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OUE Reit completes S$250 million inaugural green notes issuance
It achieves a final order book of S$425 million, 1.7 times over the upsized offer
OUE Real Estate Investment Trust : TS0U 0% (Reit) has completed the issuance of its S$250 million inaugural green notes at a 4.1 per cent fixed rate due in 2027.
The Reit&rsquo s manager announced in a bourse filing on Friday (Jun 14) that the issuance attracted strong investor demand, with a final order book of S$425 million, indicating an oversubscription of 1.7 times over the final upsized offer.
The manager added that at the initial price guidance of 4.35 per cent, the offer achieved peak orderbook in excess of S$475 million, 3.2 times oversubscribed based on the Reit&rsquo s initial target size of S$150 million.
Subsequently, the final offer was upsized to S$250 million and pricing was tightened to 4.1 per cent.
Approximately 74 per cent of the final allocation went to institutional investors.
The notes, rated BBB- by S& P Global Ratings, represent OUE Reit&rsquo s first investment-grade issuance under its S$2 billion Multicurrency Debt Issuance Programme and the Green Financing Framework established in March 2020 and November 2023, respectively.
Post-issuance, the Reit&rsquo s proportion of fixed-rate debt has increased to about 70.6 per cent from 60 per cent as at Mar 31, 2024, on a pro forma basis, while the weighted average cost of debt is expected to remain largely stable.
This &ldquo will help mitigate the impact of rising interest rates on OUE Reit&rsquo s earnings&rdquo , said Han Khim Siew, chief executive officer of the Reit&rsquo s manager.
Together with the completion of the S$600 million unsecured sustainability-linked loan in May 2024, the Reit has no refinancing requirements until the second half of 2025, when 14.4 per cent of the total debt is due.
The manager added that the Reit&rsquo s weighted average debt maturity is expected to lengthen from 2.2 years as at Mar 31, 2024, to 2.9 years on a pro forma basis.
In an earlier announcement on Jun 5, the manager stated that the notes are expected to be listed on the Singapore Exchange on or about Jun 18.
OCBC is the sole global coordinator and green finance adviser, while DBS, HSBC&rsquo s Singapore branch and OCBC were named joint lead managers and bookrunners for the notes-offering.
The Singapore branch of the Industrial and Commercial Bank of China is the joint lead manager and bookrunner (no book) of the offering.
4.1% lower than 4.5% average cost of debt.
OUE Reit Treasury prices S$250 million green notes due 2027 at 4.1%
The notes are rated BBB- by S& P Global Ratings
OUE Real Estate Investment Trust (Reit) Treasury, a wholly owned subsidiary of OUE Reit : TS0U 0%, has priced its offering of S$250 million of green notes under its S$2 billion multicurrency debt issuance programme.
The notes &ndash rated BBB- by S& P Global Ratings &ndash are expected to be issued on Jun 14 and listed on the Singapore Exchange Securities Trading on or about Jun 18.
Priced at 100 per cent, the notes will bear an annual coupon of 4.1 per cent, with coupon payments made semi-annually in arrear.
The manager said in a bourse filing on Wednesday (Jun 5) night that the notes will be guaranteed by DBS Trustee, in its capacity as OUE Reit&rsquo s trustee.
OCBC is the sole global coordinator and green finance adviser, while DBS, HSBC&rsquo s Singapore branch and OCBC were named joint lead managers and bookrunners for the notes offering.
The Singapore branch of the Industrial and Commercial Bank of China is the joint lead manager and bookrunner (no book) of the offering.
The net proceeds will be used exclusively to finance or refinance, in whole or in part, new or existing eligible green projects that meet one or more of the categories of eligibility in accordance with OUE Reit&rsquo s green financing framework.
The notes will mature on Jun 14, 2027.
KGI initiates &lsquo outperform&rsquo on OUE Reit with S$0.309 target price
The trust is expected to be well-positioned for a boom in Singapore&rsquo s tourism industry
KGI Securities has initiated an &ldquo outperform&rdquo recommendation on OUE Real Estate Investment Trust (Reit), with a 12-month target price of S$0.309.
