Letter to Unitholders

On behalf of the Board of Directors of the H-REIT Manager and the HBT Trustee-Manager, I am pleased to present our annual report for FY 2015.


Global economic conditions remained uncertain throughout 2015 amidst turbulent financial markets and this had an adverse impact on our portfolio overall. However, our recent acquisitions of hotels in cities with strong hospitality demand drivers such as Tokyo and Cambridge have supported the portfolio performance by providing the benefits of income diversification and also helped to mitigate the softer trading conditions in some of CDLHT's key markets in 2015. CDLHT's efforts in broadening the earnings base have seen Singapore properties' contribution to portfolio NPI reduce from 69.0% in FY 2014 to 66.4% in FY 2015.

For FY 2015, net property income of CDLHT decreased 2.5% to S$137.0 million. During the year, the Managers converted some of the borrowings into longer tenor fixed-rate loans in anticipation of further interest rate rises. This exercise, coupled with additional borrowings to fund its acquisition as well as the general rise in floating rates, have led to incremental interest expenses. Consequently, total distribution for FY 2015 registered a 7.8% yoy decline to S$99.2 million. Total distribution per Stapled Security for FY 2015 was 10.06 cents, compared to 10.98 cents the year before.


In 2015, the Singapore hospitality industry faced headwinds caused by weak economic environment, as well as increased room supply. This was exacerbated by the relatively strong Singapore dollar, which had affected key source markets around the region. As a result, RevPAR for the Singapore Hotels decreased 6.9% yoy in FY 2015 to S$175 despite occupancies recording a commendable 87.7%.

In 2016, Singapore is expected to see a better events calendar with new marquee events, prominent medical congresses and the return of biennial citywide events. Singapore has also been successful in attracting big corporate incentive groups to the garden city. Supporting the growth in tourism is an estimated increase of 3,930 rooms in 2016. However, the outlook for the global economy and Singapore hospitality sector in 2016 remains uncertain. The slower economic growth in China has also contributed to a higher risk of economic vulnerability worldwide. Any further slowdown in economic activities will weigh on attendant demand for hotel rooms in Singapore.

Notwithstanding the near-term challenges, the long-term outlook for Singapore tourism sector remains positive, augmented by initiatives of the Singapore government. These include the continuing pipeline of tourist attractions and ongoing construction of Changi Airport’s Terminal 4 which will serve to entrench Singapore’s position as a leading aviation hub in the region.

For CDLHT's Australia and New Zealand Hotels, fixed rent contributions were lower in FY 2015 due to local currency weakness against the Singapore dollar. The lack of new investments in the mining sector in Perth and Brisbane as a result of the weak commodity prices, coupled with the addition of new hotel supply, may weigh on the trading performance of the hospitality sector. However, any weakness in the performance of the Australia Hotels is mitigated by the defensive lease structure which provides CDLHT with largely fixed rent. In New Zealand, the tourism sector is seeing good growth momentum and the near-term outlook for the hospitality sector looks promising.

In Maldives, the operating environment was affected largely by the continued strength of the US dollar against most currencies which rendered the travel destination more expensive. In addition to the currency weakness of key source markets against the US dollar, the slowing growth in China and the recent devaluation of the Chinese yuan are also expected to dampen demand for luxury resort stays. Recognising the challenging trading environment, the Managers have also been proactively working with operators of the two resorts to work on cost containment measures to protect the profit margins.

Strong performance and contributions from the newly acquired Hilton Cambridge City Centre and the Japan Hotels have helped to mitigate the weaker contributions in other markets in 2015. For the period in which CDLHT owns the UK Hotel (4Q 2015), it traded strongly postrefurbishment, recording a yoy RevPAR growth of 20.8%. The Japan Hotels, which was acquired in December 2014, saw RevPAR growth of 22.2% (1) in FY 2015 due to a surge in visitor arrivals and active revenue management strategies. Going forward, the Japanese hospitality sector is expected to continue to benefit from the various government initiatives to bring in more tourists into Japan and from the potential growth leading up to the Tokyo Olympics in 2020.

Overall, the Managers remain cautious over the health of the global economy given lingering concerns on the slowing growth in China, as well as the tepid economies in the United States and Europe. The weak economic sentiment may exert challenges for some of the markets that CDLHT operates in. Nevertheless, the geographically diversified portfolio is expected to continue to provide CDLHT with the benefits of income diversification when some markets are going through unfavourable cycles.


