OUE Commercial REIT (OUE C-REIT) has reported a 29.8% y-o-y growth in net property income (NPI) to $62.7 million in its 3QFY2023 ended September following overall portfolio improvement.
CEO of the manager Han Khim Siew says the hospitality segment continued to be the REIT’s growth driver for the quarter, while the Singapore-focused commercial segment remains stable with positive rental reversions recorded.
“Meanwhile, the asset enhancement initiative (AEI) at Crowne Plaza Changi Airport is progressing well and the hotel is well-positioned to capture the anticipated influx of leisure and business travellers in 2024 and beyond,” he adds.
To further strengthen its capital structure, the REIT has obtained an investment grade credit rating of BBB- with stable outlook on Oct 30. The interest rate of OUE LJ3 C-REIT’s $150 million 4.20% fixed rate notes due 2027 will step down by 25 basis points to 3.95% with effect from Nov 5.
For 3QFY2023, OUE C-REIT’s commercial segment recorded higher revenue and NPI of S$47.5 million and $35.6 million respectively, up 11.6% and 9.1% y-o-y.
Its hospitality segment revenue for 3QFY2023 was up 67.6% y-o-y to $28.3 million while NPI increased by 73.2% y-o-y to $27 million. This was on the back of Hilton Singapore Orchard operations of 1,080 rooms during the quarter as compared to 634 rooms previously, as well as the ongoing recovery in the hospitality sector.
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The REIT’s AEI at Crowne Plaza Changi is expected to complete by December. It is expected to be DPU-accretive, with an estimated capital expenditure of approximately $14 million and an expected stabilised return on investment of approximately 10%.
As at 30 September 2023, OUE C-REIT’s weighted average cost of debt and aggregate leverage stood at 4.2% per annum and 39.4% respectively. The REIT has no refinancing needs until 2025 with the weighted average term of debt at 2.7 years as at end-September.
“Looking ahead, while finance costs continue to present headwinds due to elevated interest rates, we remain cautiously optimistic that the impact on distributions will be mitigated by the portfolio’s healthy revenue and NPI growth, coupled with our prudent capital management approach,” says Han.
Units in OUE C-REIT closed 0.5 cents lower or 2.17% down on Oct 30 at 22.5 cents.
