OUE C-Reit to redeem S$155 million of convertible units in One Raffles Place deal

OUE Commercial Real Estate Investment Trust (OUE C-Reit) will redeem some S$155 million of convertible perpetual preferred units (CPPUs) on June 1, the manager has said.

It released an irrevocable redemption notice on Monday for the convertible securities, which had been issued as part of the payment for a stake in downtown office building One Raffles Place.

The decision comes as part of the manager's capital management strategy "to continually review and optimise OUE C-Reit's capital structure for sustainability over the longer term", the board said in a bourse filing.

Some 220 million CPPUs will remain outstanding after the redemption, which is being made in cash and funded by proceeds from the partial divestment of OUE Bayfront.

The reduction in outstanding units will let the manager mitigate dilution in distribution per unit, should any of the CPPUs be converted into OUE C-Reit, it said.

There will also be a special preferred distribution of 1 per cent a year to the CPPU holder, pro-rated for the January-to-March quarter.

The manager added that its audit and risk committee took the interests of the trust and its minority unitholders into account, and approved the redemption.

OUE C-Reit bought an effective 67.95 per cent stake in One Raffles Place from its sponsor OUE Ltd in 2015, for about S$1.1 billion.

As part of the acquisition, it issued the CPPUs to Clifford Development Pte Ltd. Both the Reit's manager and Clifford Development are wholly owned by mainboard-listed OUE, which also has a 48 per cent interest in OUE C-Reit.

OUE C-Reit ended at S$0.40 on Monday, lower by half a Singapore cent, or 1.24 per cent. OUE shed S$0.03, or 2.04 per cent, to S$1.44, before the announcement.