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Unaudited Financial Statements Announcement For the Second Quarter and Six Months ended 30 June 2018

Financials Archive

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Statements of Total Return of Far East H-REIT and Far East H-Trust

Footnotes:

NM denotes Not Meaningful

  1. The share of results of joint venture relates to the equity accounting of Fontaine Investment Pte Ltd's ("FIPL") results.

  2. This relates to net change in fair value of interest rate swap contracts entered to hedge against the interest rate exposure of Far East H-REIT. This is a non-tax chargeable / deductible item and has no impact on the taxable income and distributable income to the Stapled Securityholders.

  3. Included in the net tax adjustments are the following:

    Notes:

    1. This represents 90% of REIT Manager's fees paid/payable in Stapled Securities.

  4. For 1H 2018, the rollover adjustment relates to the difference between the taxable income previously distributed and the quantum finally agreed with the Inland Revenue Authority of Singapore ("IRAS") for the Year of Assessment 2016.

Balance Sheets as at 30 June 2018 of Far East H-REIT and Far East H-Trust

Notes:

  1. The increase in investment properties was mainly attributable to the acquisition of Oasia Hotel Downtown of S$219.1 million (including related transaction costs) which was completed on 2 April 2018.

  2. This relates to the 30% joint venture interest in FIPL.

  3. This includes a shareholders' loan and accrued interest due from FIPL of S$26.5 million. The amount is used to finance the development of a new hotel site located at Artillery Avenue, Sentosa.

  4. This relates to the fair value of interest rate swap contracts entered to hedge against interest rate risk exposure of Far East H-REIT.

  5. The net movement in borrowings was due to the drawdown of term loan facility of $195.7 million and revolving credit facility ("RCF") of S$19.3 million in 2Q 2018 to partially fund the acquisition of Oasia Hotel Downtown. The current borrowings relate to term loans of S$100.0 million due to mature in December 2018 and RCF of S$51.0 million which is payable on demand. The REIT Manager has received commitment from lenders to refinance the term loan of S$100 million ahead of its maturity in December 2018.

Review of the performance of second quarter and six months ended 30 June 2018

2Q 2018 vs 2Q 2017

Gross revenue grew 10.2% to $28.5 million in 2Q 2018 due mainly to the addition of Oasia Hotel Downtown to the portfolio as well as an increase in master lease rental from the hotels.

The hotels showed a year-on-year improvement in performance in 2Q 2018. In addition, there was some uplift from major events such as Food & Hotel Asia in April and CommunicAsia in June. Revenue per available room ("RevPAR") of the hotel portfolio grew 6.9% to S$143 in 2Q 2018 due to an increase in average occupancy and average daily rate ("ADR") of 2.7pp and 3.7% respectively.

The serviced residence ("SR") portfolio continued to face softness in corporate demand in 2Q 2018. While the average occupancy of the SRs improved 2.0pp, the ADR was 6.8% lower year-on-year. As a result, revenue per available unit ("RevPAU") of the SR portfolio fell 4.5% to S$168 in 2Q 2018.

A snapshot of the hotel and SR performance in 2Q 2018 is set out below.

Revenue from the retail and office spaces declined 3.8% year-on-year to S$5.5 million in 2Q 2018.

Net property income was higher by 11.2% at S$25.7 million. Finance costs had increased 35.8% year-on-year to S$6.5 million because of the additional loan drawn down to fund the acquisition of Oasia Hotel Downtown.

Income available for distribution was S$19.0 million or 5.8% higher year-on-year. Distribution per Stapled Security was 4.1% higher at 1.01 Singapore cents.

1H 2018 vs 1H 2017

Gross revenue for 1H 2018 was S$54.3 million, an increase of 7.1% year-on-year, due mainly to the addition of Oasia Hotel Downtown to the portfolio as well as an increase in master lease rental from the hotels.

The hotels showed a year-on-year improvement in performance in 1H 2018. Revenue per available room ("RevPAR") of the hotel portfolio grew 5.2% to S$141 in 1H 2018 due to an increase in average occupancy and average daily rate ("ADR") of 2.1pp and 2.8% respectively.

The SRs showed a year-on-year improvement in performance in 1H 2018. The average occupancy of the SRs improved 6.0pp, however, the ADR was 6.1% lower. Correspondingly, revenue per available unit ("RevPAU") of the SR portfolio grew 1.2% to S$171 in 1H 2018.

A snapshot of the hotel and SR performance in 1H 2018 is set out below.

Revenue from the retail and office spaces declined 3.9% year-on-year to S$11.0 million in 1H 2018.

Net property income was higher by 7.7% at S$48.7 million. Finance costs had increased 17% year-on-year to S$11.5 million because of the additional loan drawn down to fund the acquisition of Oasia Hotel Downtown.

Income available for distribution was S$36.6 million or 5% higher year-on-year. Distribution per Stapled Security was 2.6% higher at 1.95 Singapore cents.

Commentary On Current Year Prospects

The operating environment for hotels in Singapore shows signs of stabilisation. The Singapore Tourism Board has forecasted total international visitor arrivals to grow 1% to 4% in 2018. As compared to the last few years, when hotel supply grew faster than demand at a compounded annual growth rate of 4.9%1, room supply is projected to increase more moderately at 1.2% for 20182. However, the hotel environment remains competitive as companies continue to be cautious with their corporate travel expenditure.

Far East H-Trust's serviced residences, which mainly serve corporations, are expected to experience a continued lag in demand, as corporate and relocation activities remain subdued. To ensure the portfolio's competitiveness, the REIT Manager will continue to focus on driving the performance of each property, and improving the value of its offerings.



1For the period 2013 to 2017
2 CBRE data & Far East H-Trust’s compilation