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OUE C-Reit Q3 DPU shrinks to 0.55 Singapore cents

LOWER revenue and higher interest expenses dampened results for OUE Commercial Reit (OUE C-Reit) in its third quarter ended Sept 30.

Distribution per unit slid to 0.55 Singapore cents from 0.62 Singapore cents in the previous year, with the latter restated to include the 1.3 billion new units issued on Oct 30, 2018 to finance the purchase of the office component of OUE Downtown. This acquisition was completed on Nov 1.

DPU as previously reported for Q3 2017 stood at 1.15 Singapore cents.

This showing came on the back of lower net property income, which fell 5.1 per cent to S$32.3 million from the year-ago period, as gross revenue slid 4.8 per cent to S$41.2 million from the year-ago period.

Q3 income available for distribution dropped 10.8 per cent to S$15.9 million from the preceding year.

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This was because the real estate investment trust (Reit) faced higher interest expenses from more borrowings, although this was offset by higher drawdown of income support and lower convertible perpetual preferred units distribution.

Net asset value per unit is expected to be S$0.70 post completion of the rights issue and acquisition of OUE Downtown. Its aggregate leverage as at Sept 30 increased slightly to 41.4 per cent. Its weighted average lease term to expiry by net lettable area (NLA) is at 2.3 years.

Year-to-date, DPU fell to 2.73 Singapore cents from three Singapore cents in the previous year. The DPU for the nine months ending September was calculated based on actual H1 2018 DPU, with Q3 2018 DPU adjusted for the rights units.

DPU calculation for the first nine months of 2017 was also calculated based on actual H1 2017 DPU, with Q3 2017 DPU adjusted for the rights units.

Year-to-date, income available for distribution slid 4.7 per cent to S$49.8 million. Gross revenue shrank 3 per cent to S$128.4 million from the preceding year. Net property income dipped 1.9 per cent to S$101.6 million from the preceding year.Average office passing rent was S$11.50 per square foot (psf) per month at OUE Bayfront, and S$9.45 psf per month at One Raffles Place. Lippo Plaza’s average office passing rent was 9.84 yuan (S$1.95) per square metre per day.

The Reit’s portfolio occupancy was 94.9 per cent as at Sept 30, with the three properties continuing to achieve higher-than-market office occupancy.

In the quarter, it saw positive office rental reversions at OUE Bayfront and Lippo Plaza, with flat rental reversions at One Raffles Place.

“The extent of negative reversions in 2018 is expected to be less than that in 2017,” the company said.

The Reit said that a significant amount of new office supply is expected to enter the Shanghai market over the next few years, but “healthy demand from the finance and technology sectors are expected to underpin occupancy as well as rental rates”.

OUE C-Reit units closed S$0.01 or 2.2 per cent higher at S$0.475 on Thursday.

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