OUE REIT has posted a 8.7% y-o-y increase in its distribution per unit (DPU) to 1.13 cents for the 2HFY2024 ended Dec 31, 2024. For the FY2024, DPU conversely fell 1.4% y-o-y to 2.06 cents.
Gross revenue in the 2HFY2024 and FY2024 grew 1.7% y-o-y and 3.7% y-o-y to $148.8 million and $295.5 million respectively. The increase was mainly due to the stable operational performance of the REIT’s Singapore office portfolio in the second half as well as the successful asset enhancement of Crowne Plaza Changi Airport which was completed in December 2023.
Due to the upward revision of prior years’ property tax for Hilton Singapore Orchard and Crowne Plaza Changi Airport, net property income (NPI) decreased by 2.3% y-o-y to $116.9 million in the 2HFY2024. NPI in the FY2024 also fell 0.4% y-o-y to $234.0 million.
The amount available for distribution for 2HFY2024 grew by 8.0% y-o-y to $62.4 million. This was achieved despite higher finance costs, which were offset by the payment of 50% base management fee in units in the 4QFY2024, the removal of working capital retention, as well as the release of the remaining $2.5 million capital distribution from the 50% divestment of OUE Bayfront.
OUE REIT’s distribution policy is to distribute at least 90% of its taxable income to unitholders on a semi-annual basis, with the actual level of distribution to be determined at the manager’s discretion.
Meanwhile, the group’s cash and cash equivalents in the FY2024 rose by a staggering 567.0% y-o-y to $361.7 million, due to sales proceeds from divestment of a subsidiary.
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In December 2024, OUE REIT divested Lippo Plaza Shanghai for a sale consideration of RMB1.917 billion ($357.4 million) and at an agreed property value of RMB1.68 billion. Lippo Plaza Shanghai is a non-core asset which contributed only 6.6% of OUE REIT’s total portfolio revenue as of 30 September 2024.
Following the completion of the divestment, all of the REIT’s assets are now located in Singapore.
OUE REIT has also adopted a proactive and prudent capital management strategy to enhance its capital structure and improve financial flexibility. It has maintained a debt maturity profile with an average term of debt at 3.0 years. As at Dec 31, 2024, OUE REIT’s weighted average cost of debt decreased to 4.7% per annum while aggregate leverage was at 39.9%.
In September, the REIT completed the issuance of its first seven-year investment grade green notes at an initial price guidance of 4.15%. The offer secured a peak orderbook of $320 million, representing 3.2 times oversubscription based on OUE REIT’s initial target size of $100 million.
The final offer was subsequently upsized to $180 million with pricing tightened to 3.90%. Leveraging on strong institutional demand, OUE REIT subsequently completed a bond re-tap issuance of $120 million in November 2024 in addition to its existing seven-year investment grade green notes at 100.714% tap re-offer price, representing a tighter tap reoffer yield of 3.78%, the lowest achieved by the REIT for a bond issuance.
With the retap, the total issuance size of the seven-year investment grade green notes increased to $300 million. On Oct 18, 2024, OUE REIT established a $2.0 billion Euro medium-term Note programme, enabling the REIT to tap into diversified sources of funding and further optimise its debt maturity profile.
On OUE REIT’s outlook, occupier sentiment is expected to remain weak due to global economic uncertainties, high fit-out costs, and elevated interest rates. However, below-historical-average office supply in the core central business district (CBD) over the next four years, combined with anticipated interest rate cuts, is likely to bolster corporate confidence in expansion in 2025.
Meanwhile, from January to November 2024, international visitor arrivals reached 15.1 million and have already achieved the Singapore Tourism Board’s full-year forecast of 15 to 16 million arrivals. Singapore’s tourism recovery is expected to maintain its upward trajectory, bolstered by improved continued tourism recovery and the launch of new tourism offerings.
In the near term, challenges such as manpower shortages, competition from e-commerce, and higher operating costs are expected to persist. Nevertheless, overall rents are projected to recover to pre-pandemic levels by 2025, supported by below-historical-average new supply.
Han Khim Siew, CO of the manager, says: “The year 2024 was marked by ongoing macroeconomic challenges, continued geopolitical tensions, protracted inflationary pressures, a prolonged high-interest rate environment, and muted China economic recovery. Despite these market headwinds, we delivered another year of resilient results, underpinned by our prime-located commercial and hospitality assets in Singapore.”
“As we move into 2025, the macroeconomic environment remains uncertain. OUE REIT will stay agile in addressing challenges, focusing on optimising asset performance and the balance sheet while seizing value-creation opportunities to deliver sustainable returns to our Unitholders,” adds Han.
Units in OUE REIT closed flat at 30 cents on Jan 23.
