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Unaudited Financial Statements Announcement For the half-year ended 30 June 2021

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

Notes:

NM – Not meaningful

  1. This includes rental rebates and waivers granted by the REIT to tenants as part of the measures to help affected tenants who need more time and support to recover from the impact of COVID-19.
  2. The share of results of joint venture relates to the equity accounting of Fontaine Investment Pte Ltd's ("FIPL") results. This arose mainly from depreciation expense on land and buildings and finance costs incurred on the borrowings in relation to Village Hotel Sentosa, The Outpost Hotel Sentosa and The Barracks Hotel Sentosa.
  3. 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.
  4. The fair value change in investment properties of S$1.3 million arose from the revaluation of 9 hotels and 4 SRs as at 30 June 2021 based on internal valuations performed by the REIT Manager. Please refer to Note 1(e)(3) Investment properties for more details. This is a non-tax chargeable / deductible item and has no impact on the taxable income and distributable income to the Stapled Securityholders.
  5. Included in the net tax adjustments are the following:

    Notes:

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

  6. The rollover adjustment for 1H 2020 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 2018.
  7. Please refer to section 8(a) of the financial statement for details of income available for distribution after retention.

Balance Sheets as at 30 June 2021

Notes:

  1. The increase in investment properties was mainly attributable to the fair value change in investment properties. Please refer to the details in Note 1(e)(3) Investment properties.
  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$33.8 million. The amount is used to finance the development of Village Hotel Sentosa, The Outpost Hotel Sentosa and The Barracks Hotel Sentosa which commenced hotel operations in 2019. The increase in trade and other receivables is mainly due to $3.1 million loans provided to FIPL during the period and lower trade receivables as at 31 December 2020 as rental rebates were provided to tenants.
  4. The decrease in trade and other payables is mainly due to higher trade payables to contractors and grant payable of S$3.4 million as at 31 December 2020.
  5. The total gross borrowings as at 30 June 2021 of S$999.6 million was S$8.8 million higher compared to balances as at 31 December 2020 mainly due to a net drawdown of revolving credit facility ("RCF") of S$8.8 million during the period to partially fund the 2H 2020 cash distribution to Stapled Securityholders and on-lend to FIPL.
  6. The current borrowings relate to term loans of S$100.0 million due to mature in December 2021 and RCF of S$21.7 million which is payable on demand. For the S$100.0 million term loan due to mature in December 2021, the REIT Manager is evaluating and assessing the refinancing options for the term loan. The refinancing of this term loan is expected to complete before the repayment date. As at 30 June 2021, Far East H-REIT has undrawn and uncommitted RCF of S$278.3 million with 4 banks to fulfill its liabilities as and when they fall due. Please refer to the details of aggregate amount of borrowings as disclosed in Note 1(e)(4) Borrowings.
  7. This relates to the fair value of interest rate swap contracts entered to hedge against interest rate risk exposure of Far East H-REIT.

Review of the performance of half-year ended 30 June 2021

1H 2021 vs 1H 2020

Gross revenue for 1H 2021 was S$41.6 million, lower year-on-year by 6.1%, mainly due to weaker demand for the SRs and commercial premises arising from the impact of the COVID-19 outbreak. The master lease rental for the hotel segment remained at the fixed rent level while the SR segment continued to perform above the fixed rent.

The average occupancy of the hotels remained flat year-on-year at 77.6% as the hotels secured contracts from companies that required accommodation for their Malaysian workers as well as from the Government for isolation purposes. The average daily rate ("ADR") was 35.3% lower year-on-year at S$66 due to the lower-rated business from the Government for isolation purposes and from companies housing their workers on a long-term basis. As a result, revenue per available room ("RevPAR") was lower year-on-year by 35.4% at S$51.

While the support from long-stay corporate sources helped to minimise the negative impact of the pandemic, the SRs experienced a decline in demand from companies requiring accommodation for their workers as the protracted border closure has caused them to look for cheaper alternatives. For 1H 2021, the average occupancy of the SRs was 76.2%, 6.5pp lower year-on-year. ADR declined by 9.5% to S$181 due to lower rates from some corporate contracts. Correspondingly, revenue per available unit ("RevPAU") fell by 16.9% year-on-year to S$138, although the master lease rental of the SR portfolio registered a smaller decline of 7.8%.

A snapshot of the hotel and SR performance in 1H 2021 is set out below.

Revenue from the retail and office spaces decreased by 23.2% year-on-year to S$7.4 million in 1H 2021 as the pandemic led to a decline in demand for such ancillary spaces located in properties primarily used for hospitality purposes.

Net property income was lower by 6.2% at S$36.2 million. Finance costs were lower by 16.9% year-on-year mainly due to lower short-term interest rates and lower fixed rates. Lower year-on-year REIT Manager's fees of 3.9% in 1H 2021 were due to the lower value of the Deposited Property.

Income available for distribution after retention was S$21.7 million, 7.6% higher year-on-year. This translates into a distribution per Stapled Security of 1.10 Singapore cents, compared to 1.03 Singapore cents in 1H 2020.

Commentary On Current Year Prospects

The resurgence of new variants of COVID-19 globally, in particular the Delta variant, puts a dampener on the recovery of the Singapore hospitality industry, which is heavily dependent on inbound travel. With international borders remaining largely closed, near-term business will continue to be supported by government and long-stay corporate contracts.

A mitigating factor for Far East H-Trust's Stapled Securityholders is the high fixed rent component of the master leases, which formed 81% of gross revenue in 1H 2021. The 20-year master leases on all portfolio assets are well-supported by the Sponsor, Far East Organization.

As vaccination rates continue to rise globally and major economies transit to life in an endemic state with resumption of business activities, we remain sanguine about the prospects of international travel arrangements materialising in the months ahead. This is backed by the Multi-Ministry Task Force's assurance that Singapore will progressively facilitate international travel with countries that have done well in managing the COVID-19 situation.

The REIT Manager is closely monitoring the progress of Singapore's reopening plans, as well as reviewing its business strategy in light of the evolving COVID-19 situation to optimise the performance of its portfolio.

During this period, asset enhancements will be expedited to prepare for the eventual upturn in the sector. In addition, we will continue to explore suitable redevelopment opportunities for our properties to extract greater value and achieve better returns.

In relation to Central Square, the REIT Manager will continue to explore various options for the site to deliver optimal value for Stapled Securityholders and make the relevant announcements when there are material developments.