the months ahead, and the initial results are very promising and showing success.

For the long-term accommodation businesses, the strong performance of the residential property market is having a negative impact on our income from this Business. This is the case as investors whose properties we managed are “taking profits” by selling their investment properties. The incoming buyers are predominantly owner-occupiers looking to secure a property or have migrated from interstate to escape rapidly growing property prices particularly in house market. The result is that we lose them from our management and let pool putting downward pressure on revenue. The actual rents charged for each property under management is experiencing circa 10% growth however we are managing less properties than we anticipated at commencement. When this has occurred in previous cycles the experience has been that properties do return to the letting pool over time as the trend reverses however we are taking a proactive approach initiatives and manager level incentives that particularly target the current circumstances.

Next Distribution

While the December and January months were less than our forecast, we do believe that we will continue to meet the overall Return on Equity guidance for FDAIF1 unit holders as we remain very confident in the long-term performance of the Businesses. As such the upcoming April distribution to FDAIF1 Unit Holders will be 12.02% per annum.

If you have any questions, don’t hesitate to get in touch with us at [email protected] or 1300 886 103.

Disclaimer

Past performance is not a reliable indicator of future performance.

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