On Friday (May 31), KGI analyst Alyssa Tee attributed the positive recommendation to OUE Reit&rsquo s strategic initiatives, strong tenant mix, diversified portfolio, and proactive management position.
She added that the trust is well-positioned for &ldquo future growth and stability in the competitive real estate market&rdquo .
The target price implies an upside of 17 per cent based on the trust&rsquo s closing price on May 30. It accounts for a terminal growth rate of 2 per cent and a cost of equity of 9.7 per cent.
In her view, enhanced strategic initiatives could meet the anticipated tourism boom in Singapore, which will be driven by improved global flight connectivity and capacity, as well as the mutual 30-day visa exemption between Singapore and China.
The 23.3 per cent year-on-year surge in revenue per available room to S$280 reflects the trust&rsquo s ability to capitalise on higher room rates amid strong demand from event attendees and tourists, the analyst noted.
The Reit currently operates a portfolio of seven properties. An additional 255-room zero-energy hotel at Changi Airport Terminal 2 is expected to be completed by 2028, anticipated to meet &ldquo the growing demand for hospitality offerings&rdquo at the airport.
An expected rate reduction of 25 basis points in September by the Federal Reserve could also benefit the Reit. Lower borrowing costs could improve its financial flexibility and drive investor interest.
&ldquo OUE Reit&rsquo s favourable credit rating from S& P positions it well for refinancing endeavours, evidenced by the successful increase of its initial loan amount from S$540 million to S$600 million,&rdquo she added.
1Q24 net property income up 6.9% vs 1Q23 and up 6.1% vs 4Q23.
OUE Reit obtains S$600 million unsecured sustainability-linked loan
The facility will be used to refinance the real estate investment trust&rsquo s existing S$540 million debt
OUE Real Estate Investment Trust : TS0U +3.85% (Reit) has obtained an unsecured sustainability-linked loan of S$600 million.
The proceeds will be used for the Reit&rsquo s early refinancing of S$540 million existing secured borrowings due in 2025 and for general corporate purposes, said its manager in a bourse filing on Tuesday (Apr 23).
OCBC was the sole mandated lead arranger and bookrunner, as well as the sustainability coordinator for the transaction.
This facility marks OUE Reit&rsquo s first sustainability-linked loan tied to its recalibrated sustainability performance targets announced on Feb 29. These new targets replace its previous goal, which was based on energy intensity, with a more ambitious aim of achieving a 40 per cent reduction in absolute greenhouse gas emissions for its commercial properties from the level in FY2023.
With the new facility in place, the Reit will have no further refinancing requirements until the second half of 2025. The average term of debt as at Dec 31, 2023 is expected to lengthen to 3.1 years, with the weighted average cost of debt to remain largely stable, on a pro forma basis.
Additionally, the proportion of unsecured debt is expected to increase significantly to 86.7 per cent post-refinancing.
&ldquo The increase in the proportion of unsecured debt enhances OUE Reit&rsquo s access to more diverse and competitive sources of funding while keeping borrowing costs stable,&rdquo noted Han Khim Siew, chief executive of the Reit&rsquo s manager.
&ldquo We will continue to leverage on our investment-grade credit rating and strengthened relationships with our bankers to enhance our capital structure for the benefit of all unitholders,&rdquo he added.
Still a much higher DPU yield than most other Singaporean focused SREITs.
Hope you have bought and hold as it is 16% paper profit excluding upcoming 4 cents dividend now as it was about $1 when you asked. Of course it did hit low of around 88 cents in mid February but you would have profited more if buy in batches. My apologies for digressing but just thought to close the loop.
HVRRVH ( Date: 12-Dec-2023 19:38) Posted:
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All these talks did not lift the share price. But got talk better than no talk. Recalled some stocks like to use " Strategic Review" that somehow boosted the share price, although nothing come out of it in the end. A good example? Sabana Reit.
