Email This Print ThisFinancial Information

Unaudited Financial Statements Announcement For the third quarter and nine months ended 30 September 2017

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

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:

  4. Notes:

    NM - Not Meaningful

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

  5. For YTD Sep 2016, the rollover adjustment related 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 2014.

Balance Sheets as at 30 September 2017 Far East H-REIT and Far East H-Trust

Notes:

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

  2. Cash and cash equivalents as at 30 September 2017 of S$2.8 million was S$12.5 million lower compared to balances as at 31 December 2016 mainly due to the repayment of revolving credit facility of S$27.0 million, and partially offset by the cash retained from the 1Q 2017 and 2Q 2017 distribution reinvestment plan ("DRP").

  3. This includes a shareholders' loan and accrued interest due from FIPL of S$26.1 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 repayment of revolving credit facility of S$27.0 million in 3Q 2017. The current borrowings relate to term loans of S$132.2 million due to mature in August 2018 and revolving credit facility of S$15.0 million which is payable on demand. The REIT Manager is currently working with its lenders to assess the refinancing options for these term loans.

Review of the performance of third quarter and nine months ended 30 September 2017

3Q 2017 vs 3Q 2016

Gross revenue declined 2.0% to S$27.5 million in 3Q 2017 as compared to S$28.0 million in 3Q 2016, due to lower master lease rental from the hotels and serviced residences ("SRs") and the softer performance of the retail and office spaces.

Demand for hotel accommodation was stronger in 3Q 2017 compared to the previous quarter, as a result of better contribution from the corporate segment. The hotel portfolio closed the gap in the average daily rate ("ADR") and increased overall occupancy by 1.0pp as compared to 3Q 2016. Correspondingly, revenue per available room ("RevPAR") for the hotel portfolio increased 0.4% to S$143.

The SR portfolio continued to be impacted by downward pressure on ADR. However, the occupancy gap that impacted trading in the first two quarters was closed in 3Q 2017. The average occupancy and ADR in 3Q 2017 were 1.0pp and 2.3% lower year-on-year respectively. As a result, revenue per available unit ("RevPAU") of the SR portfolio declined 3.4% year-on-year to S$196 in 3Q 2017.

A snapshot of the hotel and SR performance in 3Q 2017 is set out below.

Revenue from the retail and office spaces declined 4.5% year-on-year to S$5.6 million in 3Q 2017 due to lower occupancy and a marginal decrease in rental rates.

The net property income for 3Q2017 was S$24.8 million, a decrease of 2.3% year-on-year.

Finance costs of S$4.9 million in 3Q 2017 was marginally higher year-on-year as the short term interest rates moved up in 3Q 2017.

The income available for distribution was S$19.2 million or 5.4% lower year-on-year. The distribution per stapled security for 3Q 2017 was 1.03 cents or 8.0% lower year-on-year.

YTD Sep 2017 vs YTD Sep 2016

Gross revenue for the first nine months of 2017 was S$78.1 million, a decrease of 4.2% over the corresponding period last year due to the lower revenue contribution from the hotels and serviced residences and the commercial spaces.

2017 has been a challenging year for the hotel market in Singapore with fewer events compared to same period in 2016, tightening of spending by corporate clients, and new hotel supply entering the market putting downward pressure on room rates. RevPAR for the hotel portfolio decreased 1.8% year-on-year to S$137 for the first nine months of 2017.

While there has been an improvement in the performance of the SRs quarter-on-quarter, the portfolio continued to be challenged by the overall softness in corporate demand, particularly from project groups. The average occupancy was 6.1pp lower for the first nine months of 2017, and ADR dropped fractionally by 0.5% year-onyear. As a result, RevPAU declined 7.5% year-on-year to S$178 as at YTD September 2017.

A snapshot of the Hotels and SR performance for YTD Sep 2017 is set out below.

Revenue from the retail and office spaces declined by 1.5% to S$17.1 million.

The net property income was S$70.0 million or 4.7% lower year-on-year due to the lower gross revenue contribution during the reporting period.

The income available for distribution was S$54.0 million or 6.8% lower year-on-year. The distribution per stapled security for YTD Sep 2017 was 2.93 cents or 8.7% lower year-on-year.

Commentary On Current Year Prospects

The operating environment is expected to remain competitive. Despite visitor arrivals growing by 4.0% in the first eight months of 2017, the corporate segment is anticipated to remain soft.

In addition, the growth of hotel supply will continue to outstrip demand in 2017. However, new hotel supply is expected to ease off in 2018 with the completion of most of the new hotels under development.

The REIT Manager continues to drive the performance of the assets and selectively upgrade its existing properties to ensure their competitiveness. The refurbishment of the guest rooms and club lounge at Orchard Parade Hotel is progressing well and on track for completion in 2Q 2018.