OUE Commercial REIT Sees 30% Surge in Net Property Income in Q3

OUE Commercial REIT recorded net property income of S$62.7 million ($45 million) in the third quarter, up 29.8 percent from the same period a year earlier, thanks to improved performance by its hospitality assets driven by a recovery in Singapore tourism.

The trust’s rising income comes largely as a result of the return of tourists in the Lion City, higher rents from its commercial properties, and the full reopening of its Hilton Singapore Orchard hotel.

“The hospitality segment continued to be our growth driver for the quarter, while the Singapore-focused commercial segment remains stable with positive rental reversions recorded,” said Han Khim Siew, chief executive officer of OUE C-REIT’s manager.

The REIT joins other SGX-listed trusts that have profited from a global rebound in the hospitality industry, including CDL Hospitality Trust which reported 23.3 percent growth in net property income for the July-September period.

Heightened Hospitality

Sponsored by OUE Group, which is controlled by Indonesia’s Riady family, OUE C-REIT manages a S$6 billion portfolio spread across six office, retail and hospitality assets in Singapore, as well as the 91 percent stake it holds in Shanghai’s Lippo Plaza office tower.

The biggest improvement in the trust’s performance came from its hotels, which include the Crowne Plaza Changi Airport in addition to the Hilton, with net property income from the two assets growing 73.2 percent compared to the third quarter of last year to reach S$27 million.

Average revenue per available room (RevPAR) in the hospitality properties reached S$295 during the period – up 12.8 percent from a year prior, and a 41.1 percent increase from its 2019 rate of S$209 before the dawn of the pandemic.

The increased income from its hospitality holdings was helped by the re-opening of the Hilton’s Orchard wing in January which added 446 rooms to its operating properties. OUE C-REIT is in the process of upgrading the Crowne Plaza Changi Airport with more guest rooms, a restaurant, and meeting facilities.

“Meanwhile, the asset enhancement initiative at Crowne Plaza Changi Airport is progressing well and the hotel is well-positioned to capture the anticipated influx of leisure and business travellers in 2024 and beyond” Han said in the press report on Monday.

Commercial Rents Climb

OUE C-REIT reported that its five commercial assets in Singapore and Shanghai produced net property income of S$35.6 million in the period, which was up 9.1 percent compared to a year earlier.

With the exception of its Lippo Plaza property in Shanghai, the REIT manager raised rents on new and renewed leases in its office assets at rates averaging 18.4 percent above earlier contracts, the REIT manager said. In addition to its China property, the trust owns the office component of OUE Downtown in Shenton Way, as well as partial stakes in the One Raffles Place and OUE Bayfront office towers in Raffles Place.

Retail tenants in the trust’s Mandarin Gallery shopping centre attached to the Hilton on Orchard Road saw their rents rise 31.1 percent.

The average occupancy for the trust’s Singaporean offices of the trust was at 95.7 percent, below the 96.8 percent rate of the core CBD offices of the city-state according to a report from CBRE. Lippo Plaza lagged behind the rest of the portfolio with tenants taking up 88.7 percent for its desk accommodation.

Investment Grade

With the trust’s income on the rise, S&P Global Ratings on Monday assigned an investment grade credit rating of BBB- to OUECT with the expectation that the REIT will continue to manage its debt maturities and financial leverage within adequate parameters.

Analysts at S&P gave the trust a stable outlook due to what they termed the healthy operating metrics of its properties and the diversified nature of its portfolio.

“OUE Commercial Real Estate Investment Trust’s (OUECT) operating cash flow will continue to improve over the next 18 months, underpinned by a tourism recovery and good-quality office assets. Its modest scale and market presence temper the strengths of the Singapore-based real estate investment trust,” S&P said in the note.

Units in OUE C-REIT were selling for S$0.23 at the close of trading Tuesday, up 2.2 percent from S$0.225 before the release of the financial report.