This is as revenue and net property income slide

 

[SINGAPORE] OUE Real Estate Investment Trust : TS0U 0% (OUE Reit) reported a distribution per unit (DPU) of S$0.0098 for the first half ended Jun 30, 2025, up 5.4 per cent from S$0.0093 in the corresponding year-ago period. 

 

The growth reflects effective capital management and the resilience of its diversified Singapore portfolio, its manager said in a Wednesday (Jul 23) evening bourse filing. 

 

Distributable income, at S$54.3 million, was 5.9 per cent higher than H1 2024&rsquo s S$51.3 million.

 

Excluding the capital distribution in the first half of 2024, core DPU increased 11.4 per cent year on year, it added. 

 

Unitholders will receive the H1 2025 distribution on Sep 3, after the books are closed on Jul 31.

 

The improved DPU came even as revenue and net property income (NPI) slid. 

 

Revenue in H1 2025 was S$131.1 million, falling 10.6 per cent from S$146.7 million in H1 2024. NPI similarly dropped 10.1 per cent to S$105.3 million, from S$117.1 million.

 

The manager attributed this mainly to the absence of revenue contributions from Lippo Plaza Shanghai, which was divested in December 2024. 

 

On a like-for-like basis, revenue and NPI fell slightly, by 2.7 per cent and 2 per cent year on year, respectively, with the resilient Singapore commercial portfolio performance partially offsetting lower contributions from the hospitality segment, it noted.

 

Despite softer retail outlook, most S-Reits with Singapore retail assets record double-digit positive rent reversions

In H1, OUE Reit&rsquo s commercial segment grew its revenue 3.6 per cent on year to S$86.1 million, on a like-for-like basis. 

 

NPI, also on a like-for-like basis, grew 5.1 per cent year on year to S$65.2 million. 

 

The Singapore office and retail portfolio achieved a higher average passing rent across all assets, the manager pointed out.

 

The Reit&rsquo s Singapore office portfolio committed occupancy stood at 95.5 per cent as at June 2025. Positive rental reversion remained strong, at 9.1 per cent, for office lease renewals in the second quarter of 2025. 

 

Mandarin Gallery&rsquo s committed occupancy remained high, at 99 per cent, and recorded a rental reversion of 34.3 per cent in Q2. 

 

In the hospitality segment, revenue was down 12.9 per cent to S$45 million on a yearly basis. NPI slid 11.7 per cent to S$40.2 million.

 

The manager attributed the softer performance to a high-base in H1 2024, the result of the start of the China-Singapore visa-free arrangement and the strong calendar of high-profile concerts and Mice (meetings, incentives, conventions and exhibitions) events.

 

As at Jun 30, 2025, OUE Reit&rsquo s aggregate leverage fell by 30 basis points to 40.3 per cent its weighted average cost of debt remained unchanged from Mar 31, 2025, at 4.2 per cent per annum.  

 

It remains focused on tenant retention and optimising occupancy across its office assets, the manager added.

Price target raised marginally to S$0.33 from S$0.32

 

[SINGAPORE] CGS International (CGSI) has upgraded its recommendation for OUE Reit to &ldquo add&rdquo from &ldquo hold&rdquo , and raised its price target marginally to S$0.33 from S$0.32.

 

In a report on Monday (Apr 28), CGSI analysts Lock Mun Yee and Li Jialin said the Singapore-listed real estate investment trust (S-Reit) could see higher interest savings ahead, which would bode well for its distribution per unit (DPU).

 

They noted that the Reit saw a lower cost of debt at 4.2 per cent in the first quarter of FY2025, which would translate into interest expense savings of close to S$3 million.

 

For the Q1 ended March, the manager of OUE Reit reported an 11.3 per cent drop in financing costs to S$22.6 million.

 

&ldquo Management expects further interest expense savings from a lower base rate when its share of the OUE Allianz Bayfront borrowing of S$311 million is re-financed in the second half of FY2025,&rdquo the analysts added.

 

Therefore, the research house is raising its DPU estimates for the Reit by 3.8 to 4.5 per cent for FY2025 to FY2027.

