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OUE C-Reit posts 23.1 per cent rise in H1 net property income to S$115.3m
OUE Commercial Real Estate Investment Trust (OUE Commercial Reit) : TS0U -1.61% reported a 23.1 per cent increase in net property income to S$115.3 million for the first half of 2023, from S$93.6 million in the year-ago period.
Revenue rose 19.8 per cent to S$138.8 million from a year ago, the manager announced on Wednesday (July 26).
OUE Commercial Reit&rsquo s H1 performance was based on higher contributions from its hospitality segment, which benefited from the recovery of Singapore&rsquo s tourism sector its commercial segment rode on stable or improving occupancy and positive rental reversions.
However, distributable income fell by 3.3 per cent on the year to S$57.6 million, mainly due to higher financing costs in an elevated interest rate environment and the absence of income support at OUE Downtown Office, the manager said.
Consequently, there was a 2.8 per cent decrease in distribution per unit to S$0.0105 for the first half of 2023, from S$0.0108 in the previous period.
Its office segment had an occupancy of 96.1 per cent as at Jun 30, with positive rental reversion of 8.1 per cent.
Revenue from its hospitality segment rose 35.8 per cent year on year to S$45.8 million, driven by higher room rates, and supported by an influx of visitors from China and beyond.
Hilton Singapore Orchard&rsquo s H1 revenue per available room rose by 16.5 per cent to S$246 Crowne Plaza Changi Airport recorded a 54.1 per cent increase to S$207.
On the retail front, Mandarin Gallery&rsquo s committed occupancy, including short-term leases, reached 98 per cent as at Jun 30. Tenant sales in the second quarter remained stable at 83 per cent of pre-Covid-19 levels.
OUE Commercial Reit has no further refinancing needs until 2025, with a weighted average term of debt at three years as at end-June. It will continue to take a prudent approach towards capital management, with aggregate leverage remaining stable at 39.1 per cent.
Looking ahead, OUE Commercial Reit&rsquo s manager said its Grade-A office assets are well-positioned to weather market uncertainties due to their prime locations and well-diversified tenant mix. Meanwhile, its hotel properties are poised to capture the rebound in business and leisure travellers.
The manager will focus on prioritising occupancy at Lippo Plaza, its only property outside Singapore, against a backdrop of ample supply and dampened market confidence in Shanghai, China, where the property is located.
OUE C-Reit unit obtains S$430 million sustainability-linked loan
OUB Centre, an indirect subsidiary of OUE Commercial Reit : TS0U 0%, has obtained an unsecured sustainability-linked loan (SLL) of S$430 million, its manager announced in a Wednesday (June 14) bourse filing.
This is OUE C-Reit&rsquo s third SLL. It was obtained from new and existing lenders &ndash OCBC Bank, Maybank Singapore, the Industrial and Commercial Bank of China, The Bank of East Asia and Qatar National Bank. OCBC was the sustainability coordinator for the transaction.
The proceeds will be used for refinancing existing borrowings and general corporate purposes. With this facility, the Reit has no further refinancing requirements until 2025.
SLLs comprised 69.6 per cent of OUE C-Reit&rsquo s total borrowings as at end-March. The weighted average term of debt as at end-March rose to 3.2 years from 2.7 years on a pro forma basis.
The latest SLL incorporates interest-rate reductions linked to sustainability performance targets, which OUE C-Reit said are aligned with its long-term targets to reduce energy and water intensities by 25 per cent from 2017 levels, by 2030.
Han Khim Siew, the Reit manager&rsquo s CEO, said: &ldquo With the continued support from our lenders, OUE C-Reit has no near-term refinancing risk, with the next debt maturity two years away in 2025. This is in line with our prudent and proactive capital management approach to diversify funding sources, increase financial flexibility and optimise borrowing costs.&rdquo
The REIT market in SG is so competitive... the REIT has some good assets but will need to see DPU stabilize. One concern is also that their interest coverage ratio (inclusive of the write-off of upfront fees with early refinancing) dropped to 2.4. On a core operating basis, it is still 2.6 which is marginally close to the MAS threshold of 2.5 to have 50% gearing cap. Will see to see a material improvement on the fundamentals.
Timothong90 ( Date: 14-Feb-2023 23:06) Posted:
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Seems like they held back on returning the divestment gains entirely in FY22 so there' ll be some residual amount to be distributed this FY to shore up DPU. They will need to work on the commercial part of the portfolio to increase occupancy and also with positive rent reversions. Given some of the tech layoffs, overall sentiment towards CBD may be lukewarm but one major positive is that they' ve been focused on improving their capital management so some of the big ticket refinancing done last year is helpful to manage the impact on bottomline.
Kandee ( Date: 31-Jan-2023 16:17) Posted:
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True....
Moving forward, with travel restrictions lifted, especially for China, their hospitality sector will start contributing more. Was expecting this for the 2nd half 2022. Guess can see more of this in 1/2 half 2023. The reopened Hilton hotel is already being booked at higher room rates.
Guess the commercial units are still a drag....
Moving forward, with travel restrictions lifted, especially for China, their hospitality sector will start contributing more. Was expecting this for the 2nd half 2022. Guess can see more of this in 1/2 half 2023. The reopened Hilton hotel is already being booked at higher room rates.
Guess the commercial units are still a drag....
n3wbie ( Date: 30-Jan-2023 22:27) Posted:
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OUE C-Reit H2 DPU falls 24.1% to S$0.0104 despite higher revenue
THE manager of OUE Commercial Real Estate Investment Trust (OUE C-Reit) reported on Monday (Jan 30) a 24.1 per cent year-on-year decline in distribution per unit (DPU) for the second half ended December 2022.
DPU for the six-month period fell to S$0.0104 from S$0.0137 in the year-ago period, even though the revenue for the second half grew 8 per cent on year to S$125.7 million.
Net property income (NPI) also climbed 8.6 per cent on year in the second half to S$103.3 million.
The improved revenue and NPI were largely driven by lower rental rebates, partially offset by higher property expenses, the manager said.
