32
Cover Proposed Acquisition of Rendezvous Grand Hotel Singapore and Rendezvous Gallery May 2013

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Page 1: Presentation to [Company]feht.listedcompany.com/newsroom/20130515_080638_Q5...The information contained in this presentation has not been independently verified. No representation

Cover

Proposed Acquisition of

Rendezvous Grand Hotel

Singapore and Rendezvous

Gallery May 2013

Page 2: Presentation to [Company]feht.listedcompany.com/newsroom/20130515_080638_Q5...The information contained in this presentation has not been independently verified. No representation

Important Notice

This presentation may contain forward-looking statements that involve assumptions, risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from other developments or companies, shifts in expected levels of occupancy rate, property rental income, charge out collections, changes in operating expenses (including employee wages, benefits and training costs), governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. You are cautioned not to place undue reliance on these forward-looking statements, which are based on the current view of management on future events.

The information contained in this presentation has not been independently verified. No representation or warranty expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Neither FEO Hospitality Asset Management Pte. Ltd. (in its capacity as the manager of Far East Hospitality Real Investment Trust (“Far East H-REIT”)) (the “REIT Manager”), DBS Trustee Limited (in its capacity as the trustee of Far East H-REIT) (the “REIT Trustee”), FEO Hospitality Trust Management Pte. Ltd. (in its capacity as the trustee-manager of Far East Hospitality Business Trust) (the “Trustee-Manager”) or any of their affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising, whether directly or indirectly, from any use, reliance or distribution of this presentation or its contents or otherwise arising in connection with this presentation.

The past performance of Far East Hospitality Trust (“Far East H-Trust”) (which comprises Far East H-REIT and Far East H-BT) is not indicative of its future performance. Similarly, the past performance of the REIT Manager and the Trustee-Manager (collectively, the “Managers”) is not indicative of their future performance.

The value of stapled securities in Far East H-Trust (“Stapled Securities”), and the income derived from them, may fall as well as rise. Stapled Securities are not obligations of, deposits in, or guaranteed by Far East H-Trust or the Managers, the REIT Trustee or any of their respective affiliates. An investment in Stapled Securities is subject to investment risks, including the possible loss of the principal amount invested.

Investors have no right to request that the Managers redeem or purchase their Stapled Securities while the Stapled Securities are listed. It is intended that holders of Stapled Securities (the “Stapled Securityholders”) may only deal in their Stapled Securities through trading on Singapore Exchange Securities Trading Limited (the “SGX-ST”). Listing of the Stapled Securities on the SGX-ST does not guarantee a liquid market for the Stapled Securities.

This presentation is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Stapled Securities.

1

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Table of Contents

Overview of Far East Hospitality Trust A

Overview of the Acquisition B

Benefits of the Acquisition C

Acquisition Financing D

EGM Resolutions E

2

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A. Overview of Far East Hospitality Trust

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Singapore-Focused Portfolio with High Quality Assets

11 Properties, totalling 2,531 hotel rooms and apartment units and valued at $2,158.4m

Number of Units: 78 Number of Rooms: 380 Number of Units: 90 Number of Units: 128 Number of Units: 72

Central Square Village Residences (CSVR)

Changi Village Hotel

(CVH) Regency House (RH)

Riverside Village

Residences (RVR) 11 10 9 Hougang Village

Residences (HVR) 8 7

Number of Rooms: 108 Number of Rooms: 256 Number of Rooms: 428 Number of Rooms: 393 Number of Rooms: 210

The Quincy Hotel (TQH) The Elizabeth Hotel (TEH) Oasia Hotel (OH) Landmark Village Hotel

(LVH)

Albert Court Village

Hotel (ACVH) 6 5 4 3 2

4

Number of Rooms: 388

Orchard Parade Hotel

(OPH) 1

Central Region

Novena Medical Hub

Changi

International

Airport

Civic and Cultural

District

Expressways

Marina Bay

Cruise Centre

Portfolio Hotel Portfolio SR Key Areas of Interest Medical Facility MICE Facility MRT Station

1 2

3 8

4

5 6

7

9

10

11

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90

95

100

105

110

115

120

125

130

135

Aug 2012 Oct 2012 Dec 2012 Feb 2013 Apr 2013

Far East H-Trust Trading Performance Since IPO

5

Far East H-Trust

20.4%

AHTRUST 11.4%

ART 15.0%

STI 12.4%

CDLHT 0.8%

Far East H-Trust has consistently outperformed the Straits Times Index since IPO

FEHT IPO

Price:

$0.93

Source: Bloomberg as of 13 May 2013 and company announcements

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B. Overview of the Acquisition

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Far East H-Trust’s First Acquisition since IPO in August 2012

7

Title 70 years from Completion Date

Market Segment Upscale

Rooms 298

Retail Net Floor Area 2,295 sqm

Purchase Price $264.3m (Hotel: S$216.6m / Retail: S$47.7m)(1)

Colliers Valuation(2) $277.0m (Hotel: S$227.0m / Retail: S$50.0m)

JLL Valuation(2) $268.5m (Hotel: S$220.0m / Retail: S$48.5m)

FP2013 RevPAR $166

Master Lessee Serene Land Pte Ltd

Term 20 years + 20 years

Fixed Rent $6.5m p.a.

