OUE Commercial REIT has released its 2H2021 financial results on 16 February 2022. The REIT currently makes up 2.82% of my stock portfolio. The last time I reviewed the performance of OUE Commercial REIT was in February 2021.
There has been significant updates related to OUE Commercial REIT since my last followed up on this REIT. OUE Commercial REIT had divested 50% interest in OUE Bayfront and rebranded Mandarin Orchard Singapore whereby the it was relaunched as Hilton Singapore Orchard on 1 March 2022.
OUE Commercial REIT has entered into the leading FTSE EPRA Nareit Global Developed Index
on 20 September. This has enhanced OUE C-REIT’s visibility and investability.
Now, let me look at its financial results to see how OUE Commercial REIT has performed in FY2021.
OUE Commercial REIT 2H2021 Financial Results
Net property income of S$95.2 million was 20.3% lower YoY mainly due to deconsolidation of OUE Bayfront’s performance post the divestment of a 50% interest in the property on 31 March 2021, partially offset by lower rental rebates and lower property expenses
Due to drawdown of OUE Downtown Office income support, share of joint venture results from OUE Bayfront and lower interest expense, amount available for distribution was S$64.4 million.
With the release of S$5.0 million of distribution previously retained in FY 2020 and partial distribution of divestment gain from OUE Bayfront of S$5.4 million, the amount to be distributed was S$74.8 million.
A Distribution Per Unit (“DPU”) of 1.37 cents was paid, which was 4.2% lower YoY.
|Net Property Income||95.2||119.4||(20.3)%|
|Amount available for Distribution||64.4||72.5||(11.2)%|
|Distribution to Unitholders||74.8||78.4||(4.5)%|
|Distribution Per Unit (“DPU”) (cents)||1.37||1.43||(4.2)%|
OUE Commercial REIT FY2021 Financial Results
Net property income in FY2021 of S$204.2 million was 11.9% lower YoY mainly due to deconsolidation of OUE Bayfront’s performance post the divestment of a 50% interest in the property on 31 March 2021, partially offset by lower rental rebates and lower property expenses.
With the release of S$5.0 million of distribution retained in FY 2020 and partial distribution of divestment gain from OUE Bayfront of S$5.4 million, amount to be distributed was S$142.0 million, 6.9% higher YoY, translating to higher YoY DPU of 2.60 cents.
|Net Property Income||204.2||231.9||(11.9)%|
|Amount available for Distribution||131.6||137.8||(4.5)%|
|Distribution to Unitholders||142.0||132.8||6.9%|
|Distribution Per Unit (“DPU”) (cents)||2.60||2.43||7.0%|
As of 31 December 2021, gearing ratio stood healthy at 38.7%.
As of 31 December 2021, OUE Bayfront’s committed office occupancy stood at 99.3%.
Committed office occupancy of One Raffles Place and OUE Downtown Office are 88.3% and 88.6% respectively.
In Shanghai, Lippo Plaza’s committed office occupancy stood at 91.8%.
Average Passing Rent
As you can see below, average passing rent for Singapore office assets is improving. Lippo Plaza’s average passing rent is on the decline.
The average retail rent at Mandarin Gallery declined to S$20.88 per square feet per month given sustained operational challenges facing the prime retail segment due to the pandemic.
As you can see from the chart below, overall RevPar performed poorly in FY2021 as compared to FY2020.
For 4Q 2021, Mandarin Orchard Singapore’s RevPAR increased 43.9% QoQ to S$97, buoyed by local staycation demand during the year-end holiday period. Crowne Plaza Changi Airport’s RevPAR recorded a 13.0% QoQ increase to S$125 due to Singapore’s gradual relaxation of borders with the start of various Vaccinated Travel Lane arrangements. Overall hospitality RevPAR was 23.0% higher QoQ at S$113.
With renovation works underway for the most of FY 2021, Mandarin Orchard Singapore’s RevPAR declined 16.4% YoY to S$62. RevPAR for Crowne Plaza Changi Airport declined 6.7% YoY to S$110 due to a temporary closure in January 2021 as a precautionary measure to facilitate investigations by the Ministry of Health. Overall hospitality RevPAR declined by 2.5% YoY to S$87.
Current Dividend Yield
Based on the current share price of S$0.40 and FY2021 dividend payout of 2.60 cents, this translate to a current dividend yield of 6.5%.
Summary of OUE Commercial REIT 2H2021 Results
- Revenue in FY2021 of S$249.9 million was 14.4% lower
- Net property income in FY2021 of S$204.2 million was 11.9% lower
- DPU in FY2021 was higher at 2.60 cents
- Average passing rent for Singapore office assets is improving
- Lippo Plaza’s average passing rent is on the decline.
- The average retail rent at Mandarin Gallery declined to S$20.88 per square feet per month
- RevPar for Hospitality segment performed poorly in FY2021 as compared to FY2020.
As you can see above, there are many negatives as compared to positives. Perhaps it is time to say Goodbye to OUE Commercial REIT when the time is right.