However, OUE C-Reit&rsquo s amount available for distribution fell 19.1 per cent on-year to S$52.1 million, which was due to &ldquo lower income support for OUE Downtown Office and higher interest expense driven by macroeconomic factors&rdquo .
For the full-year ended Dec 31, 2022, OUE C-Reit&rsquo s amount available for distribution also fell 15.2 per cent to S$111.6 million.
DPU for the full year was 18.5 per cent lower, slipping to S$0.0212 in FY22 from S$0.026 in FY21. Based on OUE C-Reit&rsquo s unit closing price of S$0.335 as at the last trading day of 2022, FY 2022 distribution yield would be 6.3 per cent.
The manager noted that OUE C-Reit&rsquo s commercial segment, comprising office and retail, recorded higher revenue and net property income in the second half due to lower rental rebates and property expenses.
&ldquo Positive rental reversions ranging from 3.2 per cent to 8.3 per cent were recorded across all Singapore office properties in Q4 2022, with average passing rents remaining stable as of end December,&rdquo the manager said.
&ldquo OUE C-Reit&rsquo s Singapore portfolio of core Grade-A offices with high occupancies and a well-diversified tenant base is expected to underpin a stable performance in 2023,&rdquo it added.
Han Khim Siew, chief executive officer of the manager, said the second half of 2022 was characterised by &ldquo continued operating challenges posed by geopolitical tensions, inflationary pressures, interest rate hikes and macroeconomic headwinds&rdquo .
He noted that the manager has been focused on strengthening the Reit&rsquo s capital structure and improving asset performance.
As at Dec 31, 2022, OUE C-Reit&rsquo s aggregate leverage fell 1.5 percentage points from the previous quarter to 38.8 per cent. Its weighted average cost of debt remained stable at 3.4 per cent per annum. Around 71.5 per cent of its total debt of S$2.3 billion is on a fixed-rate basis.
&ldquo While we will surely face macroeconomic headwinds in the year ahead, we remain confident in our ability to navigate market uncertainties and deliver positive results for FY 2023, with the support of our stakeholders,&rdquo Han added.
Anyone follow this ? Results out with DPU down 24% for 2H22 and down 18% for FY22...
Rights issue few years back, divestment, pandemic opened up and still can't hit 50c pre-pandemic level. Fiak.
New broom sweeps clean at OUE Commercial REIT
Last November, Han Khim Siew was appointed CEO of OUE Commercial REIT&rsquo s (OUE C-REIT) manager before he took up the post in February. If a new broom truly sweeps clean, investors in OUE C-REIT should experience an overall more stable phase for the REIT.
One of the first tasks that Han undertook was the issuance of $150 million five-year 4.2% fixed rate notes. &ldquo We tapped the bond market. We launched a $150 million five-year note with a 25 bps stepdown if we get an investment-grade rating. We printed 4.2%. With a 0.25% discount, it [can potentially] go to 3.95%. We caught the timing. After that, the Fed kept pushing rates higher,&rdquo Han says in a recent interview. &ldquo At that time, the objective was getting the timing right and lower rates.&rdquo
A second major transaction undertaken by Han is the unsecured $978 million sustainability-linked syndicated loan announced in August. This implies that the majority of OUE C-REIT&rsquo s debt in 2023 and 2024 has been refinanced in advance, leaving only 12% of borrowings or $283 million to be refinanced in September 2023. As Han tells it, there were three tranches of debt to be refinanced &mdash this year, next year and 2024.
&ldquo We looked at the market after the bond issuance. In May, we felt we should get this refinancing done and take out the whole tranche since 2023 would be challenging. What made it harder was moving from secure to unsecured. A lot of the loans were on a secured loan basis. They are cheaper until you unencumbered the whole lot,&rdquo Han continues.
The banks that provided the syndicated sustainability-linked loan were OCBC Bank, Maybank, CIMB and Standard Chartered. The maturities are in 2025 and 2026.
&ldquo When we talked to the banks for moving from secured loans to unsecured, with cheaper and bigger refinancing, we ended up with 19 banks [who offered to refinance] and who understood the journey. We did not promise immediate growth but accretive growth, growing to benefit unitholders,&rdquo Han says.
Han is pleased with the refinancing which included a large sustainability-linked loan that could lower the cost of debt subject to certain sustainability targets. The refinancing exercise increased the percentage of unsecured debt from 30.9% to 70.1%, extending its weighted average debt maturity from 2.7 years to 3.1 years.
Cost of debt and gearing inched up quarterly, with 69.2% of its borrowings on fixed rates as at Sept 30 compared to 76% as at June 30, and slightly below its 70%&ndash 75% target.
Accretive versus dilutive
Growing accretively is important for unitholders. And in this respect, OUE C-REIT has not been able to meet expectations.
When asked about OUE C-REIT&rsquo s dilutive acquisitions, Han says: &ldquo As long as you think it&rsquo s going to yield up and it never materialises, then that is a poor analysis of the acquisition. If it&rsquo s clearly a case where tenants are committed but they haven&rsquo t come in, [the property] can yield up. The ideal acquisition would be accretive from day one, and it should keep yielding up.&rdquo
Since its IPO in 2014, OUE C-REIT has made two major property acquisitions and both were initially dilutive. OUE C-REIT acquired a 67.95% stake in One Raffles Place (ORP) in 2015 for $1.1 billion, funded by a ninefor-20 rights issue raising $218.3 million and issuance of $550 million worth of convertible perpetual preferred units (CPPU). Based on the funding, ORP&rsquo s acquisition was dilutive to DPU to the tune of double digits. Since then, 75 million CPPUs were redeemed in 2017, 100 million in 2018 and 155 million in 2022 leaving 220 million CPPUs outstanding as at November.
The most recent $155 million redemption was funded from the divestment proceeds from the partial divestment of OUE Bayfront to a fund managed by Allianz Real Estate in 2021 at a premium of 26.1% over the purchase consideration of $1.005 billion. The net proceeds from the divestment were $262.6 million.