Variable Rent 33% of GOR + 25% of GOP less Fixed Rent(3)

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

Notes

(1) Based on the average proportion of hotel and retail valuations by Colliers and JLL

(2) As at 31 December 2012

(3) If the calculation of the Variable Rent yields a negative figure, the Variable Rent will be deemed to be zero

Strategically located near the

business and cultural district

Easily accessible via public

transport

– Dhoby Ghaut, City Hall, Bras Basah

MRT stations

– Bencoolen MRT station is expected

to be completed by 2017

Close to major tourist attractions,

MICE venues and education

institutions

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227.0 220.0 223.5 216.6

50.0 48.5 49.3

47.7

277.0 268.5

272.8 264.3

Colliers Valuation (31 Dec 2012)

JLL Valuation (31 Dec 2012)

Average Valuation

Purchase Consideration

Hotel Retail Component

Purchase Price at a Discount to Valuation

8

Purchase Price Relative to Valuation (in $m)

4.6%

disc. 1.6%

disc.

3.1%

disc.

Total Acquisition Cost (in $m)

264.3

2.6 3.2

270.1

Total Acquisition Cost

Professional fees and other

expenses

Acquisition Fee payable to

the REIT Manager

Purchase Consideration

$761,745 $738,255 $750,000 $726,764 ($/key)

$21,786 $21,133 $21,460 $20,795 ($/sqm

of NFA)

Notes

(1) Based on the average proportion of hotel and retail valuations by Colliers and JLL

(1)

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C. Benefits of the Acquisition

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Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

10

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Yield Accretive Acquisition

11

Distribution per Stapled Security (“DPS”) for the Forecast Period(1)

(in cents)

Stapled Securityholders are expected to enjoy a higher DPS from the Acquisition

2.43 2.46

Before Acquisition After Acquisition

+ 1.1%

(2)

Notes

(1) 1 August 2013 (“Completion Date”) to 31 December 2013, subject to the assumptions set out in the circular to Stapled Securityholders dated 15 May 2013 (the “Circular”)

(2) Assuming that the New Stapled Securities are issued at an illustrative issue price of $1.10 (“Illustrative Issue Price”)

Page 13: Presentation to [Company]feht.listedcompany.com/newsroom/20130515_080638_Q5...The information contained in this presentation has not been independently verified. No representation

Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

12

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Strategic Location with Easy Access to Business, Shopping and

Cultural Districts

13

Strategically Located in the Civic District

Catered to both business and leisure

travellers

Located in close proximity to

– Tourist attractions: Orchard Road

shopping belt, National Museum of

Singapore, Singapore Art Museum,

Fort Canning Park and Padang

– Central Business District

– MICE venues: Raffles City

Convention Centre and Suntec

Singapore International Convention

and Exhibition Centre

– Educational institutions: School of

the Arts and Singapore

Management University

Convenient transport connectivity

– 5 minutes‟ walk from Dhoby Ghaut

and Bras Basah MRT stations

Source: JLL

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Positioned to Benefit from the Revamp of the Civic District

14

Improvement of pedestrian connectivity to

adjacent precincts (Fort Canning Park, Bras

Basah, Bugis, City Hall and Marina Bay

waterfront) and public spaces in the Civic District

through landscaping works

Refurbishment of landmarks (National Art Gallery,

Victoria Theatre and Victoria Concert Hall)

Expected to be completed by 2015

National Art Gallery Source: National Art Gallery, Singapore

Victoria Theatre and

Victoria Concert Hall Source: Singapore Tourism Board

The Civic District Source: Wikimedia Commons

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Recent Refurbishment Programme

15

Before Refurbishment After Refurbishment

Major refurbishment programme from 2011 to 2012

Majority of the hotel rooms refurbished with custom-designed furniture and equipped with state-of-art amenities

New retail wing Rendezvous Gallery was created, with three levels of retail space dedicated to F&B

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

16

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Attractive Growth Potential in RevPAR

17

Revenue per Available Room (“RevPAR”) (in $)