OUE Reit eyes higher hospitality contribution in growth push
WHILE offices and hotels are both considered commercial assets, they have markedly different operating and investing characteristics. Having a portfolio comprising both types of properties, though, has been a key strategy for OUE Real Estate Investment Trust (Reit).
Han Khim Siew, chief executive of the manager, eyes the benefits coming from such diversification, which provides the Reit with stability as well as a pathway for growth.
&ldquo We like the barbell we have now,&rdquo he said.
Around half of OUE Reit&rsquo s revenue last year came from the office segment, while its hospitality properties &ndash Hilton Singapore Orchard and Crowne Plaza Changi Airport &ndash contributed 32.2 per cent. The manager is targeting to grow the revenue share from the hospitality segment to 40 per cent.
&ldquo It makes sense on many fronts for us to start increasing the component of hospitality,&rdquo Han said.
OUE Reit &ndash previously known as OUE Commercial Reit &ndash first gained hospitality exposure in 2019, when it merged with OUE Hospitality Trust.
And growing the hospitality segment in the current market is part of the manager&rsquo s strategy for growth in the current uncertain macroeconomic climate.
Hospitality push
Han noted that inflation is expected to remain sticky, amid trends such as geopolitical tensions and onshoring. This would also result in a higher-for-longer interest-rate environment, even though rates may ease from their current levels.
&ldquo We must buy something which is DPU accretive. Now, historically, hospitality assets trade at (capitalisation rates) of 5 to 8 per cent,&rdquo he said, adding that this allows for accretive acquisitions, even at the current cost of debt.
Such accretive acquisitions may be more challenging for the office space. Han noted that office assets in Singapore have been trading at cap rates of between 3.5 and 5 per cent, depending on asset quality and location.
The manager is also keen on the hospitality sub-sector, as its assets allow for inflation costs to be passed through. Hotel room rates, Han pointed out, are more easily adjusted than office rents.
He noted that average daily rates, which rose sharply in 2022 and 2023, are currently likely close to their peak.
However, revenue per available room could still grow as occupancy improves.
Singapore saw 13.6 million international visitor arrivals in 2023, but this is forecast to improve to between 15 million and 16 million in 2024.
&ldquo There&rsquo s still room to grow the occupancy because visitor arrivals are just not here yet,&rdquo Han said.
To grow the contribution from hospitality in its portfolio, OUE Reit would need to reconstitute its portfolio, decreasing some of its office weightage in favour of hospitality.
&ldquo Whatever we acquire, number one, must be accretive. Number two, we want to buy very prime assets,&rdquo he said.
Han noted that the manager would consider what makes sense in Singapore, but is also looking at overseas opportunities. This would likely be in key gateway cities such as Tokyo, Sydney, Melbourne and London.
&ldquo If you look at the top ranking of destinations, tourist arrivals, you want to be there,&rdquo he said.
He added that the manager is more risk-averse, and prefers certainty, which means it would be less likely to look to developing countries.
&ldquo We believe having prime assets means we benefit: when times are tough, there is flight to quality,&rdquo he said.
While they had considered buying overseas assets previously, the gap in buyers&rsquo and sellers&rsquo expectations had been &ldquo too massive&rdquo .
&ldquo But now we are seeing that gap close&hellip and we are seeing transactions now starting to take place,&rdquo Han said. &ldquo It is actually now a good time to start looking closer.&rdquo
Stable offices
Even as hospitality is seen as a growth driver, offices remain an important part of the portfolio.
&ldquo We quite like the balance because office leases are three years, they provide a certain amount of stability,&rdquo Han said.
OUE Reit&rsquo s office portfolio comprises mostly Grade A office buildings in Singapore, including interests in OUE Bayfront, One Raffles Place and OUE Downtown.
Han noted that OUE Reit&rsquo s current passing rents for its Singapore office assets stand at S$10.43 per square foot per month on average. However, spot rents in the market are currently S$11.90.
&ldquo We still think when we renew our leases, we will see upside potential,&rdquo he said.
To move towards the target of having more revenue from hospitality, OUE Reit would need to recycle capital, which could involve divesting some of its existing office assets.