In 2018, OUE C-REIT acquired OUE Downtown which was around 4.3% dilutive to DPU based on the outstanding CPPUs to be redeemed rather than converted. OUE Downtown&rsquo s net property income (NPI) was supported by rental support of $60 million for up to five years. Han says that the $60 million has been fully utilised.
In 2019, OUE C-REIT announced a merger with OUE Hospitality Trust. The circular indicated that the merger is around 2.1% accretive to OUE C-REIT&rsquo s DPU. However, Covid hit and OUE Hospitality Trust&rsquo s income was based on the master lease income which comprised $45 million from Hilton Singapore Orchard (formerly Mandarin Orchard) and $22.5 million from Crowne Plaza Changi Airport. &ldquo The point of entry becomes quite important and you need to get that right, otherwise you are pushing water uphill,&rdquo Han says.
Growth was important
&ldquo Those acquisitions were somewhat dilutive,&rdquo Han acknowledges, referring to OUE Downtown and One Raffles Place. &ldquo In 2010&ndash 2014, a lot of REITs came to market and you had a lot of subscale REITs. If you didn&rsquo t have $1 billion of AUM, you were locked out of the market. If you were stuck at that level, the REIT would have performed poorly for unitholders, hence REITs had to grow,&rdquo Han explains.
After the merger with OUE Hospitality Trust, three things happened that showed why scale matters, says Han. OUE C-REIT&rsquo s AUM grew to $6.9 billion and the REIT could recycle capital. It sold 50% of OUE Bayfront to a fund managed by Allianz Real Estate. That leads to a second advantage. With some of the sale proceeds, OUE C-REIT was able to undertake a $150 million AEI for Hilton Singapore Orchard. &ldquo Hilton Singapore Orchard&rsquo s income was $70 million a year. If you stripped out this income, you couldn&rsquo t do AEI because we would take out the main income-generating asset,&rdquo Han points out. Thirdly, OUE C-REIT was added to the FTSE EPRA NAREIT, an index many S-REITs aspire to be in.
&ldquo The acquisitions were dilutive and the merger impact was flat. But we can see the benefits of scale because index investors are the largest part of the investing universe. Allocation is based on the size of the REIT. If you are looking at smaller REITs, there are many things you can&rsquo t do and this platform allows us more flexibility,&rdquo Han says. Boost from Hilton Singapore Orchard The average room rates at Hilton Singapore are likely to be significantly higher than at the old Mandarin Orchard. &ldquo When we opened as Hilton Singapore, our average day rates (ADR) were $300. Then in May, ADR increased to $400 and now it is $500,&rdquo Han confirms.
The increase is not only due to the rebranding. The market has opened up and quarantine restrictions have loosened. As evidenced by the Formula One night race and the Singapore FinTech Festival, visitors were flocking to Singapore in droves. In addition, it was reported that the Grand Hyatt on Scotts Road and the old Hilton across from that Thai embassy have closed for major AEIs, taking away supply from Orchard Road at a time when visitors are flocking to the Lion City.
In addition to the macro picture in Singapore, the Hilton&rsquo s booking system is likely to be more sophisticated and far-reaching than the old Mandarin Orchard system. The profile of travellers has also changed because of the brand change. Previously, booking depended on cabin crews and tour groups from the region. Now, US travellers are among the top three groups of customers.
&ldquo The idea was to tap into direct bookings and corporate travellers. That has improved the margins and rates and reduced the amount of distribution by wholesalers. We wanted North American travellers. Now, Hilton has the largest Mice facilities [along Orchard Road],&rdquo Han says.
Once all 1,080 rooms at the Hilton Singapore are ready, its revenue could rebound to levels not experienced since 2019, before Covid. In 1HFY2022 ending June 30, OUE C-REIT reported total revenue of $115.8 million, which remains lower compared to pre-Covid levels. Hilton Singapore accounted for 18.5% of revenue while Mandarin Gallery accounted for 11.3% and Crowne Plaza Changi Airport 9.3%. In FY2018, OUE Hospitality Trust, which comprised Mandarin Orchard, Mandarin Gallery and Crowne Plaza Changi Airport), reported revenue and net property income (NPI) of $129.7 million and $112.8 million respectively, indicating upside potential.
A challenge remains
DBS Group Research is sounding a cautious note about OUE C-REIT&rsquo s prospects and recommending a hold on the stock. &ldquo Key positive catalysts that could change our view include i) a hospitality ramp-up and recovery to pre-Covid levels at full capacity, ii) the office income growth trend continuing longer than expected, and iii) China reopening,&rdquo DBS says in a recent report.
It adds that the REIT may utilise &ldquo the remaining $9 million in capital distributions after the partial divestment of OUE Bayfront to smoothen out some earnings. However, the payout will be considered at the end of the year&rdquo .
On the other hand, DBS is concerned about the remaining $220 million of CPPUs. While converting to equity is highly unlikely given the conversion price of 71 cents, DBS says that &ldquo potential redemption may require equity placement.&rdquo On the other hand, the CPPUs are perpetual at 1% and the REIT may just continue to carry them as CPPUs.
Han touched on acquisitions in developed markets such as Australia and possibly UK. At present, NOI yields and cap rates are at 4% to 5% for office assets leaving very little upside given borrowing rates of 4.5% to 5.5%.
&ldquo We are waiting for market stress to kick in. No one wants to be the first to sell below valuation and you want to be able to buy at a discount to valuation. We have consolidated ourselves this year and are in a good position to act opportunistically over the next 9&ndash 12 months,&rdquo Han says.
OUE C-Reit posts 4.4% rise in net property income in Q3
THE manager of OUE Commercial Real Estate Investment Trust (OUE C-Reit) on Thursday (Nov 3) reported a 4.4 per cent year-on-year rise in net property income in the third quarter ended Sep 30, although its amount available for distribution continued to shrink.
Net property income in Q3 rose to S$48.3 million, due mainly to lower property expenses, the manager said in an exchange filing.
The Reit&rsquo s revenue increased 1.7 per cent to S$59.5 million in the quarter, compared with the same period last year.
