• Pure Singapore hospitality play
  • Rendezvous Grand Hotel Singapore
  • Reduce FV to S$1.02

Largest diversified hospitality portfolio by asset value
The portfolio of Far East Hospitality Trust (FEHT) consists of 11 properties in Singapore, including seven hotels and four serviced residences, giving a total of 2,531 rooms/units. The trust has the largest diversified hospitality portfolio in Singapore by asset value, equaling S$2.14b.
Far East Hospitality Trust
Proposed acquisition of Rendezvous Grand Hotel
In Nov, FEHT and Astor Properties Pte. Ltd., a member of the Far East Organization group (the sponsor) entered into a non-binding memorandum of understanding (MOU) with The Straits Trading Company Limited to acquire Rendezvous Grand Hotel Singapore and its retail component Rendezvous Gallery Singapore. FEHT is exploring the proposed acquisition of a leasehold interest in the property, while the sponsor is exploring the proposed acquisition of the reversionary interest for the remaining leasehold period in the property. FEHT also entered into a separate non-binding MOU with the sponsor to grant a master lease of the hotel component to the sponsor as master lessee under a master lease agreement Rendezvous Grand Hotel Singapore is a modern 4.5 star hotel with 298 rooms located at Bras Basah. The REIT manager and the sponsor are evaluating the proposed transactions and the REIT manager is exploring options to finance the proposed acquisition. We have not incorporated the proposed transactions into our model since no definitive agreements have been executed.

Visible and substantial pipeline
The proposed acquisition of Rendezvous Grand Hotel Singapore is in addition to the three hotels and four serviced residences which have been identified by the sponsor as Right of First Refusal (ROFR) properties which could be offered to Far East H-Trust.

Downgrade to a HOLD
Rolling forward our RNAV model to FY13F, and using more conservative capitalization rates given a more cautious outlook for tourism in 1H13, we reduce our fair value from S$1.08 to S$1.02, and downgrade FEHT from Buy to a HOLD.

Source: OCBC Investment Research , Sarah Ong