This would mean an &ldquo attractive&rdquo estimated DPU yield of 7.3 per cent for FY2025, the analysts said.

 

In addition, they point out, the Reit is trading at an &ldquo undemanding valuation&rdquo , with a price-to-book ratio of 0.47 times.

 

Commercial uplift

 

In its Q1 business update on Apr 24, the Reit manager reported an 11.9 per cent decrease in revenue to S$66 million, and a 12.1 per cent drop in net property income (NPI) to S$53.2 million.

 

The manager attributed the decline to the divestment of Lippo Plaza in Shanghai, as well as lower contributions from the hospitality segment due to weaker concerts and Mice pipeline compared to the previous year.

 

OUE Reit&rsquo s commercial segment, however, saw positive growth.

 

On a like-for-like basis adjusted to exclude the recently divested Lippo Plaza Shanghai, revenue and NPI for the segment both rose by 2.2 per cent to S$42.7 million and S$32.2 million, respectively.

 

Committed occupancy at the Reit&rsquo s office portfolio improved to 96.3 per cent. In particular, Mandarin Gallery&rsquo s committed occupancy inched up to 99.5 per cent &ndash the highest since December 2019.

 

&ldquo Management also took note of growing spending on food and beverage in comparison to shrinking luxury spending by Chinese tourists,&rdquo the CGSI analysts said.

 

OUE Reit&rsquo s office portfolio saw positive rental reversion of 9.9 per cent in Q1, led by OUE Downtown and One Raffles Place its retail segment at Mandarin Gallery posted positive rental reversion of 4.9 per cent.

 

The analysts noted that the Reit manager renewed 5 per cent out of the 18.6 per cent of expiring leases by gross rental income in FY2025.

 

&ldquo Management expects reversion of single-digit positive reversion to hold up as expiring leases continue being marked to market,&rdquo they added.

 

Hospitality headwinds?

 

However, CGSI still sees uncertainty for OUE Reit&rsquo s hospitality segment.

 

For Q1 FY2025, the Reit&rsquo s hospitality revenue fell 13.3 per cent to S$23.3 million, while NPI slid 12.5 per cent to S$20.8 million.

 

CGSI&rsquo s analysts said the decline was mainly led by underperformance at Hilton Orchard, as the number of travellers from the US, Indonesia and China dropped.

 

They noted that revenue per available room (RevPAR) at Hilton Orchard was 19.1 per cent lower at S$249 in March, compared to the year before.

 

The decline was partially offset by a growing contribution from Crowne Plaza, which saw an 8.9 per cent growth in RevPAR to S$247.

 

&ldquo We lowered our RevPAR assumptions for Hilton Singapore Orchard to factor in the impact of macroeconomic headwinds on travel demand, thus lowering our FY2025-2027 revenue forecasts by 3 to 4 per cent,&rdquo said CGSI&rsquo s Lock and Li.

 

OUE REIT, which divested Shanghai commercial asset Lippo Plaza Shanghai in December 2024, saw revenue and net property income (NPI) fall 11.9% and 12.1% y-o-y to $66.0 million and $53.2 million in 1QFY2025 ended March 31. On a like-for-like basis, revenue and NPI would have moderated 3.9% and 4.1% y-o-y respectively.

 

But the diversified REIT is also facing some weakness in its hospitality segment. OCBC Investment Research analyst Ada Lim thinks this weakness is " more pronounced than previously expected" , with the hospitality segment seeing revenue and NPI plunge 13.3% and 12.5% y-o-y to $23.3 million and $20.8 million respectively.

 

In an April 25 note, Lim maintains " buy" on OUE REIT with a lower target price of 31.5 cents from 34.5 cents previously.

 

OUE REIT' s revenue per available room (RevPAR) was down 11.2% y-o-y at $248, dragged by Hilton Singapore Orchard (-19.1% y-o-y), which saw lower occupancy as visitor arrivals slide in the absence of Taylor Swift' s concerts and weak Chinese demand.

 

Commercial segment still resilient

 

OUE REIT' s portfolio comprises six office, hospitality and retail assets located in Singapore. Its three office assets - OUE Bayfront, One Raffles Place and OUE Downtown Office - are situated within the central business district, with a total net lettable area (NLA) of approximately 1.6 million sq ft.