But lower income support for OUE Downtown Office and the higher interest expense in the same quarter led to a drop in the amount available for distribution, which was 13.3 per cent lower year on year at S$26.2 million.
The Reit&rsquo s commercial segment in Q3 reported 2.4 per cent year-on-year growth in revenue to S$42.6 million, as well as a 5.3 per cent year-on-year increase in net property income to S$32.7 million.
As at Sep 30, the committed occupancy of OUE C-Reit&rsquo s Singapore office properties increased 2.5 percentage points on a quarterly basis to 95.4 per cent, the manager noted.
Leasing demand was however tepid in Shanghai, owing to ongoing business uncertainty and as occupiers focused on space and cost efficiencies, it said.
Q3 revenue for the hospitality segment remained at the minimum rent of S$16.9 million under the master lease arrangements of OUE C-Reit&rsquo s hotel properties due to the reduced inventory, said the manager. Net property income rose 2.7 per cent year on year in the same quarter to S$15.6 million.
Han Khim Siew, chief executive of the manager, said it has taken a &ldquo proactive capital management approach&rdquo to stay resilient against inflation, rising interest rates and other headwinds like heightened geopolitical tensions.
&ldquo We have mitigated refinancing risk by successfully completing the early refinancing of close to S$1 billion of secured debt in August with an unsecured S$978 million sustainability-linked loan,&rdquo said Han.
This means only 12 per cent of total debt is due for refinancing in 2023 and none in 2024.
He added that the manager further diversified funding sources in May and increased financial flexibility with the issuance of S$150 million five-year 4.2 per cent fixed-rate notes.
As at end-September, the Reit&rsquo s aggregate leverage was 40.3 per cent with the weighted average cost of debt remaining stable at 3.2 per cent per annum, said the manager. It added that about 70 per cent of total debt is hedged into fixed interest rates to mitigate the impact of rising rates.
On the whole, demand for office space was largely driven by technology firms, flexible workspace operators and non-banking financial companies, said the manager.
Grade A occupancy in the central business district (CBD) grew 1.3 percentage points sequentially to 96.9 per cent, while office rents rose 2.7 per cent quarter on quarter to S$11.60 per square foot per month.
&ldquo While global macroeconomic headwinds and consolidation in the technology sector could weigh on demand and rents in 2023, core CBD Grade A office rental growth is expected to remain positive for the rest of 2022 and 2023 due to the limited supply pipeline, barring a sustained recession,&rdquo said the manager.
As for the hospitality sector, the manager said the further easing of pandemic measures, pick-up in MICE events and continued recovery of the travel-related sectors are expected to sustain hotel demand despite inflationary pressures and the uncertain economic outlook.
&ldquo The manager will adapt its leasing strategies according to the business environment and continue to recalibrate its asset management strategy to optimise the performance of OUE C-Reit&rsquo s portfolio, while remaining focused on prudent capital management,&rdquo said the manager.
&ldquo To partially offset rising costs, the Manager will be raising service charges for the Singapore commercial portfolio from January 2023.&rdquo
OUE C-Reit to refinance borrowings with S$978 million sustainability-linked loan
MAINBOARD-LISTED OUE Commercial real estate investment trust (C-Reit) : TS0U 0% successfully completed a S$978 million unsecured sustainability-linked loan to refinance existing secured borrowings.
The loan, syndicated by a consortium of 4 mandated lead arrangers and bookrunners &ndash CIMB Bank Singapore, Maybank Singapore, OCBC and Standard Chartered - was 1.26 times oversubscribed and supported by 19 banks, the Reit manager announced in a press statement on Wednesday (Aug 17).
&ldquo With the new facility in place, there are no further refinancing requirements until September 2023 where only S$291 million of debt is due,&rdquo the manager noted.
Post refinancing, the average term of debt as at Jun 30 will lengthen to 3.2 years on a pro forma basis with the weighted average cost of debt expected to remain largely stable, it added.
The proportion of the Reit&rsquo s unsecured debt will also increase significantly from 30.9 per cent to 70.2 per cent on a pro forma basis.
This is the largest sustainability-linked loan extended to a Singapore Reit till date, noted chief executive officer and executive director of the Reit manager, Han Khim Siew.
&ldquo Significantly increasing the proportion of unsecured debt is an important step in our prudent and proactive capital management strategy which will enhance OUE C-Reit&rsquo s access to more diverse and competitive funding sources while keeping borrowing costs stable,&rdquo Han added.
Sustainability-linked loans now account for 58 per cent of OUE C-Reit&rsquo s total debt. These loans incorporate interest rate reductions linked to predetermined sustainability performance targets which are aligned with the Reit&rsquo s commitment to reduce the environmental impact of its portfolio, the filing noted.
OUE C-Reit has set energy and water intensity reduction targets of 25 per cent below 2017 levels, to be achieved by 2030.
OUE Commercial Reit net property income slumps 21.5% in Q1
NET property income for OUE Commercial Reit (OUE C-Reit) fell 21.5 per cent to about S$48 million for the first quarter ended Mar 31, 2022, from S$61.1 million in the year-ago period.
This was mainly due to the deconsolidation of OUE Bayfront&rsquo s performance after the divestment of a 50 per cent stake in the property on Mar 31, 2021.
The drop in net property income was partly mitigated by lower rental rebates and lower property expenses, the real estate investment trust&rsquo s manager said in a quarterly business update on Thursday (May 12) evening.
Revenue tumbled by 20.3 per cent to S$59.5 million, down from S$74.7 million in the corresponding period last year.
The amount available for distribution shrank by 15.8 per cent year on year to S$31.2 million for the quarter, from S$37.1 million previously. The latest amount included the drawdown of income support at OUE Downtown Office, the share of joint venture results of OUE Bayfront, and lower interest expense.
In OUE C-Reit&rsquo s commercial segment, committed occupancy inched down by 0.3 percentage points quarter on quarter to 91.2 per cent as at Mar 31, 2022.
Committed office occupancy in Singapore eased 0.4 percentage points to 90.8 per cent. Nonetheless, the average passing rents of all its Singapore office properties remained stable as of this March, the manager said.
