OUE Commercial Real Estate Investment Trust (C-Reit) on Thursday posted a distribution per unit (DPU) of one Singapore cent for the half-year ended June 30, 40.5 per cent lower than a year ago.

 

It said it had retained S$13.8 million of distribution to " preserve financial flexibility" amid the Covid-19 pandemic. 

 

OUE C-Reit has a semi-annual distribution policy unitholders can expect the distributions to be paid on Sept 11. 

 

Revenue for the second quarter had risen 23.9 per cent on the year to S$64.3 million, resulting in a 32.4 per cent year-on-year (y-o-y) increase in H1 revenue to S$142 million. 

 

Net property income for Q2 increased 23.7 per cent on the year to S$50.4 million, due to the contribution from the merger with OUE Hospitality Trust last year, although this was partially offset by rental rebates to tenants.

 

For H1, net property income thus rose 33.4 per cent y-o-y to S$112.5 million. 

 

However, the Reit' s manager said that while the Covid-19 situation has largely stabilised in Singapore and China for now, it will continue to monitor the situation, and is prepared to introduce further initiatives to support OUE C-Reit&rsquo s tenants as required.

 

It also noted " protracted containment measures and weaker global conditions" . The manager has thus opted to retain S$13.8 million of distributions to " preserve financial flexibility" .

 

In Q2, OUE C-Reit' s hospitality segment - contributed by the merger with OUE Hospitality Trust - recorded S$16.9 million in revenue. Revenue per available room (RevPAR) for the segment was 71.7 per cent lower y-o-y in Q2 at S$55, due to travel restrictions arising from the pandemic. 

 

In the commercial segment, revenue declined 8.6 per cent on the year to S$47.4 million. The Reit has committed about S$13.8 million of rental rebates to date, excluding an estimated S$19.9 million of support from the Singapore government, comprising property tax rebates and mandated share of relief for small and medium-sized enterprises. 

 

Committed occupancy for the commercial segment declined 2.7 percentage points (ppt) quarter on quarter to 91.6 per cent as at June 30.

 

The Singapore portfolio' s committed office occupancy slid 2 ppt quarter on quarter to 93.7 per cent in Q2, as leasing momentum was dampened by the weak economic outlook and the suspension of leasing activities during the " circuit-breaker" period, the Reit said.

 

The Singapore office properties have continued to achieve positive office rental reversions of 6.8 per cent to 14.8 per cent during Q2, however.

American poet Maya Angelou once famously said, " Make a mark on the world that can' t be erased" - and banking and finance veteran Tan Shu Lin aspires to do just that.

 

" I would like to be a successful leader who inspires people to reach their fullest potential," says the chief executive of the manager of OUE Commercial Real Estate Investment Trust (OUE C-Reit).

 

" At the end of the day, it' s not only about growing the Reit in terms of assets and cash flows, but also the intangibles, such as grooming talent in the team, and fostering a strong, positive corporate culture."

 

The Bachelor of Arts graduate with first-class honours in economics from the University of Portsmouth began her career in various financial institutions.

 

In 2001, she entered property via Ascendas Funds Management, the manager of Ascendas Real Estate Investment Trust (A-Reit) and the second Reit on Singapore Exchange when it listed in 2002.

 

" That brought me into a corporate environment where real estate, financial services and financial markets converged," recalled Ms Tan, who spent six years at A-Reit, rising to head of capital markets.

 

After a stint at UBS, she rejoined A-Reit in 2008 and became responsible for strategic direction, as well as operational and capital structure.

 

Fast forward to October 2013, and her appointment to helm the manager of OUE C-Reit meant Ms Tan, 47, had come full circle.

 

" Just like in any corporate set-up, it' s a marathon, not a sprint," she said. " We start with an idea, and develop it to fruition. In everything that you do, you keep the long-term perspective in mind."

 

Ms Tan says the past six years have been the most satisfying of her career. " That' s when I oversaw the fourfold expansion of OUE C-Reit' s assets, growing it from $1.6 billion to $6.8 billion, following several corporate actions, including a merger with OUE Hospitality Trust."

 

Completing the merger - spanning nine months - was a high point, but it proved to be a long, complicated journey.

