OUE Commercial REIT (OUE C-REIT) invests in strategically located prime landmark commercial properties in Singapore and China. It was listed on the SGX on 27 January 2014 with an initial portfolio of two properties valued at S$ 1.62 billion. Since then, it has acquired one additional property, thus, enlarging its portfolio to three properties valued at S$ 3.41 billion as at 31 December 2016.
In this article, I’ll list down 10 quick facts that you need to know about OUE C-REIT before you invest.
#1: Stock Symbol
Ticker Symbol: SGX: TS0U
Market Capitalization: S$ 1.10 Billion (23 December 2017)
Share Price: S$ 0.71 (23 December 2017)
#2: The Business
OUE C-REIT derives income from the following properties:
- OUE Bayfront
OUE Bayfront is an iconic 18-storey Grade A office building located at Collyer Quay in Singapore’s CBD. In 2016, it was valued at S$ 1.15 billion, accounting for 36.7% of the value of OUE C-REIT’s portfolio. It has recorded a 97.8% occupancy rate with a pool of 54 tenants. The key tenants include Bank of America – Merrill Lynch, OUE Ltd, and Hogan & Lovells. In 2016, OUE Bayfront has made S$ 59.7 million in gross revenue to OUE C-REIT.
- One Raffles Place
One Raffles Place is an integrated development consisting of One Raffles Place Tower 1, One Raffles Place Tower 2 and One Raffles Place Shopping Mall located in Raffles Place, Singapore. In 2016, it was valued at S$ 1.74 billion, accounting for 46.5% of the value of OUE C-REIT’s portfolio. It has recorded a 93.0% occupancy rate with a pool of 233 tenants. Its major tenants include Akamai Tech, Virgin Active Singapore, and Aegis Media Asia Pacific Management Pte Ltd. In 2016, One Raffles Place has made S$ 87 million in gross revenue to OUE C-REIT.
- Lippo Plaza
Lippo Plaza is a 36-storey Grade A commercial building with retail podium located in Shanghai, China. In 2016, Lippo Plaza was valued at S$ 524.2 million, accounting for 16.8% of the value of its portfolio. It has recorded a 95.0% occupancy rate with a pool of 106 tenants. Its major tenants include Victoria’s Secret, Ermenegildo Zegna, and Q-Med International Trading (Shanghai) Co. Ltd. In 2016, the Lippo Plaza has made S$ 31.1 million in gross revenue to OUE C-REIT.
#3: The Financials
Since its listing, OUE C-REIT has recorded growth in gross revenue, net property income, and distributable income. Distributions per unit (DPU) has grown from 3.63 cents in 2014 to 5.18 cents in 2016.
Source: Annual Reports of OUE C-REIT
Source: Annual Reports of OUE C-REIT
#4: Major Acquisitions
There is no major acquisition or disposal announced by OUE C-REIT.
#5: Sponsor Strength
OUE Ltd is the sponsor of OUE C-REIT. OUE Ltd is a diversified real estate development and investment corporation with a real estate portfolio located in prime locations in Asia and the United States. It is an SGX-listed entity that is worth S$ 1.68 billion in market capitalization.
OUE Ltd has granted OUE C-REIT a right of first refusal (ROFR) over three properties. They include OUE Downtown 2 and Downtown Gallery located at Shenton Way in Singapore and the U.S. Bank Tower at Los Angeles in the United States. Thus, OUE C-REIT has the potential to increase its portfolio to 476,556 sq. m., up from 224,923 sq. m. in 2016.
#6: Lease Profile
As at 30 September 2017, OUE C-REIT has recorded 97.0% in committed occupancy rate for its portfolio. 47.9% of its leases would expire starting in the financial year 2020 and beyond.
Source: Investors’ Presentation of Q3 2017 Financial Results of OUE C-REIT
As I write, OUE C-REIT is trading at S$ 0.71 a unit.
As at 30 September 2017, OUE C-REIT has reported having S$ 0.85 in net asset value a unit. Thus, its current P/NAV works out to be 0.84.
OUE C-REIT adopts a distribution policy to declare and pays out at least 90% of its distributable income on a quarterly basis. Over the last 2 quarters, OUE C-REIT has paid out 1.15 cents in DPU.
If OUE C-REIT is able to maintain its DPU at 1.15 sen for the next 4 quarters, it would pay out 4.60 cents in DPU. As such, its gross dividend yield is expected to be 6.48%.
#8: Debt Profile
In September 2017, OUE C-REIT has made its maiden issuance of 3.03% fixed rate notes maturing in 2020 amounting to S$ 150 million. This has increased OUE C-REIT’s proportion of fixed-rate debt to 91.8% and has extended its debt maturity profile. As such, it has improved OUE C-REIT’s financial flexibility.
As at 30 September 2017, OUE C-REIT has recorded S$ 1.21 billion in total loans and borrowings. It works out to be 34.8% of OUE C-REIT’s total asset value of S$ 3.48 billion. The weighted average cost of debt is 3.5% a year.
In October 2017, OUE C-REIT has announced its proposal to redeem S$ 75 million worth of convertible perpetual preferred units (CPPUs) as part of its plan to optimize its capital structure over the long-term. The redemption was effective on 2 November 2017 and was funded by a combination of existing credit facilities and cash flows from its operations. Thus, OUE C-REITs was able to mitigate dilution in Distributions per Unit (DPU) from potential conversion of CPPUs into new units in the future.
#9: Investor Relations
For further enquiries or to request for additional investment information on OUE C-REIT’s Investors Relation matters, you may contact:
Designation: Vice President, Investor Relations
Telephone: +65 6809 8704
#10: Major Shareholders
As at 8 March 2017, Clifford Development Pte Ltd is the largest shareholder of OUE C-REIT with 61.73% shareholdings. OUE Ltd is one of the main ultimate shareholder of OUE C-REIT as OUE Ltd has interest in Clifford Development Pte Ltd.