OUE Commercial REIT’s (OUECT) FY2020 distributions per unit (DPU) fell by 26.6% to 2.43 cents, giving an historic yield of 6.39 %. Amount for distribution for the same period rose 7.8% y-o-y to $132.8 million. In 1H2020, OUECT retained $10.8 million. Of this, $5.8 million was released in 2H2020.
In terms of segment contribution by income, 23.1% is from hospitality, 14.8% from retail and the remaining 62.1% is office. FY2020 was challenging for retail and hospitality. Hence, during 2020, OUECT extended approximately $18.3 million of rental rebates to support tenants. This excludes the $21.9 million of support from the Singapore Government comprising property tax rebates and cash grants.
SEE: OCBC positive on OUE Commercial REIT, but notes weak leasing in Mandarin Gallery
On a positive note, OUECT’s unitholders could expect a special distribution this year. On Jan 18, the manager announced the divestment of 50% of OUE Bayfront, OUE Tower and OUE Link to a fund managed by Allianz Real Estate Asia Pacific. The agreed value for 100% of the property is $1,267.5 million or $3,170 psf. This is 7.3% higher than the property’s latest book value as at Dec 31, and 26.1% higher than its purchase price during the IPO. The estimated net proceeds are $262.6 million.
Sponsor OUE owns around 47.7% of OUECT. OUE is also the sponsor of First REIT and has provided an undertaking to take up its share of First REIT’s rights issue, and to acquire any unsubscribed units. The entire rights issue should raise around $158 million.
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OUECT’s manager has said that if the proceeds from the sale of OUE Bayfront and the adjoining assets are used to repay loans, OUECT’s leverage could fall to 34.5%. As at Dec 31, leverage rose to 41.2%, up from 40.3% a year ago. This was due to the lower valuations for the hotel and retail components of the portfolio. As a result, net asset value fell 3.2% y-o-y to 59 cents.
On the whole, market watchers suggest that OUECT is the best managed and least troubled among the Riady REITs. Its unit price is down just 28% y-o-y, compared to sharp declines and value destroying transactions by Lippo Mall Indonesia Retail Trust and First REIT.
