ASCOTT RESIDENCE TRUST October 2006 0
Disclaimer IMPORTANT NOTICE The value of units in ART and the income derived from them may fall as well as rise. Units in ART are not obligations of, deposits in, or guaranteed by the Manager or any of its affiliates. An investment in the units in ART is subject to investment risks, include the possible loss of the principal amount invested. The past performance of ART is not necessarily indicative of its future performance. This presentation may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income, changes in operating expenses, including employee wages, benefits and training, property expenses and governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. Investors are cautioned not to place undue reliance on these forward-looking statements, which are based on the current view of the Manager on future events. Investors have no right to request the Manager to redeem their units in ART while the units in ART are listed. It is intended that unitholders may only deal in their units in ART through trading on the SGX-ST. Listing of the units in ART on the SGX-ST does not guarantee a liquid market for the units in ART. 1
Agenda Introduction Financial Highlights Management Strategies Growth by Acquisition Active Asset Management Capital and Risk Management Conclusion 2
ART s Pan-Asian Portfolio Somerset Liang Court, Singapore Ascott Beijing Singapore China Somerset Grand Cairnhill, Singapore Somerset Grand Fortune Garden, Beijing S$952million portfolio value (US$600 million) 14 properties 2,304 apartment units Singapore China Vietnam Indonesia Japan Philippines Japan Roppongi, Somerset Tokyo* The Philippines Somerset Millennium, Makati Salcedo, Somerset Makati Hui, Somerset Xu Shanghai Somerset Olympic Tower, Tianjin* Ascott Jakarta Indonesia Grand Somerset Citra Country Woods Vietnam Somerset Grand Hanoi Ho Chi Somerset Minh City * Recent acquisitions 3
Serviced residences an attractive asset class Lease Structure & Terms Apartments for Rent Long-term leases Serviced Residences Hybrid between hotels and apartments/condominiums Variable lease terms from one week to one year or longer Hotels Short-term accommodation Seasonality Dependent on general property sector conditions Some seasonality of hospitality industry, though longer lease terms provide certain level of rental support Seasonal nature of hotel industry Highly correlated with the tourism industry Range of Services No service provided Limited services provided Role and involvement of property manager less intensive compared to hotels Full range of hospitality service Role and involvement of property manager most intensive Cost Structure Minimal staff cost and low maintenance costs Less intensive staffing requirements as only limited services are provided Lower maintenance costs as average length of stay is longer More intensive staffing requirements due to need to cater complete range of services High maintenance due to significant wear and tear 4
Structure of ART Manager (Ascott Residence Trust Management Limited) Holding of units Management services Management fees Net profit Ownership of assets Unitholders ART Distributions Acts on behalf of Unitholders Trustee s fees Dividends Ownership of shares Trustee (for Unitholders) Singapore properties Overseas properties Each of the overseas properties are held indirectly through property holding companies Serviced residence management services Serviced residence management fees Serviced residence management services Serviced residence management fees Serviced residence management companies 5
Financial Highlights 6
Higher Net Distributable Income and DPU Than Forecast For the period 31 March 2006 30 September 2006 + 2 % 14.0 14.3 Forecast Actual 3.08 3.14 Distribution (S$million) DPU (cents) Net Distributable Income and DPU # Exceeded Forecast* by 2% # There is no distribution declared for the period from 01 July to 30 September 2006. Distribution declared for the period from 31 March to 30 June was paid on 28 August 2006. ART makes distributions to unitholders on a semi-annual basis, with the amount calculated as at 30 June and 31 December each year for the six-month period ending on each of the said dates. * The forecast numbers for 2006 are extracted from the forecast which was disclosed in the prospectus and pro-rated to correspond to the period from 31 March to 30 September. 7
