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OUE Commercial Reit Q2 DPU down to 1.06 Singapore cents from 1.15 Singapore cents

Distribution per unit for OUE Commercial Reit (OUE C-Reit) in its second quarter dipped to 1.06 Singapore cents from 1.15 Singapore cents in the previous year, the group said in a Singapore Exchange filing on Thursday evening.

That came as Q2 income available for distribution fell 7.5 per cent to S$16.5 million from the previous year.

For the three months ended June 30, gross revenue shrank 2.6 per cent to S$43.1 million from the previous year. Net property income shrank 2.4 per cent to S$33.9 million from the year-ago period.

The Reit said that it faced lower retail revenue from One Raffles Place Shopping Mall as a result of "transitional vacancy from the departure of an anchor tenant," it said. This was offset partially by low utilities cost.

While it faced S$0.3 million higher other income due to higher income support drawdown for OUE Bayfront from its sponsor, net finance cost also rose S$1.2 million mostly due to higher interest costs from its higher borrowings.

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For the first half of the year, distribution per unit slipped to 2.18 Singapore cents from 2.38 Singapore cents in the year-ago period.

That came as H1 income available for distribution slipped 1.6 per cent to S$33.9 million from the previous year.

For the six months ended June 30, gross revenue fell 2.1 per cent to S$87.2 million from the previous year. Net property income dipped 0.3 per cent to S$69.2 million from the preceding year.

Its portfolio occupancy stood at 95.2 per cent, with all three properties of its properties - One Raffles Place, Lippo Plaza in Shanghai and OUE Bayfront - continuing to achieve higher than-market office occupancy. Positive rental reversions were achieved at OUE Bayfront and Lippo Plaza in Q2 2018.

Meanwhile, the rental gap between expiring office rents and market continued to narrow at One Raffles Place, OUE C-Reit said in its investor presentation.

Average office passing rent was S$11.42 per square foot (psf) per month at OUE Bayfront, and S$9.49 psf per month at One Raffles Place. Lippo Plaza’s average office passing rent was 9.83 yuan (S$2) psm per day.

OUE C-Reit said that One Raffles Place is likely to see negative reversions this year to be less than that in 2017, and its revenue base has improved because of a significant increase in committed office occupancy achieved in 2017, which would blunt the impact of any negative reversions.

In China, healthy demand from the finance and technology sectors are expected to support occupancy as well as rental rates in Shanghai, despite a significant amount of new office space primed to enter the Shanghai market in the next two years before it eases in 2020.

OUE C-Reit units ended S$0.005 or 0.7 per cent down at S$0.69 on Thursday.

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