Mandarin Gallery&rsquo s shopper traffic and tenant sales have rebounded to about 80 per cent of pre-pandemic levels. The mall&rsquo s committed occupancy increased 2 percentage points quarter on quarter to 88.7 per cent.
Over in Shanghai, leasing demand in Q1 this year was affected by Chinese New Year and the Covid-19 outbreak, the manager noted. Still, Lippo Plaza&rsquo s committed office occupancy was stable at 91.6 per cent, and again outperformed the overall Shanghai central business district Grade A office occupancy of 90 per cent.
In the hospitality segment, the property formerly known as Mandarin Orchard Singapore was relaunched as Hilton Singapore Orchard during the quarter. After a rebranding and extensive refurbishment, the property now houses 1,080 rooms and suites, new and enhanced Mice (meetings, incentives, conferencing, exhibitions) facilities, and revamped and new food and beverage offerings.
Although the latest easing of Covid-19 restrictions in April will support an uplift in inbound travel, visitor arrivals are not expected to return to pre-pandemic levels in the near term, the manager said.
It also flagged that the tight labour market and inflationary pressures pose additional challenges to the hospitality sector.
OUE Commercial Reit looks to acquire office assets in Sydney, Melbourne and London
JUST 1 out of the 7 assets in OUE Commercial Real Estate Investment Trust&rsquo s (OUE C-Reit&rsquo s) portfolio is outside Singapore, but there are plans to acquire more overseas assets to grow the trust, with a focus on office assets in Sydney, Melbourne and London.
&ldquo These are key gateway markets with a lot of liquidity for transactions in the S$200 million to S$400 million range so you can enter and exit the market fairly quickly,&rdquo said Han Khim Siew, the chief executive officer of OUE Commercial Reit Management. &ldquo The UK and Australia also have very good market transparency and governance.&rdquo
The trust is eyeing office properties in those 3 cities (with some supporting retail if any), but it is unlikely to go for pure retail assets, he added. &ldquo Hospitality assets, we will look at selectively.&rdquo
While all 7 existing assets of the Reit were from its sponsor, OUE, the overseas assets that the Reit is looking to buy will be third-party acquisitions.
Han also said that &ldquo we want to keep the majority of our asset composition in Singapore&rdquo . For the year ended Dec 31, 2021, 90 per cent of OUE C-Reit&rsquo s revenue was from Singapore.
Close to 60 per cent of the Reit&rsquo s revenue last year was from its office assets, about 25 per cent from its hospitality assets and 15 per cent from retail assets.
A key factor that has paved the way for the Reit to position itself for growth was the divestment of a half-stake in OUE Bayfront for S$634 million, which was completed in March 2021.
In turn, this capital recycling and portfolio reconstitution strategy has been facilitated by OUE C-Reit&rsquo s merger with OUE Hospitality Trust in 2019, combining OUE C-Reit&rsquo s 4 properties with OUE Hospitality Trust&rsquo s 3 assets, resulting in a total asset size of S$6.8 billion.
In a similar vein, OUE Hospitality Trust, with only 3 assets, may not have found it as feasible to embark on the revamp/rebranding of its Orchard Road hotel as it would have meant taking its biggest asset out of play.
Han said the rebranded hotel, Hilton Singapore Orchard, will contribute its maiden full-year income only next year. Some 40 per cent of the total 1,080 rooms inventory is being refurbished and this is slated for completion in H2 this year, hopefully in time for this year&rsquo s Singapore Grand Prix at the end of September.
Leveraging on Hilton&rsquo s strength in business travel and MICE, the hotel is able to diversify the business mix by tapping into the higher-yielding luxury market from North America and Europe for both corporate and leisure segments, complementing the property&rsquo s traditional strength in serving Asian leisure travellers.
OUE C-Reit&rsquo s top priority is to strengthen its capital structure amid rising interest rates. Some 72.4 per cent of its S$2.26 billion total debt as at end-2021 is on fixed interest rates. About 7.6 per cent of its debt matures this year, but OUE C-Reit is also looking to refinance this year part or all of the 24 per cent of its total debt that falls due next year - to try and lock in the rates as well.
&ldquo A 100-basis-point increase in interest rates will translate into a S$6 million impact on our distributable income,&rdquo says Han. The Reit&rsquo s amount available for distribution in FY2021 was S$131.6 million.
Han, who was formerly co-head of Asia-Pacific at BNP Paribas Real Estate before being appointed to his current position in February, also highlights that a large part of OUE C-Reit&rsquo s assets are encumbered (that is, with secured loans). He hopes that with the support of its banks, by a certain period, it can get all its assets unencumbered, similar to where a number of its peers are at already. This would allow greater borrowing flexibility - including for overseas acquisitions - and typically results in better terms and lower interest rates.
A major challenge ahead for OUE C-Reit is rising costs - including electricity and labour, which affect property management costs. The group is tackling these through greater use of technology.
Han is positive about the outlook for the various segments of the Singapore market OUE C-Reit is involved in. &ldquo The office market has bottomed and it is picking up. Our retail and hotel assets will benefit from the opening of the borders and loosening of Covid restrictions.&rdquo
He said that the Reit&rsquo s hospitality assets - besides the Hilton Singapore Orchard, it also owns the Crowne Plaza Changi Airport - are &ldquo well positioned for the inflationary period coming up because you can move room rates up on a daily basis, whereas for office rents, you are locked in for 3 years&rdquo .
&ldquo The increase in hospitality income through the increase in our room rates will allow us to buffer against cost rises,&rdquo added Han.
OUE, controlled by the Riady family, is not only the sponsor of OUE C-Reit of which it owns 50.47 per cent (based on data as at Mar 7, 2022) but is also the master lessee for both hospitality assets owned by the Reit.
In its capacity as master lessee, OUE entered into a branding and management agreement with Hilton in March 2020 for the former Mandarin hotel.
A refurbishment exercise was embarked upon, with the first phase kicking off in February 2021 and ending a year later with Hilton Singapore Orchard soft opening on Feb 24. The room count in the 39-storey Mandarin Wing, parallel to Orchard Road, rose slightly from 631 to 634.