Attractive opportunity to leverage on the expertise of the REIT Manager and the hotel operator to grow the

Hotel’s business

Source: Singapore Tourism Board (Upscale Hotel Segment)

166

227.50

The Hotel (FP2013)

Upscale Hotel Segment (1Q2013)

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Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

18

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Reduced Concentration Risk of Far East H-Trust’s Income

19

ACVH 5.4%

CVH 11.8%

TEH 9.4%

LVH 11.7%

OH 15.4%

OPH 23.0%

TQH 4.0%

CSVR 7.3%

HVR 2.5%

RH 5.4%

RVR 4.1%

The Property

9.4%

ACVH 4.9%

CVH 10.7%

TEH 8.5%

LVH 10.6% OH

13.9%

OPH 20.8%

TQH 3.7%

CSVR 6.6%

HVR 2.3%

RH 4.9%

RVR 3.7%

Maximum Net Property Income contribution for any single property would be lower, from 23.0% to 20.8% for the

Forecast Period(1)

Breakdown of Net Property Income by Asset for the Forecast Period

Before Acquisition After Acquisition

Notes

(1) Subject to the assumptions set out in the Circular

Page 21: Presentation to [Company]feht.listedcompany.com/newsroom/20130515_080638_Q5...The information contained in this presentation has not been independently verified. No representation

Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

20

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Increased exposure to the corporate segment 1

In line with the REIT Manager‟s strategy to increase corporate contribution to the hotel portfolio‟s revenue, given

Singapore‟s positioning as a key financial centre and business hub in the region and the Property‟s proximity to

MICE venues and the CBD

Alignment with the REIT Manager’s Strategy

21

$2,158.4m

$2,431.2m

Before Acquisition After Acquisition

Value of Mid-tier and Upscale Portfolio

(in $m)

+ 12.6%

Size of Mid-tier and Upscale Portfolio

(by keys)

2,163 keys

2,461 keys

Before Acquisition After Acquisition

+ 13.8%

Increased exposure to the mid-tier and upscale market segments 2

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Alignment with the REIT Manager’s Strategy

22

Increased exposure to the mid-tier and upscale market segments 2

72%

82%

77%

88%

79%

87%

70%

85%

2009 2010 2011 2012

Luxury Upscale Mid-tier Economy

Historical Occupancy Rate by Segment

(in %)

Historical Average Daily Rate (“ADR”) by Segment

(in $)

$316

$422

$210

$294

$142

$197

$88 $111

2009 2010 2011 2012

Luxury Upscale Mid-tier Economy

Source: Singapore Tourism Board

Increased exposure to the resilient mid-tier and upscale segments which the REIT Manager believes to be the

fastest-growing, most profitable and scalable hospitality market segments

(CAGR: 10.1%)

(CAGR: 11.9%)

(CAGR: 11.6%)

(CAGR: 7.8%)

Page 24: Presentation to [Company]feht.listedcompany.com/newsroom/20130515_080638_Q5...The information contained in this presentation has not been independently verified. No representation

Benefits of the Acquisition

Yield Accretion 1

High Quality Property with Strategic Location 2

Attractive Growth Potential in RevPAR 3

Greater Income Diversification 4

Alignment with the REIT Manager’s Strategy 5

Greater Economies of Scale 6

23

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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Economies of Scale

24

Synergies from the hotel operator for the Existing Portfolio 1

Operational efficiencies from outsourcing of F&B operations 2

As F&B businesses typically operate on thinner margins, the REIT Manager believes that the incoming hotel

operator could potentially improve operating margins by outsourcing the F&B businesses that are currently

internally operated

The Existing Portfolio is in the mid-tier and upscale segments. With the addition of the Property, the hotel operator

for the Enlarged Portfolio can further derive greater economies of scale in managing the properties through

operational and cost synergies

Straits Café The Courtyard at Rendezvous Grand Seribu Sari Indonesian Dining

Source: Rendezvous Grand Hotel Singapore and/or Rendezvous Gallery

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D. Acquisition Financing

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Proposed Funding Method

26

264.3

2.6 3.2

132.2

137.9

270.1 270.1

Sources Uses

Professional

fees and other

expenses

Acquisition Fee

payable to the

REIT Manager

Purchase

Consideration

Sources and Uses of Proceeds (in $m)

