OUE Limited and the manager of OUE Commercial REIT (OUE C-REIT) TS0U have unveiled a $22 million asset enhancement initiative (AEI) for Crowne Plaza Changi Airport (CPCA), expected to complete by end-2023.
Works include the addition of 12 guest rooms to a total room stock of 575 and repurposing a former restaurant space into a 352 sq m function room.
In an Aug 2 statement, the manager of OUE C-REIT says it expects the AEI to be accretive to distribution per unit (DPU). “With the estimated capital expenditure of up to approximately $14 million, the AEI is expected to generate a stabilised return on investment of approximately 10%.”
The manager intends to draw down on existing loan facilities to fully fund the AEI, which is not expected to have a material effect on the net tangible assets or aggregate leverage of OUE C-REIT and its subsidiaries for the financial year ending Dec 31.
Brian Riady, deputy chief executive officer and executive director of OUE, which is the master lessee of CPCA, says OUE has a proven track record in adding value to its portfolio. He points to the rebranding of Mandarin Orchard Singapore to Hilton Singapore Orchard, completed in January.
“Our goal of the AEI is to reposition CPCA for its next phase of growth and to be well-positioned to capture the expected rebound in both business travellers and tourist arrivals,” says Riady.
See also: OUE C-REIT reports 1HFY2023 DPU of 1.05 cents, 2.8% lower y-o-y
Han Khim Siew, chief executive officer of the manager, says OUE C-REIT has been “actively optimising” the quality of its assets to create long-term value for unitholders and stakeholders. “This AEI is timed to capture the anticipated influx of leisure and business travellers in 2024 and beyond as the recovery prospects of Singapore’s hospitality sector remains positive.”
Han believes that these “income-generating enhancements” will strengthen CPCA’s competitive positioning as a premier hospitality destination in its unique Changi Airport location. “The AEI will also capitalise on the ongoing transformation of the Changi region, which began with the addition of Jewel in 2019, and will continue with the future development of Terminal 5, Changi East Industrial Zone and Changi East Urban District.”
On July 26, OUE C-REIT reported DPU of 1.05 cents for 1HFY2023 ended June, 2.8% lower y-o-y.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
Despite a higher revenue and net property income (NPI), the REIT’s distributable income fell by 3.3% y-o-y to $57.6 million mainly due to higher finance costs from the high interest rate environment and the lack of income support for OUE Downtown Office.
Meanwhile, revenue for the period rose 19.8% y-o-y to $138.8 million with the recovery in Singapore’s tourism sector and y-o-y growth in the REIT’s operational performance. NPI also rose 23.1% y-o-y to $115.3 million in line with the higher revenue.
Units in OUE Commercial REIT closed 1.5 cents lower, or 4.84% down, at 29.5 cents on Aug 2.
