OUE Commercial REIT (OUE C-REIT) has reported a distribution amount of $67.2 million for the 1HFY2021 ended June, up 23.4% from $54.5 million previously.
This translates to a distribution per unit of 1.23 cents for the 1HFY2021, up from 1 cent the year before.
The higher distribution amount was underpinned by the absence of any retentions compared to the year before, where the REIT retained $10.8 million due to Covid-19 uncertainties.
The REIT reported revenue of $133.5 million for the 1HFY2021, 6% lower y-o-y from $142 million, while net property income (NPI) declined 3.1% y-o-y to $109 million.
The REIT had, in March, divested 50% in OUE Bayfront, resulting in contributions from the development no longer being consolidated but instead recognised as a share of joint ventures results. The loss in contributions underpins the lower NPI, though this was partially offset by lower rental rebates and property expenses.
But following the share of joint venture results of some $4.1 million, OUE C-REIT’s amount available for distribution grew 3% y-o-y from $65.3 million in 1HFY2020, which was also supported by lower interest expense.
“Operating performance for the Singapore commercial properties remained stable despite disruptions in business activities from the tightened safe management measures imposed in May. The impact of a lower contribution from OUE Bayfront due to the divestment of 50% interest on 31 March 2021 was mitigated by lower rental rebates extended to tenants, as well as lower interest expense,” says Tan Shu Lin, CEO of OUE C-REIT’s manager.
During the 1HFY2021, OUE C-REIT refinancing its existing debt, resulting in an extension of the REIT’s average term of debt to 2.9 years as at June 30, with a lower aggregate leverage of 38%, while weighted average cost of debt remained at 3.2% per annum.
OUE C-REIT’s commercial segment, which comprises offices and retail, the REIT reported 4.4% y-o-y lower NPI of $78.5 million due to the partial divestment of OUE Bayfront. Approximately S$6.2 million of rental rebates were extended to retail tenants, to address the business impact of safe management measures of Phase 2 (Heightened Alert) in Singapore.
Occupancy for the commercial segment stood at 91.7% as at June 30. In Singapore, committed office occupancy declined 1.4 percentage points q-o-q to 92.3%, though average passing rents continued to improve as of June. “Further, the successful renewal of an anchor tenant at a higher-thanpreceding rental rate will continue to underpin OUE Bayfront’s performance going forward,” the REIT adds.
Prime Singapore retail leasing sentiment weakened in 2Q 2021 as retailers turned cautious on the back of tightening Covid-19 measures. Mandarin Gallery's committed occupancy declined two percentage points q-o-q to 89.6% as at 30 June. Including short-term leases to support tenants’ space requirements, committed occupancy was 96.1%.
OUE C-REIT’s hospitality segment also continues to be impacted by the pandemic, with revenue for the 1HFY2021 coming in at $33.8 million, which is the minimum rent under the master lease arrangements of the hotel properties in OUE C-REIT’s portfolio. NPI for the period was 0.6% higher y-o-y at $30.6 million due to lower property operating expenses.
Looking ahead, the manager takes a cautious stance, viewing that “significant risks and uncertainties remain”. To that end, the manager says it will continue to focus on proactive asset management to sustain occupancy, as well as prudent capital management to maintain financial flexibility.
Units in OUE C-REIT closed flat at 43 cents on July 29.
