Post-merger OUE C-Reit posts 44.5% jump in Q1 amount available for distribution; virus impact still unclear

Singapore

AS THE Covid-19 situation continues to evolve, its full impact on OUE Commercial Real Estate Investment Trust (OUE C-Reit) will depend on factors such as the duration of the pandemic, length of the circuit breaker and the trajectory of recovery when the pandemic is brought under control, the Reit said in its latest financial results.

The Reit's manager plans to maintain its focus on proactive asset management and managing capital prudently for "financial flexibility, so as to preserve sustainable long term returns for unitholders".

For the first quarter ended March 31, the amount available for distribution rose 44.5 per cent year on year to S$37.63 million on the back of contributions following the merger with OUE Hospitality Trust in 2019.

Revenue was up 40.5 per cent at S$77.73 million, while net property income was 42.5 per cent higher at S$62.08 million. The Reit's manager said it will review OUE C-Reit's financial results for both Q1 2020 and Q2 2020 to determine the level of distribution for the first half year.

Amid the ongoing pandemic, OUE C-Reit has extended about S$18.8 million in support to tenants in Singapore, which includes the full pass through of property tax rebates. Eligible tenants have also been put on flexible rental payment schemes. For Lippo Plaza in Shanghai, the support measures for all qualifying tenants are in line with government advisories, the Reit's manager said, adding that it is prepared to roll out additional initiatives to support its tenants if needed.

For the quarter under review, OUE C-Reit's commercial (office and retail) segment reported a 10 per cent bump in revenue to S$60.86 million while net property income was S$47.1 million, up 8.1 per cent. As at March 31, OUE C-Reit's commercial segment committed occupancy was stable at 94.3 per cent. Some 14 per cent of the gross rental income for the commercial segment is due for renewal for the rest of this year, while the renewal for an additional 28.5 per cent of gross rental income is due in 2021.

Net property income for the hospitality segment came to S$14.97 million while revenue worked out to S$16.88 million, thanks to the minimum rent under the master lease arrangements of the hotel properties in its portfolio.

Tan Shu Lin, chief executive of the Reit's manager, said: "While we are pleased to report a healthy Q1 2020 operational performance for our commercial segment, the Covid-19 situation is still evolving and there remains uncertainty as to when businesses can resume normal operations."

Meanwhile, the manager is leveraging on the weak operating environment to re-brand the Mandarin Orchard Singapore as the Hilton Singapore Orchard from the second quarter onwards, "with new income-generating spaces to create value and drive sustainable returns". This will see it investing S$90 million over the renovation period, which will be in phases.

"The minimum rent embedded of S$45 million per annum within the hotel master lease arrangement will provide downside protection throughout the phased renovation and ramping-up period," the Reit's manager said.

As at March 31, the Reit's aggregate leverage was 40.2 per cent, with a slightly lower weighted average cost of debt of 3.2 per cent per year.

In March, the Reit's manager established a S$2 billion multi-currency debt issuance programme, giving access to diversified avenues of funding. "Around S$596 million of debt due in the latter part of 2020 will be refinanced ahead of maturity, and average cost of debt is expected to remain stable," it said.

OUE C-Reit units closed at 40 Singapore cents on Tuesday, up 1.5 cents.