Letter to Unitholders

On behalf of the Board of Directors of the H-REIT Manager and the HBT Trustee-Manager (collectively the "Managers"), I am pleased to present our annual report for the financial year ended 31 December 2016 ("FY 2016").


2016 marks a significant milestone for CDLHT as it represents a meaningful and rewarding decade since CDLHT was listed on the Singapore Exchange Securities Trading Limited. CDLHT’s portfolio has delivered commendable growth and the strategy pursued by us has generated approximately 207.3% (1) in total return for Stapled Security Holders who have invested in CDLHT since its public listing on 19 July 2006.

H-REIT, which was the first hotel REIT to list in Singapore, started with a portfolio of assets valued at S$846.3 million, comprising four hotels with 1,915 rooms and a retail mall adjoining Orchard Hotel, in Singapore. CDLHT has since expanded to become one of Asia’s leading hospitality trusts with quality assets valued at S$2.4 billion, comprising 15 hotels and 2 resorts with 4,912 rooms as well as a retail mall. We have also geographically diversified our footprint from a single country exposure to six countries, which has strengthened our portfolio and earnings base.

We will build on our decade of success and strive to continually create value and deliver sustainable returns for Stapled Security Holders through strategically pursuing hospitality assets with growth potential and engaging in active asset enhancement to maximise the potential of our investments.


2016 was a year of challenging global economic conditions and uncertainties which affected the trading environment of some of the markets that we have a presence in, particularly our core market, Singapore. Certain key industries in Singapore such as Offshore & Marine, Shipping and Finance witnessed a significant slowdown which affected the hospitality industry. Major currencies also experienced volatility, which were in part affected by the unexpected result of the referendum for Britain’s withdrawal from the European Union ("Brexit") in June 2016 as well as other political events worldwide.

While headwinds were faced in some of our markets, CDLHT’s portfolio has benefited from the diversification of income through strategic acquisitions in key cities over the years. These acquisitions have helped to mitigate the decline in net property income ("NPI") from our Singapore portfolio and our overseas contribution of portfolio NPI has grown from 33.6% in FY 2015 to 38.5% in FY 2016.

NPI of CDLHT increased slightly by S$0.6 million in FY 2016 to S$137.6 million despite challenging conditions. This was supported by the contribution from the acquisition of Hilton Cambridge City Centre, and strong NPI growth from Grand Millennium Auckland as a result of higher variable rental income driven by strong underlying hotel performance. The higher rental income for this hotel was also due to the rebranding and commencement of the new lease in September 2016 which contains a more significant variable rent component. There were also incremental contributions from our only retail mall, Claymore Connect, and the Japan Hotels. The increase in NPI helped to offset weakness in the Singapore and Maldives markets as well as lower contribution from the Australia Hotels due to negative currency translation and smaller variable income.

Consequently, total distribution to Stapled Security Holders for FY 2016 was largely unchanged at S$99.1 million. We are pleased to deliver Total Distribution per Stapled Security of 10.00 cents for FY 2016, compared to 10.06 cents in FY 2015, reflecting stability in our overall performance.


In 2016, the Singapore hospitality industry faced headwinds amidst lower corporate activities which stemmed from global economic weakness, as well as increased room supply. As a result, RevPAR for the Singapore Hotels declined by 8.6% to S$160 in FY 2016. Total visitor days to Singapore grew 2.2% year-on-year ("yoy") for 2016 (2). Our Singapore Hotels were able to maintain a healthy average occupancy rate of 85.4% for FY 2016.

In 2017, the trading environment in Singapore for hotels is expected to remain competitive, especially given the absence of biennial city-wide events such as the Singapore Airshow in February and Food & Hotel Asia in April. With a further 5.9% increase in new supply of hotel rooms (3) and uncertainties arising from Brexit as well as increased global political risks, the outlook remains one of caution.

Despite uncertainties in the near term, we are optimistic on the long term outlook for the Singapore tourism sector. Singapore, being a key financial centre and gateway for conducting business with the Asia Pacific region and the rest of the world, continues to be an attractive hub for conferences and events and was ranked as the top international meeting city for the ninth consecutive year (4). Continued efforts by the Singapore government are also in place to drive tourism flows such as active marketing by the Singapore Tourism Board ("STB") and infrastructure development. These include strategic partnership deals between STB and Chinese online travel services, as well as the ongoing construction of Changi Airport’s Terminal 4, Terminal 5 and Jewel Changi Airport – a retail and lifestyle mixed-use complex, which will serve to anchor Singapore’s position as a leading aviation hub in the region.

In Japan, demand drivers remained strong with international visitor arrivals growing 21.8% to a record 24.0 million for 2016 (5). Consequently, the Japan Hotels enjoyed strong occupancies of over 90% but faced rate pressure partly from currency headwinds during the year and rising competition from new hotel room supply. As a result, RevPAR increased marginally by 0.6%. The long-term outlook for the hospitality sector in Japan is expected to be positive, with the Japanese government’s favourable initiatives and aim to welcome 40.0 million foreign visitors in 2020 (6) in conjunction with the Tokyo Olympics. The government’s approval of the integrated resorts will likely also provide support for long term tourism growth.

In Maldives, the near term outlook continues to be challenging. Given that the room rates are priced in US dollar, the relative strength of the US dollar against some of the top source markets has affected demand and caused a downward adjustment in room rates as a compensating effect. In addition, the cautious consumer sentiment towards discretionary spending in the high-end leisure market and slowing growth in China may continue to affect the performance of our Maldives Resorts. As such, the Managers have been working with operators of both resorts to improve the market mix as well as taking cost containment measures.