Statement of Total Return For the period 31 March 2006 30 September 2006 Public Trust S$m Actual Forecast Growth (%) Revenue 52.3 52.7-1% Gross Profit 25.2 24.1 +5% Unitholders Distribution 14.3 14.0 +2% Distribution Per Unit (cents) 3.14 3.08 +2% Distributable Income Exceeded Forecast by S$0.3 million 8
Double Digit RevPAU Growth in Singapore and the Philippines 200 150 + 21 % 135 164 China: - Reconfiguring bigger apartment units into smaller units to meet growing demand 161 143 + 8 % 120 130 Indonesia: - Drop in occupancy for Ascott Jakarta due to massive construction activities surrounding the residence (expected to be completed around mid 2007) + 4 % 115 120 S$/ day 100 84 82 + 27 % 55 70 50 0 Singapore China Vietnam Indonesia Philippines Overall Q3 2005 Q3 2006 9
Growth in Projected DPU Distribution Per Unit* (cents) 6.11 5.2% growth 6.43 Commitment to pay out 100% of ART s taxable income and net overseas income for FY2006 and FY2007 and at least 90% thereafter Semi-annual distributions, calculated as at 30 June and 31 December each year 2006F 2007P * Annualised figures as stated in the Prospectus 10
Management Strategies 11
Management Strategies Growth By Acquisition Active Asset Management Capital and Risk Management Deliver Stable and Growing Distributions 12
Growth By Acquisition Growth by Acquisition Key Acquisition Strategies Focus on acquisitions in the Pan-Asian region Acquisition of Ascott s remaining Pan-Asian portfolio (given right of right refusal) Acquisition by leveraging on strategic relationship with the CapitaLand Group 13
Focus on acquisitions in the Pan-Asian region Growth by Acquisition Singapore Thailand India Malaysia Indonesia Countries with existing ART-owned properties Countries with investment opportunities China Korea Japan Vietnam Philippines Australia New Zealand Explore attractive investment opportunities in the Pan-Asian region Focus on locations where Ascott has an established presence Tap growth of Asia economies Leverage on the increasing popularity of serviced residences as an alternative accommodation concept Increasing trend in business travel into Asia Increasing preference of corporate executives for home-styled accommodation for extended stays 14
Recent Investments & Management Contracts by The Ascott Group Growth by Acquisition 2005 Management Contracts Contracts 2006 Feb 2005 Somerset Berlian, Jakarta Mar 2005 Somerset Park Suanplu, Bangkok Oct 2005 Somerset Grand Sukhumvit, Bangkok Somerset Jadaf, Dubai Dec 2005 Somerset Nusasiri Pattaya Citadines Suzhou Emerald City Apr 2006 Citadines Xi an Central Agreement with Addax to manage 15 MENA properties Sep 2006 MOU to manage Citadines Singapore Mount Sophia 2005 Equity Equity Investment Of Of More More Than Than S$550 S$550 million million (US$350 (US$350 million) million) 2006 Jan 2005 Ascott Guangzhou Dec 2005 Citadines Bangkok Sukhumvit 16 Mar 2006 Sale of 12 properties to ART Jan 2006 Citadines Bangkok Sukhumvit 23 Apr 2006 Citadines Suzhou Xinghai Citadines Suzhou Lejia Citadines Hong Kong Ashley May 2006 Citadines Bangkok Sukhumvit 11 Citadines Bangkok Sukhumvit 8 Jul 2006 Ascott Singapore Raffles Place Citadines Singapore Scotts May 2006 Liang Court Shopping Centre Aug 2006 Somerset Zhong Guan Cun, Beijing Somerset Youyi, Tianjin Master development agreement with Rattha Holdings for seven properties in South India First property Somerset Greenways, Chennai 2005 Divestment Proceeds Proceeds Of Of S$650 S$650 million million (US$410 (US$410 million) million) 2006 August 2006 The Ascott Mayfair 15
Pan-Asian assets owned* by The Ascott Group (1/2) Growth by Acquisition Properties in operation Singapore Somerset Orchard (Singapore) China Ascott Pudong (Shanghai) Malaysia Ascott Kuala Lumpur Somerset Seri Bukit Ceylon (Kuala Lumpur) Thailand Ascott Sathorn (Bangkok) Vietnam Somerset West Lake (Hanoi) Somerset Chancellor Court (Ho Chi Minh City) * Companies either wholly owned, majority or minority stake 16