&ldquo We just need a partial divestment, we don&rsquo t need to sell everything,&rdquo Han noted.
Recycling capital would allow the Reit to fund acquisitions while maintaining an aggregate leverage ratio of under 40 per cent. The manager is not considering an equity fundraising for acquisitions currently.
&ldquo Our price-to-book ratio is so far below parity currently, that it really doesn&rsquo t make sense for us to do it,&rdquo Han said.
With its closing price of S$0.275 on Apr 5, OUE Reit : TS0U 0% trades at a trailing 12-month distribution yield of around 7.6 per cent. The Reit also trades at over a 50 per cent discount to its net asset value of S$0.60 per unit.
Han believes that investors may have been discounting the counter due to perceptions over the Reit&rsquo s main focus.
He noted that during the Covid-19 era, many were concerned about hospitality players. While prospects for hospitality have since improved, concerns about the global office sector have seen investors penalise the Reit now for a different reason.
&ldquo I think we&rsquo re getting penalised, and if you look at most of the office Reits, it&rsquo s sort of massively penalised,&rdquo Han said.
OUE Reit rebranded itself earlier this year, dropping the word &ldquo commercial&rdquo from its name to reflect the diversified nature of its portfolio of hospitality, office and retail assets.
Han also noted that in the current interest-rate environment, some investors may naturally prefer other assets over Reits.
&ldquo Once you see the Fed cut, I think you will see the Reits re-rate, because then the fear in the market would have dissipated,&rdquo he said.
The manager has focused on its capital structure, amid the challenging interest-rate environment.
This includes launching a S$150 million bond in 2022, which came with a step-down in interest rates once the Reit became investment-grade. OUE Reit obtained its investment grade rating last October, with S& P Global Ratings assigning a &ldquo BBB-&rdquo rating with stable outlook.
Han added that the manager also carried out refinancing to move its debt from secured to unsecured, with zero refinancing due in 2024.
Nevertheless, higher interest rates have weighed on performance, with net finance costs more than doubling in the second half of 2023 to S$55.8 million. However, the Reit&rsquo s distribution per unit (DPU) remained stable in the second half, at S$0.0104.
The Reit could maintain its DPU performance, if stronger performance from both office and hospitality can offset any impact from higher finance costs.
&ldquo It&rsquo s manageable in my view,&rdquo Han said. &ldquo We&rsquo re still seeing reversionary growth from our office portfolio in Singapore, and we believe our two hotels will still continue to grow, so it&rsquo d be more than adequate to offset that.&rdquo
Not for those people who bought in the low 20s four months ago
Share price still abysmal leh. KNN.
Good FY23 result - 2H DPU up 8.3% YoY on a like-for-like basis.
They nothing better to do. Waste time and waste money for the change. Dont know who's idea again? No any benefit for the shareholders. Don't know how much will be spent this time on the change? Also already 10 years anniversary and price kept dropping. Hope the reit manager or the one giving this idea of changing name can see this post.
换 汤 不 换 药 Trad. 換 湯 不 換 藥 huà n tā ng bù huà n yà o. different broth but the same old medicine (idiom) a change in name only a change in form but not in substance. 
The manager of OUE Commercial REIT TS0U has announced that it will rebrand to OUE REIT with effect from Jan 29. So think the share price won't go up even after the rebranding as it is still link to OUE.
Yes that initial drop I think was due to speculation about OUE level issues. It seems they turned out not to have any foundation in reality, but the share price has some way to go to fully recover.
Oue c reit is particularly sensitive. It actually dropped from very high. The most significant was during aug 2023. Now share price like not much different from first reit.
I think the Aug reaction to the AEI was just ill informed sellers - given the thin liquidity does not take much to move the market.
The decilne since Jan is a general pulback of interest rate sensitive stocks and bonds - not company specific.
The decilne since Jan is a general pulback of interest rate sensitive stocks and bonds - not company specific.
Reits has been down for the last couple of days.
Smallinvestor ( Date: 23-Jan-2024 08:07) Posted:
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