In the quarter, the REIT’s revenue per available room (RevPAR) surged 11.7% y-o-y to $277, thanks to events such as the biennial Singapore Airshow and maiden voyage of the Disney Cruise. This helped drive NPI for the hospitality segment by 16.8% y-o-y.
The commercial segment, on the other hand, saw its NPI up by 3% with office renal reversions up by 6%, even though committed occupancy edged lower.
OUE REIT was earlier in the news for acquiring a 19.9% interest in 180 George Street, also known as Salesforce Tower in Sydney for A$357.2 million, or $319.8 million, which is at an initial passing yield of 5.8%. The property’s committed occupancy, as at March 31, was 99.2%, above the market average of 90.6% for premium grade assets.
OUEREIT has a right of first refusal (ROFR) to further increase its stake in 180 George Street, and management appears keen to exercise this should the opportunity arise, says Ada Lim of OCBC Group Research, adding that rental growth for the Sydney Central Business District (CBD) market is expected to remain supported by flight-to-quality trends and limited new supply beyond 2027.
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On the other side of the capital reallocation coin, OUEREIT is exploring the divestment of One Raffles Place, ahead of potentially muted reversions in 2028-2029 as new supply comes to market.
Meanwhile, the REIT expects to lower its financing costs further. Aggregate leverage, as at March 31, was 41.5%, 3 percentage points higher as compared to the end of FY2025 following the drawdown of debt to fund the acquisition of 180 George Street.
Cost of debt, however, improved a further 20 basis points over the quarter to 3.7%, with 73.6% of debt on fixed rates and is seen to lower to the mid-3% handle. Assuming a 25bps decline in interest rate, DPU would increase by 0.03 Singapore cents.
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The REIT’s management, according to Lim, has not seen a “noticeable impact” on its hotels from the Middle East war. “We are cautious that this may take some time to filter through,” warns Lim.
“That being said, we expect margins to remain stable, underpinned by long-term utilities contracts,” says Lim, who has revised her FY2026 and FY2027 DPU projections by 0.4% and 0.7%, respectively, leading to a new fair value of 41 cents, from 40 cents.
In her separate note, Tabitha Foo of DBS Group Research is even more bullish on the REIT, with her “buy” call and target price of 45 cents.
To her, the REIT “remains one of the key beneficiaries of a declining interest rate environment in Singapore within the mid-cap REIT space, with steady q-o-q interest savings that are likely to continue,” says Foo.
For her, “meaningful” catalysts for the REIT would be a focus on capital recycling, including a potential divestment of One Raffles Place, or Crowne Plaza Changi Airport. Valuations, for Foo, are attractive at 0.65x price to book and more than 6.5% FY2026 yield.
Li Jialin and Lock Mun Yee of CGS International, meanwhile, have turned more bullish on this counter, as they raised their target price from 41 cents to 44 cents.
They note that the REIT will be adding one level of office space at OUE Bayfront by converting the existing chiller system space on Level 17. "We see potential upside from this upon completion in 1HFYFY2027."
For them, re-rating catalysts include accretive divestments and timely capital deployment, while downside risks include interest cost hike and disruptions to global travel.
OUE REIT units closed at 37 cents on April 24, down 1.35%.
