On 3rd November 2022, OUE Commercial REIT announced their business update for 3Q 2022. The REIT has 3 category of properties in its portfolio. The category of properties are office, hospitality and retail.
In the office segment, rental growth was driven by demand from technology firms, flexible workspace operators and non-banking financial companies.
In hospitality and retail segment, there was also strong growth in RevPAR and retail rental driven by gradual recovery of tourism.
Below are more details of its operational performance.
3Q 2022 Financial Performance
Revenue increased 1.7% YoY to S$59.5 million.
Despite the increase in revenue, the amount available for distribution was 13.3% lower year on year at S$26.2 million. This was mainly due to lower income support for OUE Downtown Office and higher interest expense.
Net Property Income (NPI) increased 4.4% year on year to S$48.3 million mainly due to lower property expenses.
| 3Q2022 (S$’m) | 3Q2021 (S$’m) | Change | |
| Gross Revenue | 59.5 | 58.5 | 1.7% |
| Net Property Income | 48.3 | 46.2 | 4.4% |
| Share of Joint Venture Results | 3.4 | 4.0 | (13.6)% |
| Amount available for Distribution | 26.2 | 30.2 | (13.3)% |
Debt
As of 30th September 2022, gearing ratio stood at 40.3%. This was an increase as compared to 39.1% on 30th June 2022.
69.2% of the debt is hedged at fixed interest rate to mitigate against hikes in interest rates.
OUE Commercial REIT has obtained an unsecured S$978 million sustainability-linked loan in August 2022. As such, there is no further refinancing requirements until September 2023 where only 12% (S$283 million) of total debt is due, with none due in 2024.
Occupancy
The committed occupancy of OUE Commercial REIT’s Singapore office properties increased 2.5 percentage points quarter-on-quarter to 95.4% on the back of the Manager’s proactive leasing strategy.
As you can see below, the manager achieved positive rental reversions ranging from 1.6% to 9.2% across its Singapore offices with average passing rents remaining stable as of September 2022.
In Shanghai, Lippo Plaza continues to face intense leasing competition amidst significant new supply. As of 30th September 2022, Lippo Plaza’s committed office occupancy declined 2.1 ppt to 85.6%.
RevPAR (Revenue Per Available Room)
In 3Q2022, the overall hospitality segment revenue per available room increased 15.5% quarter-on-quarter to S$262. This is due to higher room rates at the newly rebranded Hilton Singapore Orchard (“HSO”), strong demand at both hotels with the increase in visitor arrivals and nascent recovery in the MICE sector.
Current Dividend Yield
Based on FY2021 full year distribution of 2.60 cents and current share price of S$0.32, this translate to a current dividend yield of 8.125%.
Summary of OUE Commercial REIT Business Update for 3Q 2022
In my opinion, OUE Commercial REIT has performed well in its office segment and hospitality segment. In the office segment, it has achieved positive rental reversions. Riding on the reopening of borders, the hospitality sector is also recovering with RevPAR improving.
If the positive continues, I am sure OUE Commercial REIT will continue to perform well in upcoming quarters.