Pan-Asian assets owned* by The Ascott Group (1/2) Growth by Acquisition Properties under development Singapore Ascott Singapore Raffles Place Citadines Singapore Scotts Thailand Citadines Bangkok Sukhumvit 16 Citadines Bangkok Sukhumvit 11 Citadines Bangkok Sukhumvit 23 Citadines Bangkok Sukhumvit 8 China Ascott Guangzhou Somerset Zhong Guan Cun (Beijing) Citadines Suzhou Xinghai Citadines Suzhou Lejia India Somerset Greenways, Chennai Somerset Youyi (Tianjin) Citadines Hong Kong Ashley * Companies either wholly owned, majority or minority stake Ascott owns* about 3,100 apartment units in 12 cities 17
Pan-Asian assets managed/ leased* by The Ascott Group Growth by Acquisition China Beijing Dalian Guangzhou Indonesia Jakarta Japan Tokyo Malaysia Kuala Lumpur Philippines Manila Shanghai Suzhou Xi an Surabaya Kuching 1,333 units 601 units 272 units 124 units 134 units Singapore Singapore South Korea Seoul 630 units 432 units Thailand 1,767 units Bangkok Pattaya Australia & New Zealand 745 units Sydney Melbourne Hobart Auckland Ascott manages/ leases about 6,100 apartment units in 20 cities * As at 2 October 2006. Excludes ART portfolio, owned assets in Pan-Asian region and assets in Europe and the Gulf region. 18
Acquisitions by leveraging on strategic relationship with the CapitaLand Group Growth by Acquisition May tap into CapitaLand s real estate expertise, experience and knowledge to source for potential acquisitions for ART E.g. Ascott acquired a serviced residence development in Guangzhou in the prime Tianhe East Road from CapitaLand Group in January 2005 Ascott Guangzhou, China 19
Yield-Accretive Acquisitions Growth by Acquisition Two yield-accretive acquisitions since listing Somerset Olympic Tower Property in Tianjin, China acquired at a 7% yield 1 on 24 July 2006 Somerset Roppongi, Tokyo in Japan acquired at a 5% yield 1 on 4 September 2006 Funded by equity and assumption of bank debt Placement on 19 September 2006 of 44,000,000 new units @ S$1.10 Raised S$48.4 m (US$31m) 1.5 times subscribed Increased free float from 23% to 30% Somerset Olympic Tower Property, Tianjin # Annualised property yield. For the forecast year 2006. 2 VWAP of S$1.14 from 18 September 2006 to 19 September 2006 (up to 12.30pm). Somerset Roppongi, Tokyo 20
Diversification across geography and economic cycles Growth by Acquisition The Philippines 3% Vietnam 13% Japan 2% Indonesia 10% Property Values Singapore 30% China 42% Total Property Value 1 = S$952.1m (US$600m) ART s Share of Gross Profit For the Forecast Year 2006 The Philippines 3% Japan 1% Indonesia 15% Vietnam 19% Singapore 21% China 41% Total Gross Profit 2 = S$48.6m (US$31m) Diversification enhances earnings stability Low reliance of ART s earnings on any single market Reduced portfolio volatility Strong growth potential in key Asian cities ¹ Based on ART s share of interest in the Properties. 2 Based on the assumptions set out in the Prospectus and ART s proportionate share of the gross profit of the Properties for the Forecast Year 2006. Assumes the acquisitions of the Somerset Olympic Tower, Tianjin and Somerset Roppongi, Tokyo took place on 1 January 2006. 21
Geographic Diversification of Gross Profit - And further diversification of China portfolio Growth by Acquisition Pre-Acquisitions Singapore 24% China 34% Vietnam 22% Shanghai 15% Beijing 85% Philippines 3.5% Indonesia 16.5% Post-Acquisitions* Singapore 21% Vietnam 19% Philippines 3% Japan 1% China 41% Indonesia 15% Shanghai 11% Tianjin 26% Beijing 63% * Based on the assumptions set out in the Prospectus and ART s proportionate share of the gross profit of the Properties for the Forecast Year 2006. Assumes the acquisitions took place on 1 January 2006. 22
Extended length of stay profile and diversity in market segment Growth by Acquisition Apartment rental income by length of stay 1 6 to 12 months 18% 1 to 6 months 21% <1 month 23% > 12 months 38% Apartment rental income by market segment 1 Project 19% Business Trip 30% Family/ Leisure 3% Others 4% Relocation 44% Stability in earnings ¹ For the 6 months ended 30 June 2006. Assumes the acquisitions took place on 1 January 2006. 23
Diverse tenant mix and quality clientele Growth by Acquisition Apartment rental income by industry1 1 Legal 1% Healthcare 1% Real estate/ lodging 1% Industrial 3% Capital Goods/ Unlisted 2% Others 39% Consumers 4% Media & Telecom 5% Government/ NGOs 5% Energy & Utilities 6% IT 9% Financial Institutions 10% Manufacturing 14% Earnings not reliant on a single industry or tenant ¹ For the 6 months ended 30 June 2006. Assumes the acquisitions took place on 1 January 2006. 24