 

LONG-TERM PERSPECTIVE

 

Just like in any corporate set-up, it' s a marathon, not a sprint. We start with an idea, and develop it to fruition. In everything that you do, you keep the long-term perspective in mind.

 

MS TAN SHU LIN, on how her appointment as chief executive of the manager of OUE C-Reit means she has come full circle.

The merger proposal was a bold, unprecedented move. " Because it involved two different asset classes, there were a myriad of questions over whether we could carry it off and how investors would react," Ms Tan notes.

 

" On many occasions, there were no prior examples for us to fall back on. It all boiled down to just soldiering on to try to make it happen."

 

That is all now in the rear-view mirror. " We' re really savouring the fruits of our labour, and the benefits are obvious.

 

" We have a much larger market capitalisation, increased trading liquidity, higher visibility on investors' radar, and more participation during our roadshows."

 

The Reit' s increased size makes it better able to access capital, allowing it to undertake larger transactions and renovations.

 

Following its merger with OUE Hospitality Trust, the Reit now owns seven properties across the commercial and hospitality segments in Singapore and Shanghai, comprising about 2.2 million sq ft of prime office and retail space, as well as 1,640 upscale hotel rooms.

 

Assets here include the Mandarin Gallery mall in Orchard Road, the Mandarin Orchard Singapore hotel, One Raffles Place, OUE Bayfront and OUE Downtown Office.

 

In Shanghai, it owns Lippo Plaza.

 

With the future of land use focusing on mixed-use projects, a portfolio that has exposure to more than one property segment offers an edge. " One sector can mitigate the downturn from another, as we have seen with Covid-19," Ms Tan notes.

 

While the supply of new Grade A office space remains limited in the medium term, both occupancy and office rents are expected to take a hit, given the economic climate.

 

The 43 per cent year-on-year slump in international visitor arrivals in the March quarter prompted OUE C-Reit to implement cost-containment measures and seek alternative sources of demand.

 

These include guests on self-isolation stays, the front-line healthcare workforce, as well as workers affected by border shutdowns.

 

The minimum rent component of $67.5 million a year under the master lease arrangements of its hotels, offers protection, while government assistance such as wage and tax reliefs provide an added buffer.

 

" Covid-19 has impacted everyone. But the question is how do you use the downtime, and (how) to future-proof yourself?" Ms Tan says.

 

OUE C-Reit plans to rebrand Mandarin Orchard Singapore as Hilton Singapore Orchard, with new income-generating spaces.

 

" The domestic hotel segment will likely remain weak until the first half of next year. This makes it ideal for us to undertake asset enhancement initiatives... so as to catch the return wave in 2022."

 

In China, the Reit will focus on retaining tenants and keeping occupancy rates stable.

 

" Since the end of April, after the Chinese economy and businesses restarted, occupancy levels have hovered above 80 per cent," Ms Tan adds.

 

While the trust is focused on managing the fallout from Covid-19 in the near term, it is also keeping an eye on medium-to longer-term growth targets.

 

Office assets will still be OUE C-Reit' s mainstay as this defensive segment of the real estate market offers more resilient cash flow than hospitality or retail.

 

But local opportunities remain limited, Ms Tan admits. " Most Grade A offices in Singapore are already owned by other Reits or in institutional hands - that' s why we need to spread our wings abroad."

OUE Commercial Real Estate Investment Trust (OUE C-Reit) has priced an offering of S$100 million of 4 per cent notes due 2025, to be guaranteed by Reit trustee DBS Trustee.

 

Net proceeds from the issuance will be used to refinance Reit borrowings, the manager said.

 

OCBC and Standard Chartered were named joint lead managers and bookrunners for the notes offering, which will be issued under OUE C-Reit&rsquo s S$2 billion multi-currency debt scheme, the manager added in a bourse filing on Monday night.

 

The notes will mature on June 24, 2025, with the interest to be paid semi-annually, although the issuer can redeem them all on any interest payment date, among other redemption scenarios.

 

They constitute direct, unconditional, unsubordinated and unsecured obligations of the issuer and will rank pari passu with all of its other unsecured obligations, besides the subordinated obligations and priorities created by law.

https://www.businesstimes.com.sg/companies-markets/oue-c-reit-prices-s100-million-offering-of-4-notes-due-2025