OUE REIT' s two hotels, Hilton Singapore Orchard and Crowne Plaza Changi Airport, offer a total of 1,655 upper upscale hotel rooms. Complementing Hilton Singapore Orchard is Mandarin Gallery, a 126,294 sq ft retail mall.

 

Lim expects mid-single-digit rental reversions for OUE REIT' s commercial segment this year, notwithstanding tariff uncertainty. Performance from the commercial segment remained resilient, with revenue and NPI growing 2.2% y-o-y to $42.7 million and $32.3 million respectively on a like-for-like basis.

 

The office portfolio performed well, clocking rental reversions of 9.9% during the quarter, while committed occupancy improved 1.7 percentage points (ppt) q-o-q to 96.3%.

 

OUE REIT' s retail portfolio also saw committed occupancy improve, albeit by a smaller 1.3 ppt q-o-q to 99.5%, with rental reversions of +4.9%.

 

Capital management updates

 

OUE REIT' s aggregate leverage crept up 0.7 ppt from 39.9% as at end-2024 to 40.6% as at end-March. Average cost of debt improved 50 bps from 4.7% to 4.2% over the same period, with 74.7% of debt on fixed rates.

 

For every 25 bps decrease in Singapore Overnight Rate Average (SORA) rates, management shared that distribution per unit (DPU) would increase by 0.03 cents.

 

" We review our assumptions and factor in weaker RevPAR performance from the hospitality segment. Our FY2025 and FY2026 DPU forecasts are lowered by 7.3% and 3.5%, respectively," writes Lim. " We also raise our cost of equity input from 7.8% to 8.3% to account for greater macroeconomic uncertainty, though we continue to think that OUE REIT' s portfolio should stay relatively resilient given its 100% exposure to high quality assets in Singapore."

This is mainly due to the divestment of Lippo Plaza in Shanghai, China, as well as lower contributions from the hospitality segment

 

[SINGAPORE] OUE Reit&rsquo s revenue fell 11.9 per cent to S$66 million for its first quarter ended Mar 31, from S$74.9 million in the year-ago quarter.

 

This was mainly due to the divestment of Lippo Plaza in Shanghai, China, as well as lower contributions from the hospitality segment due to a weaker trading environment compared to the previous year, the manager said in a business update on Thursday (Apr 24).

 

Net property income (NPI) fell 12.1 per cent on the year to S$53.2 million for the quarter, from S$60.5 million.

 

By segment, the commercial (office and retail) segment&rsquo s revenue and NPI increased 2.2 per cent to S$42.7 million and S$32.3 million, respectively, excluding the impact of the Shanghai divestment.

 

This was underpinned by high-quality assets located in prime areas.

 

For the hospitality segment, revenue declined 13.3 per cent to S$23.3 million, and NPI fell 12.5 per cent to S$20.8 million, against the high-base effect in Q1 2024.

 

Meanwhile, the manager said proactive capital management in 2024 has reduced the weighted average cost of debt to 4.2 per cent per annum as at Mar 31, 2025, from 4.7 per cent per annum as at Dec 31, 2024.

 

Financing costs also fell 11.3 per cent on year to S$22.6 million in Q1 2025.

 

Looking ahead, the manager said the outlook for the year remains &ldquo cautiously optimistic after an uninspiring Q1 2025&rdquo , with an improved concert line-up.

 

Yet, macroeconomic uncertainties and competition from more affordable regional destinations will continue to weigh on tourists&rsquo preferences and travel appetites.

 

The manager expects overall retail rents to recover to pre-pandemic levels by 2025, supported by new supply that falls below the historical average.

 

Han Khim Siew, chief executive of the manager, added that the real estate investment trust&rsquo s fundamentals remain strong with healthy positive reversionary rents in its office segment.

 

&ldquo Singapore&rsquo s solid economic fundamentals and position as a global business hub will continue to underscore the strength of our portfolio, enabling OUE Reit to deliver stable long-term performance with sustained growth potential,&rdquo he said.