OUE Reit selling Crowne Plaza Changi Airport for S$500 million; unitholders to get special payout

[SINGAPORE] OUE Hospitality Sub-Trust, a wholly owned subsidiary of OUE Reit , is set to sell the Crowne Plaza Changi Airport hotel for S$500 million to a Tokyo Century-OUE Ltd joint venture.

The distribution-accretive sale represents about a 1.3 per cent premium to the average of two independent valuations, said the real estate investment trust’s (Reit) manager on Thursday (Jun 25). Net cash proceeds are expected to be about S$498.5 million.

The manager added that it intends to distribute S$20 million of the net cash proceeds to unitholders evenly as special distributions over the first two years after the divestment is complete.

“This is an opportune time to crystallise the value of Crowne Plaza Changi Airport,” said Han Khim Siew, CEO of the Reit’s manager. “It allows us to avoid substantial capital expenditure and income risks arising from operational downtime and transition uncertainty associated with potential asset repositioning works.”

He noted that the hotel’s master lease agreement and hotel management agreement are set to expire in 2028.

Assuming the proposed divestment, including the termination of the master lease agreement, had been completed on Jan 1, 2025, OUE Reit’s distribution per unit would have increased 5.8 per cent on a pro forma basis for FY2025. This is after the special distribution, with the pro forma distribution yield reaching 6.6 per cent, said the manager.

Assuming the net cash proceeds are used to repay debt, aggregate leverage would fall from 41.5 per cent to 36.6 per cent on a pro forma basis, it added.

Focus on value-creation

Upon completion of the proposed divestment, it said that the Reit will remain Singapore-centric, with about 94.3 per cent of its assets under management located in the Republic.

Post-divestment, the portfolio will be anchored by the office segment, which contributes more than 54.3 per cent of OUE Reit’s total revenue on a pro forma basis.

SEE ALSO

‘Off to a good start’: Analysts expect OUE Reit to unlock further value from assets after strong Q1 showing

OUE Reit posts 8.4% rise in Q1 NPI to S$57.6 million

OUE Reit looks to unlock value in mature assets, eyes Sydney for higher-yield growth

OUE Ltd is the sponsor and controlling unitholder of OUE Reit. The Reit will seek independent unitholders’ approval for the Crowne Plaza sale at an extraordinary general meeting in the third quarter, with completion expected by the fourth quarter.

Tokyo Century, a Japan-based financial services company, entered into a joint-venture with OUE Ltd for the purchase, with OUE taking a 51 per cent stake and Tokyo Century holding the remaining 49 per cent.

This marks the second collaboration between the two, following the signing of their inaugural joint venture in May 2025 to develop Hotel Indigo Changi Airport at Terminal 2.

The joint venture partners said that they plan to leverage their development expertise to execute asset enhancement initiatives on the property. This will future-proof the hotel and capitalise on Changi Airport’s expansion, including the opening of Terminal 5 scheduled for the mid-2030s.

The airport hotel’s divestment builds on the Reit’s existing capital-recycling efforts and enhances its financial flexibility to pursue “value-accretive opportunities, strengthen the portfolio and deliver sustainable returns to unitholders”, noted Han.

The move is also part of OUE Reit’s “Phase 3 Value Creation journey” that also involves portfolio optimisation. This comes as One Raffles Place, in which OUE Reit has an 81.54 per cent interest, is being marketed for more than S$2.3 billion.

Units of OUE Reit rose 1.4 per cent or S$0.005 to close at S$0.355 on Wednesday. Shares of OUE Ltd fell 2 per cent to close S$0.02 lower at S$1.