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Cover
Proposed Acquisition of
Rendezvous Grand Hotel
Singapore and Rendezvous
Gallery May 2013
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
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
A. Overview of Far East Hospitality Trust
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
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
B. Overview of the Acquisition
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
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)
C. Benefits of the Acquisition
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
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”)
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
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
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
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
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
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)
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
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
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
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
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%)
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
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
D. Acquisition Financing
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”)
E. EGM Resolutions
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
Appendix I – Profit Forecast
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
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