For the Australia Hotels, rent contribution for FY 2016 was lower mainly due to negative currency translation and lower variable income. With the subdued natural resources sector outlook and increase in new hotel room supply in Perth and Brisbane, the trading performance of the hospitality sector will likely remain challenging. However, the defensive lease structure of the Australia Hotels which provides CDLHT with largely fixed rent will mitigate any downside risks in the hotels’ performance.

The acquisition of Hilton Cambridge City Centre in October 2015 has augmented CDLHT’s portfolio performance in FY 2016. The positive influence of the rebranding exercise in 2016 coupled with the product uplift after its refurbishment, has supported a yoy RevPAR growth of 11.9%. Looking ahead, the weaker pound is likely to improve tourism flows in UK and international arrivals are expected to increase in 2017 (7). However, there will be economic uncertainty due to the impending commencement of the formal Brexit negotiations in March 2017, which may affect corporate demand.

In New Zealand, the tourism sector continued to enjoy strong growth, reflected by the 11.8% yoy growth in visitor arrivals in 2016 to a record high of 3.5 million (8). The surge in tourism arrivals was supported by additional commercial flight capacity serving Auckland during 2016, with new international airlines being launched and new routes being established. This has benefited our NZ Hotel, Grand Millennium Auckland, which saw a robust yoy RevPAR growth of 10.8%.

The Managers are optimistic about the outlook of the New Zealand hospitality sector and the growth momentum is likely to be supported by the increase in new international air services and a strong events calendar. In 2017, New Zealand will host a number of global sporting events, including the World Masters Games, Lions Tour and Rugby League World Cup, which are expected to increase international visitor flows to Auckland. Grand Millennium Auckland’s new variable lease structure allows CDLHT to be strongly positioned to maximise the benefit of the growth trajectory going forward.

The importance of broadening our asset base remains a paramount consideration. Our geographically diversified portfolio of quality assets is expected to continue to provide CDLHT with the benefits of income diversification and generate sustainable returns for our Stapled Security Holders.


The Managers are actively pursuing asset enhancement initiatives for CDLHT’s portfolio and we believe that the softer trading environment in some of our markets presents opportunities to improve our assets’ value and competitiveness, which allows CDLHT to capture the medium and long-term growth potential of our properties.

In 2016, Grand Copthorne Waterfront Hotel completed its extensive renovation where its lobby was refreshed, meeting room capacity was increased and its food and beverage offerings were significantly augmented. At M Hotel, the refurbishment of rooms was completed at the end of 2016. At Claymore Connect, the tenant mix was enhanced with new food and beverage offerings with the introduction of PIM PAM by FOC and return of Muddy Murphy’s Irish Pub in 2016. In 2017, there will be further asset enhancement programmes to improve the competitiveness of our Singapore Hotels in view of the new products in the market place.

For CDLHT’s overseas assets, the Japan Hotels have completed the conversion of all 118 smoking rooms to non-smoking rooms across both hotels as at January 2017, to facilitate the growing demand from non-smoking guests. In New Zealand, Grand Millennium Auckland’s lobby refurbishment was completed in 2016 and some public area enhancement works will be ongoing during 2017. Over in Australia, Mercure Perth is expected to complete its bar refurbishment to an Italian café in 2017. For Hilton Cambridge City Centre, refurbishments which supported the hotel’s ability to capitalise on the market buoyancy, such as the entrance canopy replacement, addition of a gym and the Executive Lounge, were completed during 2016. The UK Hotel will continue to see ongoing enhancements to the lobby and restaurant concept in 2017.


As at 31 December 2016, our balance sheet remained robust with a gearing ratio of 36.8%. CDLHT has maintained its rating of BBB- on the Fitch Issuer Default Rating and has an interest cover of 6.2 times for FY 2016.

In August 2016, the Managers successfully refinanced the bridge loan of £64.6 million relating to the acquisition of the UK Hotel and a medium term note of S$83.6 million into two 5-year floating rate term loans. Post- refinancing, our overall debt maturity profile has been further improved to 3.0 years with no borrowings maturing in 2017 while our floating rate risk continues to be well managed with 61.0% of our borrowings being fixed-rate loans.


On behalf of the Board, I would like to thank Jimmy Chan, Daniel Desbaillets and Ronald Issen, who have stepped down from the Board during 2016, for their advice and immeasurable contributions over the years. At the same time, I would like to extend a warm welcome to Bill Foo and Kenny Kim, who joined the Board on 11 May 2016 and 25 January 2017 respectively. To my fellow Board members, management and staff of the Managers and the H-REIT Trustee, I would like to express my sincere gratitude for your tireless commitment to the business over the years. I would also like take this opportunity to thank our lessees, business partners and service providers from around the world for your continued support to the Group. Finally, I want to thank our Stapled Security Holders for your steadfast support in the last decade. It has truly been a fulfilling 10 years for CDLHT and we will strive to continually capitalise on opportunities to create value in the long run.

Wong Hong Ren

  • (1) Total return comprises capital appreciation and assumes the distributions paid out during the period from 19 July 2006 to 31 December 2016 are reinvested in the Stapled Securities of CDLHT.
  • (2) International Visitor Arrivals Statistics – STB.
  • (3) Based on STB, Horwath data (January 2017) and CDLHT research.
  • (4) Travel Biz, "Singapore crowned Top International Meeting City by UIA", 30 September 2016.
  • (5) Japan National Tourism Organization.
  • (6) Nikkei Asian Review, "Japan prepares for mass influx of tourists", 11 January 2017.
  • (7) TTG, "2017 could be ‘record year’ for inbound tourism", 30 December 2016.
  • (8) Statistics New Zealand, "International Visitor Arrivals to New Zealand".