Far East Hospitality Trust's Riverside Village Residences (Photo: REITsWeek)

Far East Hospitality Trust (Far East H-Trust)(SGX:Q5T) has been assigned a ‘BBB- Long-Term Foreign and Local Currency Issuer Default Ratings with a Stable Outlook’ by Fitch Ratings. This investment grade rating was assigned on 5 February 2013 and will be reviewed annually by the ratings agency.

FEHT is the first and only Singapore-Focused Hotel and Serviced Residence Hospitality Trust.

With a credit rating, a real estate investment trust (REIT) can increase its aggregate leverage limit to a maximum of 60% of the value of its deposited property, up from the limit of 35% in the absence of a credit rating. The credit rating by Fitch Ratings will therefore allow Far East H-Trust more flexibility in managing its capital structure to cater for future acquisitions.

Gerald Lee, Chief Executive Officer of the REIT Manager commented, “This rating by Fitch underscores the quality and resilience of the Far East H-Trust portfolio. It also opens the doors and gives us greater financial flexibility to address acquisition opportunities as we execute our growth strategies. With the rating, we will also be in a better position to diversify our funding sources and tap on the debt capital market in the future.”

As at 31 December 2012, Far East H-Trust has a total debt position of S$650 million. The weighted average debt maturity is four years, and the gearing stands at 29.2% as at 31 December 2012.

According to Fitch Ratings, the ratings reflect Far East H-Trust’s stable property portfolio and a robust regulatory environment in which the hospitality stapled group operates. Fitch Ratings also highlighted the resilience of Far East H-Trust’s diversified mix of mid-tier and upscale Hotel assets, particularly evident during the 2009 financial crisis, and the stability added to its earnings by the Serviced Residences. Other attributes which Fitch Ratings noted were the income downswing protection provided by the long-term master lease structure and the backing of a strong Sponsor, Far East Organization.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.