OUE Reit H1 DPU falls 11.4% despite higher revenue, net property income
The manager cites higher finance costs, higher retention for working capital, and payment of base management fees fully in cash
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OUE Real Estate Investment Trust (OUE Reit) reported a distribution per unit (DPU) of S$0.0093 for the first half of its fiscal year ended Jun 30, down 11.4 per cent from S$0.0105 in the corresponding year-ago period, its manager announced on Wednesday (Jul 24).
This is even as its revenue and net property income (NPI) for the six-month period rose.
Revenue grew 5.7 per cent year on year to S$146.7 million, from S$138.8 million previously. NPI also increased 1.6 per cent to S$117.1 million, compared with S$115.3 million in H1 2023.
The manager attributed the Reit’s improved performance to the resilience of Singapore commercial properties and higher hospitality sector contributions.
“The benefits of a diversified Singapore-centric portfolio were evident in H1 2024,” said Han Khim Siew, chief executive officer of the manager.
But accounting for increased finance costs, higher retention for working capital, and the payment of base management fees fully in cash, the amount available for distribution in H1 2024 was S$48.8 million – down 15.3 per cent from S$57.6 million in H1 2023.
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Distributable income for H1 2024 was also lower at S$51.3 million, a 10.9 per cent fall from the amount distributable to unitholders in the year-ago period.
This includes a pro-rated distribution amount of S$2.5 million. This arose from the approved release of the remaining S$5 million capital distribution from the 50 per cent divestment of OUE Bayfront, to be distributed semi-annually.
The distribution will be paid out on Sep 4, after books closure on Aug 1.
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Han noted stable income growth and high occupancy in OUE Reit’s commercial assets, as well as attractive returns from the recovery of Singapore businesses and leisure tourism, which have benefited the Reit’s two hotels.
The commercial segment’s revenue rose 2.2 per cent year on year to S$95 million in H1 2024. Higher property tax and utility costs offset the better performance, bringing NPI down marginally by 0.9 per cent to S$71.7 million.
As at June 2024, OUE Reit’s Singapore office portfolio committed occupancy increased to 95.2 per cent. Positive rental reversion “remained strong” at 11.7 per cent for office lease renewals in the second quarter.
In the hospitality segment, revenue was up 12.9 per cent to S$51.7 million, and NPI grew 5.9 per cent to S$45.5 million.
The manager credited “higher room rates and occupancies supported by the strong Mice (meetings, incentives, conventions and exhibitions) and event pipeline in the first quarter of 2024, which offset the impact of softer tourist arrivals between April (and) June 2024 due to the seasonality of demand”.
Han said: “Our proactive and disciplined approach to strengthening our investment-grade balance sheet has also placed us in a favourable position (for) mitigating the impact of the persistent elevated interest rate environment.”
He noted prevailing concerns over the economic outlook, inflation and geopolitical risks as challenges.
“Our team will remain focused on optimising our asset performance and minimising our cost of capital, while prudently and patiently exploring new growth avenues.”
The counter closed at S$0.29, down S$0.005 or 1.7 per cent, on Wednesday before the announcement.
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