At the hotel&rsquo s lobby, on the ground floor of Orchard Wing (parallel to Orchard Link), some carpark lots on level 2 were demolished to create double-volume space.
Also in the Orchard Wing, all the carpark lots on level 5 were removed to create space for 7 new meeting rooms, a communal lounge for coffee breaks and other casual breakout areas. These are integrated with the Grand Ballroom on level 6 (which can be partitioned into 3 smaller ballrooms) and the existing 5 meeting rooms on level 8, allowing MICE organisers to manage efficiently their events within the Orchard Wing.
All in, the hotel has 16 meeting (including ballroom) spaces totalling 2,400 square metres net lettable area. All but one are in the Orchard Wing the exception is the Imperial Ballroom, which is in the Mandarin Wing.
Said OUE&rsquo s deputy CEO Brian Riady: &ldquo Hilton Singapore Orchard offers one of the largest event venues in the heart of Orchard Road&hellip .Leveraging on Hilton&rsquo s strength in business travel and MICE, the hotel is able to diversify the business mix by tapping into the higher-yielding luxury market from North America and Europe for both corporate and leisure segments, complementing the property&rsquo s traditional strength in serving Asian leisure travellers.&rdquo
The hotel has 5 dining concepts, 4 of which are operating with the fifth, Italian restaurant Osteria Mozza, set to open by June.
Under the second phase of the hotel&rsquo s refurbishment, which began earlier this year and is targeted for completion in H2 2022, the 446 rooms in the Orchard Wing are being spruced up.
Also under phase 2, the previous Meritus Club Lounge, which was formerly a revolving restaurant known as the Top of the M, will be recreated into a new destination bar that will pay homage to the history of the Mandarin hotel.
The hotel&rsquo s refurbishment cost is S$150 million, of which S$90 million is being paid by OUE C-Reit and the remaining S$60 million funded mostly by OUE with some contribution by Hilton.
A key factor that has enabled the renovations in the hotel is the S$45 million minimum rental income per annum for the property guaranteed by OUE as the master lessee, which has provided downside income protection to OUE C-Reit&rsquo s unitholders throughout the period of phased renovation and ramping-up of operations.
OUE C-Reit H2 DPU falls 4.2% to S$0.0137
OUE Commercial Real Estate Investment Trust (OUE C-Reit) on Wednesday (Feb 16) posted a distribution per unit of S$0.0137 for the second half of the fiscal year ended December 2021, down 4.2 per cent from DPU of S$0.0143 in the comparable year-ago period.
This propped up the Reit' s full year DPU to S$0.0260, 7 per cent higher than DPU of S$0.0243 in FY2020.
The H2 distribution is expected to be paid out on Mar 30, after the book closure date on Feb 24.
Revenue for H2 was down 22.4 per cent to S$116.3 million versus S$150 million in the year-ago period. Net property income for the 6 months was down 20.3 per cent to S$95.2 million from S$119.4 million.
Amount available for distribution for the 6 months was down 11.2 per cent year-on-year to S$64.4 million from S$72.5 million.
For the full FY2021, revenue was down 14.4 per cent to S$249.9 million, while net property income was down 11.9 per cent to S$204.2 million.
OUE C-Reit said its commercial segment recorded lower revenue and net property income primarily due to the divestment of a 50 per cent stake in OUE Bayfront on Mar 31 last year, which resulted in the performance of the property being equity accounted as share of joint venture results versus being consolidated prior to the divestment.
This was, however, partially mitigated by lower rental rebates and other support measures granted to tenants compared to H2 2020 and FY2020.
As at end-December 2021, the valuation of OUE C-Reit' s properties was approximately S$6 billion. The lower valuations for the hospitality and retail segments of the portfolio were mitigated by higher valuations for the Singapore office properties, which saw fair value gains ranging from 0.2 per cent to 7.5 per cent.
The Reit' s total debt stood at about S$2.3 billion as at end-December last year. Aggregate leverage was 38.7 per cent, with the weighted average cost of debt at 3.2 per cent per annum.
Approximately 72.4 per cent of the Reit' s total debt is on a fixed rate basis, mitigating the potential impact of interest rate fluctuations.
In its outlook statement, the OUE C-Reit' s manager said a " stronger rebound" is expected after 2022 when border restrictions are expected to be relaxed more substantially. However, there are still significant uncertainties such as supply chain disruptions, rising business costs due to inflation, and the risk of emergence of new Covid-19 variants which may result in further business disruption.
Han Khim Siew, chief executive of the Reit manager, said: " With the authorities allowing 50 per cent of employees to return to the office from January, we have seen an improvement in office leasing momentum. This bodes well for a continued recovery in Singapore office rents in 2022, which will underpin the performance of OUE C-Reit' s high quality Grade A office properties."
I no mean from behind start to count
ttbanthony ( Date: 27-Nov-2021 18:01) Posted:
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Beside first reit, this oue is number 2 in terms of quality.
Lobster ( Date: 27-Nov-2021 17:23) Posted:
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I will be posting this in all REITs stock in which I have some interests. But please hor, due diligence please, do not take this as the final and only positive statement and cheong to take up positions.....if you are lazy to read through the entire article, just focus on the highlighted parts....
Why is the Singapore REIT market going so strong after two years of COVID-19?
SINGAPORE: Singapore real estate investment trusts or S-REITs have emerged as a resilient segment of the local stock exchange in the past two years.
Traditionally a key pillar of the portfolios of individual investors in Singapore, the iEdge S-REIT Index, regarded as the S-REIT benchmark, reported a total return of 5.2 per cent since the start of 2020 to Nov 17.
This was despite S-REITs raising new equity from unitholders, creating additional units and leading to potential dilution risk. In the past 23 months, S-REITs raised a total of S$8 billion through placements and rights issues led by mega-issuances from Ascendas Real Estate Investment Trust and Frasers Commercial Trust.
Most S-REITs largely maintained their dividends, compensating for the fall in unit prices in this period.