Management Strategies Growth By Acquisition Active Asset Management Capital and Risk Management Deliver Stable and Growing Distributions 25
Asset Management Strategies Active Asset Management Responsive yield management to maximise RevPAU Leverage on the branding and marketing expertise of serviced residence management company to attract quality clientele Ensure effective cost management by improving operating efficiencies and economies of scale Implement asset enhancement plans to enhance property yields and maintain quality of portfolio 26
Asset Enhancement For Better Yield Active Asset Management Ascott Beijing, China Work to reconfigure layout of some larger units into smaller onebedroom units First phase started in Q4 2006 Somerset Xu Hui, Shanghai, China Completed reconfiguration of clubhouse layout with 15,000 sqf NLA of commercial space in Q3 2006 Ascott Beijing Somerset Xu Hui, Shanghai 27
Management Strategies Growth By Acquisition Active Asset Management Capital and Risk Management Deliver Stable and Growing Distributions 28
Capital and Risk Management Capital & Risk Management Maintain strong balance sheet and optimise gearing Gearing of 30.1% after the acquisitions in Tianjin and Tokyo Adopt conservative interest rate management strategy ART gearing profile Bank Loans Debt S$298.8m (30.1%) Equity & Other Liabilities S$694.0m (69.9%) ART s proportionate share of asset value S$992.8m Floating S$42.6m # 14% 86% Fixed/ 5-years S$256.4m * Notes: * 100% of ART s borrowings (amounting to S$220.3 million) and 45% of its subsidiaries borrowings (amounting to S$36.1 million ART s share) # 55% of subsidiaries borrowings (amounting to S$42.6 million ART s share) are on a floating basis 29
Managing foreign exchange exposure Capital & Risk Management Capital values Adopt natural hedge strategy, as far as possible Borrowing in the same currency as underlying asset Cashflows Manage volatility of foreign currency cash flow from overseas assets, examples: In China, majority of revenue and operating expenses are in RMB For Indonesia, Philippines & Vietnam, majority of revenue in US$ while operating expenses are in local currencies In Japan, majority of revenue and operating expenses are in Yen Monitor foreign exchange risks associated with remitting RMB, US$ and Yen to Singapore for distribution, to the extent feasible, hedge these currency risks 30
Conclusion 31
Conclusion Key attractions of ART Exposure to growing serviced residence industry in the fastest growing region Asia Quality Portfolio Well located and quality assets in key gateway cities Stable and Growing Distributions Strong Sponsorship from The Ascott Group 32
Thank You 33
Assets owned* by Ascott Residence Trust (1/2) Singapore Vietnam Somerset Liang Court Property (Singapore) Somerset Grand Cairnhill (Singapore) Somerset Grand Hanoi Somerset Ho Chi Minh City Located on the fringe of Singapore s CBD, along River Valley Road 193 apartment units Located along Orchard Road, Singapore s main shopping area 144 apartment units Located within Hanoi s CBD 185 apartment units Located within Ho Chi Minh City s CBD 165 apartment units China Ascott Beijing Somerset Grand Fortune Garden, Beijing Somerset Xu Hui, Shanghai Somerset Olympic Tower, Tianjin Located along Jian Guo Road, in the Chaoyang District 272 apartment units Located along Liangmaqiao Road, in the Chaoyang District 81 apartment units Located in Shanghai s prime residential district 167 apartment units Located in the Heping District, in Tianjin s business district 172 apartment units 34
Assets owned* by Ascott Residence Trust (2/2) The Philippines Japan Somerset Millennium, Makati Somerset Salcedo, Makati Somerset Roppongi, Tokyo Located in Makati City s shopping and business district 138 apartment units Located in Makati City s shopping and business district 71 apartment units Located in the heart of Minato-Ku in Tokyo s Central Business District 64 apartment units Indonesia Ascott Jakarta Somerset Grand Citra, Jakarta Country Woods, Jakarta Located in the Golden Triangle, Jakarta s business and shopping district 198 apartment units Located in the Golden Triangle, Jakarta s business and shopping district 203 apartment units Located in South Jakarta 251 apartment units 35