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Announcement:

Moody's: Singapore's hospitality REITs exhibit weaker performance due to lower tourist arrivals

16 Feb 2015

Singapore, February 16, 2015 -- Moody's Investors Service says that of the three hospitality trusts that it rates, Far East Hospitality Trust (FEHT, Baa2 stable), and OUE Hospitality Real Estate Investment Trust (OUE H-REIT, Ba1 stable) are the most adversely affected by the lower visitor numbers in Singapore.

Moody's conclusions were released after the Singapore Tourism Board announced on 11 February 2015 that tourist arrivals fell 3.1% year-over-year in 2014, and total tourism receipts for 2014 were at the same level as that in 2013.

"FEHT and OUE H-REIT are the most affected by the fall in visitor numbers because their focus is on the Singapore market," says Jacintha Poh, a Moody's Assistant Vice President and Analyst.

"We expect FEHT and OUE H-REIT's aggregate EBITDA to grow by less than 2% in 2015," adds Poh.

Moody's analysis is contained in its recently-released report titled " Softer Performance of Singapore-Focused Hospitality REITs, Due to Lower Tourist Numbers," and is co-authored by Poh, and Agnes Lee, an Associate Analyst.

Moody's report points out that tourist arrivals in Singapore fell for the first time in five years during 2014.

As for Singapore's hospitality sector as a whole, Moody's expects the sector's operating environment to remain challenging at least over the next 12 months, as the supply of new hotel rooms continues to grow, while demand for accommodation tapers.

In the fiscal year ending 31 December 2015 (FY2015), Moody's expects that FEHT's adjusted debt/total deposited assets and adjusted EBITDA interest coverage will weaken to 32%-35% and 4.5x-5.0x, as it continues to draw down debt for the funding of its Sentosa hotel development joint venture with Far East Organization Centre Pte Ltd (unrated).

Moody's report says that in FY2014, FEHT was the most affected by the slowdown in tourist arrivals, because the trust derived 67% of its total revenue from hotels during the year, 14% from serviced residences, and 19% from commercial premises.

Its hotels' revenue per available room (RevPar) fell by 6% year-over-year to SGD155 while its serviced residences' revenue per available unit fell 3% year-over-year to SGD219.

As for OUE H-REIT, over the next 12 months, Moody's expects that the trust's adjusted debt/total deposited assets will be around 40%-45%, and adjusted EBITDA interest coverage will fall in the range of 6.4x-6.6x, assuming the trust takes on additional debt of around SGD400-SGD500 million to fund the acquisition of Crowne Plaza Changi Airport.

In January 2015, the trust completed Phase 1 of the acquisition of the hotel. The SGD290 million partial acquisition was fully funded by a five-year secured term loan.

OUE H-REIT reported RevPar of SGD249 in FY2014. The result was 3% lower than the trust's forecast of SGD257.

The third Singapore hospitality REIT that Moody's rates is Frasers Hospitality Trust (FHT, Baa2 stable). Moody's report says that FHT is the least exposed of the three trusts to the weaker hospitality outlook for the Singapore market, because only around one-third of its revenue is from the city state.

Moody's expects FHT's financial metrics in FY2015 to improve, with adjusted debt/total deposited assets of 38%-40%, and adjusted EBITDA interest coverage of around 5.5x, post receipt of tax refund to repay debt.

Like OUE H-REIT, FHT Singapore portfolio's RevPar in 2014 outperformed the trust's own forecast. Its RevPar of SGD267 for the period from inception on 14 July 2014 to 31 December 2014 was higher than its forecast of SGD259.

The higher RevPar was due to the stable performance achieved by its InterContinental Singapore luxury hotel, which helped cushion the softer performance of its serviced residences — Frasers Suites Singapore — against the backdrop of a weaker Singapore rental market.

Subscribers can access the report at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1003131.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Jacintha Poh
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Philipp L. Lotter
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: Singapore's hospitality REITs exhibit weaker performance due to lower tourist arrivals
No Related Data.
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