Global financial markets including S-REITs initially crashed when COVID-19 became a pandemic, with investors panicking and selling liquid financial assets. For investors daring and savvy enough to put money to work during the trough in end-March 2020, total returns from capital gains have been a whopping 57 per cent.
Despite headlines on troubles in the retail space and how work-from-home has made offices redundant, occupancies measured by leases have remained high for S-REITs holding shopping malls and offices in Singapore, with little problems in rental collection, even if fewer are using these spaces.
In the hardest hit hotel sector, the fall in physical property asset value was contained to less than 10 per cent at a portfolio level among the S-REITs tracked by OCBC, a good outcome despite the pandemic curbing travel.
Hospitality REITs will likely need time to recover and could do better in a 24-month timeframe as borders reopen further.
S-REITs today generate a significant volume of trading activity for the stock exchange - about one-fourth of the daily turnover before COVID-19. Primary equity markets in Singapore also skew towards S-REITs.
S-REITs, at S$110 billion, represents 12 per cent of Singapore& rsquo s whole equity market by market cap & ndash a figure that is 6 per cent for Australia and only 2 per cent for Japan, the other two top REIT markets in the Asia-Pacific with large domestic economies.
WHY S-REITS STILL ATTRACT SO MANY INVESTORS
The top-performing Singapore stock in the past 23 months goes to iFAST Corporation, an investment products distribution platform, which generated total returns of 771 per cent during this time, superseding the Bloomberg Bitcoin Galaxy Index at 750 per cent.
This is lower than the 1,131 per cent on the Bloomberg Galaxy Crypto Index tracking cryptocurrencies.
Still, S-REITs and the Singapore commercial property market continue to attract significant investor attention.
Investors in Singapore are very familiar with the nuts and bolts of running a property, and understand how policies like stamp duties, urban planning, zoning, tenancy and ownership rules influence whether and when investors should buy an investment property and what to look out for in assessing a property& rsquo s attractiveness.
Many like the idea of owning a passive, stable and recurring income stream. S-REITs generate fairly stable revenue, with the iEdge S-REIT Index reporting revenue per unit of S$132.5 in 2019.
Though it dropped 6.3 per cent in 2020, analysts expect a rebound to S$135.6 this year.
S-REITs are a good source of income. Qualifying S-REITs are encouraged to pay gains to unitholders instead of hoarding profits as they not taxed on dividends distributed to unitholders.
The key challenge is share dilution when S-REITs need to raise to acquire new properties.
Past transactions that have stirred market discussions include K-REIT Asia& rsquo s (now known as Keppel REIT) 87.5 per cent interest in Ocean Financial Centre in 2011, Ascott Residence Trust& rsquo s acquisition of Ascott Orchard Singapore, Citadines City Centre Frankfurt and Citadines Michel Hamburg in 2017 and Lippo Malls Indonesia Retail Trust& rsquo s acquisition of Puri Mall in 2021.
S-REITs are also regulated as a collective investment scheme under the Securities and Futures Act, where there is a 50 per cent cap on the leverage limit for S-REITs to keep credit risks in check. As listed entities, S-REITs also follow SGX rules on the disclosure of information and the right for minority investors to vote on major matters.
S-REITS MORE ACCESSIBLE THAN EVER
Until S-REITs were launched in July 2002, the commercial property market was inaccessible to most individual retail investors, with ticket sizes of each standalone commercial property in the millions and billions of dollars.
Today, all it takes is S$230 at last Wednesday& rsquo s prices for an individual investor to buy into CapitaLand Integrated Commercial Trust (& ldquo CICT& rdquo ), Singapore& rsquo s largest REIT, and enjoy a portion of CICT& rsquo s rental income from shopping malls and offices.
Few investment opportunities provide such stability for 4 to 7 per cent dividend yield per year. It& rsquo s little wonder such investment classes with a dividend income and the potential for capital gains appeal to investors with a neutral risk profile at Singapore& rsquo s median age of 42.
Singapore has maintained an encouraging ecosystem for the development of S-REITs. Regulatory uncertainty is minimised as regulators routinely seek industry feedback from REIT managers, investors and lawyers before introducing new rules.
The market has grown to include fund managers who invest in S-REITs as their specialty, REIT exchange traded funds and REIT derivatives.
Bank lenders and bond investors in Singapore are highly familiar with S-REITs, together providing a pool of liquidity that allows the S-REIT market to grow bigger. Brokerages are also prepared to lend individual investors buying larger amounts of REIT units.
WILL GAINS IN S-REITS CONTINUE?
The bigger question is whether we will continue to see capital gains in the coming 12 to 24 months as interest rates rise.
In a world where stock market prices are affected by sentiments, Reddit fads and breaking news, S-REITs continue to see strong investor demand because their valuation is backed by commercial properties where asset value has seen a continued upward trend.
Indeed, S-REIT indices are not a good representation of the underlying economy. They are weighted towards larger S-REITs, rather than each S-REIT& rsquo s contribution to the Singapore economy.
The iEdge S-REIT& rsquo s top five components make up 43.3 per cent of the index which have an outsized influence on total returns.
Three are large-cap industrial REITs with industrial properties in Singapore and countries across Asia-Pacific, Europe and the United States & ndash in a world where logistics, data centres, business parks and manufacturing facilities have been resilient through the pandemic.
The remaining two are large-cap commercial REITs owning quality assets with tenants largely staying put despite the economic downturn, with occupancies remaining above 90 per cent.
Beyond the broad index, S-REITs that hold hotels and shopping malls located in the city centre have been dragged by the pandemic. With the city centre hollowed out as we work from home and international travelers non-existent, these S-REITs have underperformed Industrial REITs.
Furthermore, the S-REIT industry has been kept buoyant by an inflow of capital. The broad money supply in Singapore has surged by 10.9 per cent year-on-year as of September. With interest rates on cash near-zero, all that money needs to go somewhere.
The S-REITs market is unlikely to cool anytime soon. There is momentum. Thirteen out of the 80 IPOs with primary share offering in Singapore since 2016 were S-REITs raising S$5.6 billion collectively at an average offer size of S$430 million.
