OUE REIT, through its wholly-owned subsidiary, has entered into an agreement to divest the entire equity interest of Lippo Realty (Shanghai), which owns 91.2% share of strata ownership of Lippo Plaza in Shanghai, for RMB1.92 billion ($357.4 million).
Based on Lippo Plaza’s net property income of RMB94.6 million for FY2023 and the agreed property value of RMB1.68 billion, the estimated net property yield is 5.7% per annum.
The proposed divestment aligns with the REIT manager’s proactive asset management strategy to optimise portfolio composition, strengthen income resilience and bring sustainable return to unitholders, says its CEO Han Khim Siew.
Lippo Plaza is a non-core asset, contributing only 6.6% of OUE REIT ’s total portfolio revenue as of September. The property’s shortening leasehold tenure and vintage building specifications have started to impact its valuation and competitiveness, especially with the current supply overhang in the Shanghai market, Han points out.
“With no plans to further expand our footprint in China, this divestment offers an opportunity to monetise the asset and redeploy the proceeds towards more strategic uses, strengthening OUE REIT’s balance sheet and enhancing financial flexibility for future growth opportunities,” he adds.
The proposed divestment is expected to be completed by the end of 2024. The net proceeds from the divestment are expected to be approximately $318.2 million.
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Upon the completion of the divestment, all of OUE REIT's assets are located in Singapore. These comprise four commercial properties — OUE Bayfront, One Raffles Place, OUE Downtown and Mandarin Gallery — as well as two hotels, namely Hilton Singapore Orchard and Crowne Plaza Changi Airport.
Units in OUE REIT closed 0.5 cents lower or 1.8% down on Dec 20 at 27 cents.
