OUE Commercial REIT 4Q18 net property income rises on OUE Downtown Office acquisition

The OUE Downtown building in Singapore’s central business district. Credit: Shenton WireThe OUE Downtown building in Singapore’s central business district. Credit: Shenton Wire

OUE Commercial REIT reported on Wednesday that its fourth quarter net property income rose 5.6 percent on-year to S$36.64 million, mainly on contributions from OUE Downtown Office, acquired at the beginning of November.

That was partly offset by a lower contribution from the rest of the portfolio, it said in a filing to SGX after the market close on Wednesday.

Revenue for the quarter ended 31 December rose 9.2 percent on-year to S$48.04 million, the filing said.

“We are pleased to report healthy operational performance for OUE C-REIT’s portfolio of properties in FY2018,” Tan Shu Lin, CEO of OUE Commercial REIT Management, the REIT manager, said in the statement.

She said the acquisition of OUE Downtown Office, which had committed office occupancy of 93.5 percent at year-end, increased the REIT’s exposure to Singapore’s central business district, where the office rents are growing.

To partly finance the acquisition, the REIT raised around S$587.5 million via a rights issue, as well as obtaining S$1.1 billion in new bank borrowing for refinancing and acquisition financing, it said.

The distribution per unit (DPU) for the quarter was 0.75 Singapore cent, compared with a restatement of 0.62 Singapore cent for the year-ago quarter to include 1.29 billion rights units issued at the end of October, it said. Excluding the rights issue, the year-ago DPU was 1.14 Singapore cents, it said.

For the full-year, the REIT reported net property income of S$138.19 million, flat on-year, on revenue of S$176.40 million, up just 0.1 percent on-year. DPU for the full year was 3.48 Singapore cents, compared with 3.62 Singapore cents a year-ago, restated for the rights issue in the second half, and 4.67 Singapore cents excluding the rights issue.

Portfolio occupancy was “healthy” at 94.7 percent as of end-December, with positive rental reversions at all properties in the fourth quarter, the REIT said.

OUE Bayfront’s office occupancy was 97.6 percent at year-end, above the Singapore CBD’s market level of 94.8 percent and committed rents for new, reviewed and renewed office leases in the third quarter ranged from S$11.50 to S$14.20 per square foot per month, well above market rents of S$10.80, the REIT said.

The One Raffles Place property also saw committed office occupancy rise 0.9 percentage point on-quarter to 97.1 percent at year-end, with positive rental reversions on lease renewals, it said. The retail portion of the property saw committed occupancy of 99.4 percent by year-end after an asset enhancement exercise, it said.

In its outlook, the REIT pointed to data from CBRE showing Singapore’s grade A CBD core office rents rose for six straight quarters, while occupancy had tightened.

“Co-working operators continued to be the main driver of demand, with technology companies contributing to demand expansion,” it said. “Given the benign medium term supply outlook, we continue to expect positive operational performance across the Singapore portfolio in 2019.”

However, in Shanghai, it pointed to significant amounts of new office supply set to enter the market this year, along with softer demand amid a slower economy, which was set to dampen rental growth.

OUE Commercial REIT’s portfolio includes the OUE Bayfront, One Raffles Place and OUE Downtown Office in Singapore, and the Lippo Plaza in Shanghai.

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