Outside of S-REITs, a further S$2.7 billion was raised for two listings, Kakao Corp, the Internet company global depository receipt listing and NetLink NBN Trust, a business trust which holds infrastructure assets.
The remaining 65 had an average offer size of S$28 million & ndash small cap listings with limited liquidity.
Tellingly, the two upcoming IPOs in Singapore - Daiwa House Logistics Trust and Digital Core REIT - are both S-REITs.
The equity analyst community is still optimistic and forecasting a rise in S-REIT dividends in the next 12 to 24 months.
Driven by the growth and resiliency of industrial assets, particularly logistics warehouse and data centres, the Big Three industrial REITs of Ascendas Real Estate Investment Trust, Mapletree Logistics Trust and Mapletree Industrial Trust also recorded average total returns of 15.6 per cent in the past 23 months.
DON& rsquo T DISMISS SGX
Looking ahead, Singapore investors should not be so quick to dismiss the SGX, given the current slew of corporate restructuring exercises with the potential for capital gains, which may not be immediately apparent to new individual investors in the market.
Buying S-REITs is likely to remain a cornerstone investment strategy for many individual investors. The more pertinent decision points remain how much S-REITs should feature as a percentage of one& rsquo s investment portfolio and which specific ones to invest in.
Still, until a next financial crisis with significant liquidity stress, we are unlikely to repeat the kind of capital gains seen from March 2020 to date in S-REITs.
A lot of the negatives has since been priced in, with the broad iEdge S-REIT Index trading at 1.1 times the price-to-book value, indicating that the market cap of the S-REITs as a broad basket is now higher than the value of the underlying properties.
TAKE NOTE.............OUE REIT JUST A BIG SPIKE IN VOLUME & PRICE.
IT IS TRADING AT THE SUPPORT LINE OF 0.44............MAY BE QUITE REWARDING
IT IS TRADING AT THE SUPPORT LINE OF 0.44............MAY BE QUITE REWARDING
OUE C-Reit' s amount available for distribution slips 7.5% in Q3 to S$30.2m
OUE Commercial Reit' s (OUE C-Reit) amount available for distribution was S$30.2 million for the third quarter ended Sep 30, down 7.5 per cent year on year, the real estate investment trust (Reit) said in a Singapore Exchange business update on Tuesday after market close.
Revenue was down 17.5 per cent at S$58.5 million, while net property income for the quarter fell 17.1 per cent to S$46.2 million. The Reit attributed this mainly to the deconsolidation of OUE Bayfront' s performance, after the divestment of its 50 per cent stake in the property.
Despite slower leasing momentum due to tightened Covid-19 curbs, OUE C-Reit' s commercial segment' s committed occupancy edged up 0.3 percentage points to 92 per cent as of Sep 30, with improved office occupancies in both Singapore and Shanghai.
About S$1.1 million in rental rebates was provided in Q3, lower than in previous quarters. The Reit' s manager said that with the further extension of Covid-19 curbs into Q4, it will " continue to monitor the situation closely and provide support where necessary" .
In the hospitality segment, revenue per available room was S$92, down 9.6 per cent from the previous quarter.
" Despite potential demand risks as occupiers assess their longer-term space requirements, the limited supply pipeline is expected to support a positive medium-term outlook for Grade A office rents," said the Reit.
Its Hilton Singapore Orchard property is expected to relaunch in Q1 2022 and " will be well-positioned to capture the nascent recovery in the hospitality segment" with the opening of Vaccinated Travel Lanes, it added.
Beyond the quarter, the Reit secured its first S$540 million sustainability-linked loan in October. The refinancing of existing borrowings with this new facility will extend the Reit' s pro forma average term of debt to 3.3 years, with no debt due until December 2022.
" OUE C-Reit' s recent inclusion in the FTSE EPRA Nareit Global Real Estate Index has also enhanced its visibility and investability among global investors," said the Reit manager' s chief executive officer Tan Shu Lin. The Reit was included in September.
I think very few people here have this.....vested
OUE C-Reit' s amount available for distribution slips 7.5% in Q3 to S$30.2m
OUE Commercial Reit' s (OUE C-Reit) amount available for distribution was S$30.2 million for the third quarter ended Sep 30, down 7.5 per cent year on year, the real estate investment trust (Reit) said in a Singapore Exchange business update on Tuesday after market close.
Revenue was down 17.5 per cent at S$58.5 million, while net property income for the quarter fell 17.1 per cent to S$46.2 million. The Reit attributed this mainly to the deconsolidation of OUE Bayfront' s performance, after the divestment of its 50 per cent stake in the property.
Despite slower leasing momentum due to tightened Covid-19 curbs, OUE C-Reit' s commercial segment' s committed occupancy edged up 0.3 percentage points to 92 per cent as of Sep 30, with improved office occupancies in both Singapore and Shanghai.
About S$1.1 million in rental rebates was provided in Q3, lower than in previous quarters. The Reit' s manager said that with the further extension of Covid-19 curbs into Q4, it will " continue to monitor the situation closely and provide support where necessary" .
In the hospitality segment, revenue per available room was S$92, down 9.6 per cent from the previous quarter.
" Despite potential demand risks as occupiers assess their longer-term space requirements, the limited supply pipeline is expected to support a positive medium-term outlook for Grade A office rents," said the Reit.
Its Hilton Singapore Orchard property is expected to relaunch in Q1 2022 and " will be well-positioned to capture the nascent recovery in the hospitality segment" with the opening of Vaccinated Travel Lanes, it added.
Beyond the quarter, the Reit secured its first S$540 million sustainability-linked loan in October. The refinancing of existing borrowings with this new facility will extend the Reit' s pro forma average term of debt to 3.3 years, with no debt due until December 2022.
" OUE C-Reit' s recent inclusion in the FTSE EPRA Nareit Global Real Estate Index has also enhanced its visibility and investability among global investors," said the Reit manager' s chief executive officer Tan Shu Lin. The Reit was included in September.