OUE Commercial REIT reported Tuesday its third quarter net property income fell 17.1 percent on-year to S$46.23 million after the divestment of a 50 percent stake in OUE Bayfront in March, partially offset by lower rental rebates and property expenses.
Revenue for the July-to-September quarter declined 17.5 percent on-year to S$58.74 million, the REIT said in a filing to SGX.
The share of joint venture results was S$3.97 million in the quarter, compared with none the previous year, the filing said.
The amount available for distribution slid 7.5 percent on-year to S$30.23 million for the quarter, due to lower interest expenses after the OUE Bayfront divestment, the filing said.
“We are pleased to report a stable operating performance for the office properties in Singapore despite a slowdown in leasing activity due to the recurrent tightening of safe management measures over 3Q 2021,” Tan Shu Lin, CEO of the REIT’s manager, said in the statement.
OUE Commercial REIT’s commercial segment posted committed occupancy of 92 percent, edging up 0.3 percentage point on-quarter on improved office occupancies in Singapore and Shanghai.
Mandarin Gallery’s committed occupancy posted a 2.2 percentage point decline on-quarter to 87.4 percent, although the figure is at 93.3 percent when including short-term leases.
“While the tightened social restrictions for Singapore in the third quarter of 2021 had dampened prime retail leasing sentiment, the vacancy increase was also partly attributable to ongoing repositioning of certain spaces to increase the food & beverage offering to enhance the tenant mix and strengthen the appeal of Mandarin Gallery for shoppers,” OUE Commercial REIT said.
Shopper traffic and tenant sales at Mandarin Gallery were around 70 percent and 60 percent, respectively, of pre-Covid levels, the REIT said.
In the hospitality segment, overall revenue per available room (RevPAR) was S$92 for the quarter, down 9.6 percent on-quarter, the REIT said.
RevPAR at the Mandarin Orchard Singapore declined to S$68 in the third quarter, off 5.5 percent on-quarter, on the absence of stay-home notice (SHN) business, which ended in June, and on a lower volume of staycation bookings, the REIT said.
The Crowne Plaza Changi Airport posted third quarter RevPAR of S$111 in the quarter, as it continued serving the air crew and aviation segment due to airport proximity.
The REIT’s outlook was upbeat.
For the office segment, “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,” OUE Commercial REIT said.
For the hospitality segment, OUE C-REIT pointed to Singapore’s moves to expand quarantine-free travel corridors.
“With the relaunch of Hilton Singapore Orchard expected in the first quarter of 2022, the property will be well-positioned to capture the nascent recovery in the hospitality segment,” OUE C-REIT said.
But the REIT noted prime Orchard Road rents have continued to decline in the third quarter. The tony Orchard Road shopping belt has been hard-hit by the pandemic as it relies on tourism for shopper traffic.
“While retail rents are likely to remain soft for the rest of 2021, the retail sector is set to benefit from the improvement in consumer sentiment and economic activity with the progressive easing of border restrictions and high vaccination rates,” the REIT said.