Debt

Equity

Equity

Financing

Stapled Securities issued to STC:

approximately $68.0m

Stapled Securities issued to FEO

Group: approximately $67.8m

New Stapled Securities will be issued at

10-day VWAP

STC will provide a 180-day lock-up on

its Consideration Stapled Securities

Debt Financing Debt facilities of approximately $132.2m

resulting in a slight increase in gearing

approximately from 29% to 31%

Assumed effective interest rate of 2.3%

per annum

The Sponsor and STC is expected to have an interest of

51.9%(1) and 3.6%(1) in Far East H-Trust respectively post-

Acquisition

Notes

(1) Assuming that the New Stapled Securities are issued at the Illustrative Issue Price on Stapled Securityholdings as at 6 May 2013 (the “Latest Practicable Date”)

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E. EGM Resolutions

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EGM Resolutions

28

Issue Rationale

Resolution 1

(Ordinary)

The proposed master lease of

Rendezvous Grand Hotel Singapore

as an Interested Person Transaction

Downside protection through the Master Lease Agreement with expected rental growth

– Long-term stream of quality rental income supported by long tenure of 20 +

20 years

– Fixed Rent provides downside protection to Far East H-REIT as it provides

for a minimum rental payment regardless of the Master Lessee‟s

performance, mitigating risk caused by the uncertainty and volatility of global

economic conditions

– Fixed Rent is 60.8% of the total rental payment of the Hotel for the Forecast

Period (49.6% for the Existing Hotel Portfolio)

Resolution 2

(Ordinary)

The proposed issue of new Stapled

Securities to the Straits Trading

Company Limited as partial

consideration for the proposed

acquisition

Minimised market risks and costs

– Efficient funding method compared to fund-raising from the market

– Greater market risk for fund-raising from the market which typically require

new Stapled Securities to be issued at a discount to market price, resulting in

lower DPS yield accretion to Stapled Securityholders

– Greater completion risk for fund-raising from the market as subscription for

new Stapled Securities would depend on market demand

– Far East H-Trust will not incur equity fund-raising costs which would

otherwise be incurred in a fund-raising from the market

Alignment of STC and FEO Group‟s interests with existing Stapled Securityholders

– STC will enter into a 180 days lock-up arrangement for the Consideration

Stapled Securities

Resolution 3

(Ordinary)

The proposed issue and placement

of new Stapled Securities to the Far

East Organization Group of

Companies as an Interested Person

Transaction

The IFA is of the opinion that (i) the Master Lease Agreement and (ii) the issue and placement of new Stapled

Securities to FEO Group are based on normal commercial terms and not prejudicial to the interests of Far East

H-Trust and minority Stapled Securityholders

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Appendix I – Profit Forecast

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Profit Forecast(i)

S$’000

Forecast Period (1 August 2013 to 31 December 2013)(1)

The Property

Total Gross Revenue 5,672

Less: Property Expenses (781)

Net Property Income 4,891

REIT Manager's management fee (537)

REIT Trustee's fees (23)

Other trust expenses (60)

Finance costs (net)(2) (1,267)

Net income before tax and fair value change 3,004

Fair value change in investment properties 5,807

Net income before tax and fair value change 8,811

Income tax expense (-)

Net income after tax 8,811

Add / (Less): Non-tax (chargeable)/deductible items (net)(3) (5,300)

Income available for distribution to holders of Far East H-REIT Units 3,511

30

Notes:

(1) The forecast total return will vary to the extent that the Newly Issued Stapled Securities are issued on a date other than 1 August 2013 (the “Completion Date”) and other than the Illustrative Issue Price

(2) Finance costs comprise interest expense, amortisation of upfront debt financing costs and other bank charges and fees

(3) “Non-tax (chargeable)/deductible items” comprise the REIT Manager‟s management fees paid or payable in Stapled Securities, the REIT Trustee‟s fees, amortisation of upfront debt financing costs, fair value change

in investment properties and non-capitalised issuance costs

S$’000

Forecast Period (1 August 2013 to 31 December 2013)(1)

Existing Portfolio Enlarged Portfolio

Income available for distribution to holders of

Far East H-REIT Units 39,231 42,742

Weighted average number of Stapled Securities in

issue(2) („000) 1,614,932 1,740,734

Distribution per Stapled Security (cents) 2.43 2.46

Notes:

(1) The forecast DPS will vary to the extent that the Newly Issued Stapled Securities are issued on a date other than the Completion Date and other than the Illustrative Issue Price

(2) Includes the assumed payment of 80.0% of the REIT Manager‟s management fees incurred in relation to the Property for the relevant period in the form of Stapled Securities issued at the Illustrative Issue Price

Notes

(i) Subject to the assumptions set out in the Circular

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Thank You Key Contacts:

Gerald Lee

Chief Executive Officer

Tel: +65 6833 6600

Email: [email protected]

Danny Peh

Chief Financial Officer

Tel: +65 6833 6677

Email: [email protected]

31