OUE C-Reit's Q4 DPU down 13.2% at 1.18 cents

OUE Commercial Reit (OUE C-Reit) on Thursday posted a distribution per unit (DPU) of 1.18 Singapore cents for the fourth quarter ended Dec 31, 2016, down 13.2 per cent from 1.36 cents a year ago.

Amount available for distribution to unitholders went down 12.5 per cent year on year to S$15.43 million in Q4.

OUE C-Reit said the steeper decline was due to a one-off distribution of capital return of S$1.3 million, excluding which DPU for Q4 2015 would be 1.26 cents.

Net property income went up 17.3 per cent to S$34.82 million, while revenue went up 11.6 per cent to S$45.02 million.

This is on the back of improved performance at all three properties - One Raffles Place and OUE Bayfront in Singapore, Lippo Plaza in Shanghai - coupled with lower property operating expenses of S$10.2 million.

For the full year, the amount available for distribution came to S$67.42 million, representing a 20.1 per cent increase from FY2015. DPU for FY2016 was 5.18 cents, up 18.3 per cent from 4.38 cents in FY 2015. Net property income went up 83.3 per cent S$138.63 million, while revenue went up 76 per cent to S$177.81 million, mainly due to full-year contribution from One Raffles Place which was acquired in October 2015.

Overall, OUE C-Reit's portfolio occupancy stood at 94.8 per cent as at Dec 31, 2016.

OUE C-Reit said: "In view of further new office supply coming on-stream in Shanghai in 2017, the overall CBD Grade A vacancy rate may continue to increase in the coming quarters and hence the rental outlook is expected to be subdued. We expect a stable performance from Lippo Plaza given its prime location."

The long-term lease committed by Victoria's Secret for its first flagship store in China, which is opening in Q1 2017, will also start to contribute to Lippo Plaza's performance in 2017.

As for Singapore, OUE C-Reit said: "While the decline in Singapore office rents appears to have slowed, current market rents are still lower than that in 2014, when most of OUE C-Reit's leases expiring in 2017 were committed. Hence, negative rental reversions for expiring leases are likely in the coming year."

However, OUE C-Reit said this is mitigated as there is downside protection for rental revenue at OUE Bayfront as a result of the income support arrangement which will expire in only in 2019.

OUE C-Reit closed unchanged at 70 Singapore cents per share at the end of trading on Thursday.