PROPERTY developer OUE on Friday posted a 52.5 per cent drop in third-quarter revenue to S$134.2 million, due to lower contribution from its investment properties, on the back of rental rebates extended to tenants on a targeted basis.

 

About S$19.9 million of rental rebates have been committed or extended to tenants to-date, it said in its business updates.

 

Its lower revenue also came on the back of weaker hospitality performance, fewer sale completion of OUE Twin Peaks units, as well as an absence of S$95 million in revenue from the sale of the Nassim Road development project in August 2019.

 

OUE' s earnings before interest and tax, however, rose 41.7 per cent to S$128.1 million, driven mainly by higher contribution from interests in equity-accounted investees, as well as an absence of one-off legal and professional expenses from the merger of two of its Reits and the sale of Oakwood Premier OUE Singapore last year.

 

Operationally, its Singapore office portfolio remained resilient with committed occupancy levels of between 92.3 per cent and 100 per cent as at end-September 2020. Its Singapore retail portfolio also has committed occupancy above 90 per cent but effective rents have declined as a result of rent rebates extended to tenants.

 

In Shanghai, its committed office occupancy has increased to 82.8 per cent, notwithstanding weak demand in Grade A office and new office supply in Q3.

PROPERTY developer OUE posted a S$207.2 million net loss for the six months ended June, plunging the mainboard-listed company into the red from a S$61.9 million net profit a year ago.

 

The steep loss was mainly due to a S$310 million fair value loss on the US Bank Tower, which an OUE unit sold for US$430 million on July 17. The fair value loss represents the discount of the sale price to the property&rsquo s book value as of end-2019.

 

The company did not declare an interim dividend for the period, citing the need to &ldquo conserve cash in the current uncertain market conditions&rdquo .

 

OUE had a weaker operating performance across the board in H1. Its top line shrank 28 per cent to S$311.4 million as contributions from all divisions fell, except for investment properties.

 

The hospitality division' s revenue dropped 55.2 per cent to S$49.6 million as room occupancy and banquet sales plunged amid Covid-19 travel restrictions.

 

The development property division&rsquo s revenue fell 37.8 per cent to S$98.5 million. Income for the period came mainly from the completion of sale of some OUE Twin Peaks units sold under deferred payment schemes.

 

The consumer income division' s income fall 45 per cent due to lower contributions from OUE Skyspace LA, arising from its mandatory closure since mid-March, imposed by the authorities in the US.

 

Healthcare revenues for H1 dipped 1.7 per cent to S$14.9 million, due to lower management fees earned by the manager of First Reit.

 

Only the investment property division had an increase in income, by 1.9 per cent, due to the inclusion of contribution from Mandarin Gallery after the merger of OUE Hospitality Trust and OUE Commercial Reit in September last year. The increase was dampened by rental rebates granted to tenants.

 

Despite the weak results, OUE said that it has sufficient liquidity to meet its near-term debt obligations, having secured a S$100 million committed facility in June. The expected completion of the sale of US Bank Tower in September will also improve gearing, the company said.

 

&ldquo During a period in which the Covid-19 pandemic and its related lockdown measures have affected tenancies and income for the property, disposing of the property will enable the group to streamline its asset ownership, increase its cash reserves, improve its net gearing by paring down existing debts,&rdquo OUE said.

 

The company is also in discussion to sell its leasehold interest in OUE Skyspace LA.

 

OUE added: &ldquo The group&rsquo s key priorities to mitigate the uncertain business and economic outlook include implementing cost management, cash conservation, and maintaining financial flexibility, such as by suspending non-essential capital and operating expenditure across the properties.&rdquo