OUE Commercial REIT (OUE REIT) has reported a 13.3% drop in distributable income of $26.2 million for the 3QFY2022 ended September.
This is mainly due to lower income support for OUE Downtown Office and higher interest expenses.
During the quarter, revenue increased by 1.7% y-o-y to $59.5 million, while net property income (NPI) increased 4.4% y-o-y to $48.3 million. The better performance was attributed to lower property expenses.
The REIT’s commercial (office and retail) segment reported higher revenue and NPI of $42.6 million and $32.7 million, up 2.4% and 5.3% respectively.
As at Sept 30, the committed occupancy of OUE C-REIT’s Singapore office properties increased 2.5 percentage points q-o-q to 95.4% on the back of the manager’s proactive leasing strategy.
Positive rental reversions ranging from 1.6% to 9.2% were recorded across all Singapore office properties with average passing rents remaining stable as of September.
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Rental reversions at Mandarin Gallery turned positive at 9.2% in 3QFY2022. Average passing rent was stable at $20.89 psf per month. For 3QFY2022, both shopper traffic and tenant sales remained at approximately 90% and 85% respectively, of pre-Covid 19 levels.
The REIT’s hospitality segment revenue for 3QFY2022 remained at the minimum rent of $16.9 million under the master lease arrangements of OUE C-REIT’s hotel properties due to the reduced inventory. NPI for the same period was 2.7% higher y-o-y at $15.6 million.
For 3QFY2022, the overall hospitality segment revenue per available room increased 15.5% q-o-q to $262 due to strong demand from the return of tourism and the recovering MICE sector, as well as higher room rates at the newly rebranded Hilton Singapore Orchard.
The CEO of the manager Han Khim Siew says its proactive capital management approach over the past six months has allowed the REIT to stay resilient amidst the macroeconomic headwinds of inflation, rising interest rates and heightened geopolitical tensions.
“We have mitigated refinancing risk by successfully completing the early refinancing of close to $1 billion of secured debt in August with an unsecured $978 million sustainability-linked loan. Only 12% of total debt is due for refinancing in 2023 and none in 2024.
“Earlier in May, we further diversified funding sources and increased financial flexibility with the issuance of $150 million five-year 4.2% fixed rate notes. With prudent asset and capital management, we remain confident in our ability to deliver sustainable returns to our unitholders,” he adds.
As at Sept 30, OUE C-REIT’s aggregate leverage was 40.3% with the weighted average cost of debt remaining stable at 3.2% per annum.
To mitigate the impact of rising interest rates, about 70% of total debt is hedged into fixed rates.
For 3QFY2022, the Manager has elected to receive 50% of its management fees in cash with the balance in units of OUE C-REIT.
Units in OUE C-REIT closed at an unchanged 32 cents on Nov 3.