On 1 October 2015, CDLHT made its maiden entry into Europe with the acquisition of a hotel in Cambridge, UK for a property price of £61.5 million (approximately S$132.7 million (2)). This acquisition was fully funded by sterling-denominated debt. Hilton was appointed as the manager of the hotel and the hotel was rebranded to Hilton Cambridge City Centre on 15 December 2015.

This transaction represented a unique opportunity for CDLHT to secure a prominent presence in Cambridge, which is one of the most robust hospitality markets in UK with a strong demand profile. It remains one of the primary tourist destinations in UK due to its historical and cultural appeal. As it is also an important location for UK's R&D sector, it is home to a large cluster of high-tech businesses focusing on biomedical, pharmaceutical and technology.

The hotel is a newly-refurbished upper upscale hotel and comes with a comprehensive suite of facilities. It also boasts a prime location in the heart of Cambridge city centre, with easy access to transport amenities and close proximity to tourist attractions. In addition, the recent rebranding should also augment the trading performance as the hotel benefits from the management expertise and distribution strength of the international operator.

With the successful completion of its first investment in Europe, CDLHT's portfolio valuation has grown to S$2.5 billion as at 31 December 2015 and it now enjoys greater income diversification though an enlarged portfolio of 15 hotels and two resorts in six markets with a total room count of 4,911.


The Managers are constantly evaluating the portfolio for asset enhancement opportunities that would improve the assets’ value and competitiveness.

In 2015, asset enhancement initiatives that were completed include the refurbishment of restaurant and bar at Mercure Perth as well as the addition of two new beach villas at Jumeirah Dhevanafushi. Claymore Connect (formerly known as Orchard Hotel Shopping Arcade) was officially opened in October 2015 following an asset enhancement exercise. The mall’s net lettable area has increased by about 10,000 sq ft to approximately 54,000 sq ft (3) and is being repositioned as a family-friendly mall.

In 2016, Grand Copthorne Waterfront Hotel is expected to complete its extensive renovation to refresh its lobby, add meeting room capacity and significantly augment its food and beverage offerings. At M Hotel, with the exception of 10 suites, the refurbishment of all the rooms which started in March 2015 is scheduled for completion by end of 2016. These initiatives reflect the Managers’ commitment to enhance the competitive positioning of the assets in order for CDLHT to capitalise on the medium- and long-term growth potential of the Singapore hospitality market.

In Japan, the two hotels have undergone conversion of some of its smoking rooms to non-smoking rooms to capture the burgeoning demand from non-smoking guests in early part of 2016. Over in Australia, Novotel Brisbane is undergoing a refurbishment of its bar while Mercure Brisbane is refurbishing the area outside its conference rooms into a unique space to accommodate various types of exhibitions and trade shows.


We are positioned for acquisitive growth with a gearing of 36.4%. CDLHT has maintained its rating of BBB- on the Fitch Issuer Default Rating and has a robust interest cover of 6.6 times for FY 2015.

During the year, the H-REIT Manager has actively refinanced existing debt facilities ahead of their maturities and extended the tenor of its loans so as to mitigate interest rate volatility. In September 2015, the two floating rate loans that were drawn for the acquisition of the Japan Hotels were refinanced with a fixed rate bond and term loan. Separately in December 2015, the H-REIT Manager also refinanced its Australia dollar term loan and secured a fresh revolving credit facility. Post-refinancing, the weighted average debt to maturity has been extended to 2.8 years and the proportion of borrowings on fixed interest rates has increased to 60.2%.

Looking ahead, the Managers will continue to maintain strong financial discipline to capitalise on any acquisition opportunities while strengthening the competitiveness of our properties through proactive asset enhancements.


In January 2016, the Boards of the Managers have each established a new committee, the Nominating and Remuneration Committee, to assist the Boards in matters such as the appointment and re-appointment of Board and Committee members as well as the review of remuneration packages for the Directors and Key Management Personnel of the Managers.


On behalf of the Board, I would like to thank our lessees, business partners and service providers for their continued support and valued contribution to the Group. To my fellow directors, management and staff of the Managers and the H-REIT Trustee, I would like to express my appreciation for your dedication and commitment to the business. Finally, I want to thank our Stapled Security Holders for your unwavering support during the year. I look forward to meeting you at our annual general meetings on 28 April 2016.

Wong Hong Ren

  • (1) The yoy RevPAR comparison assumes H-REIT, through the Japan Trust, owned the Japan Hotels for year ended 31 December 2014.
  • (2) Based on an exchange rate of £1.00 = S$2.1575. Price does not include net working capital adjustments and transaction costs.
  • (3) Excludes net lettable area of the adjoining Galleria which is not part of the asset enhancement exercise.