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OUE C-REIT posts 40.5% drop in 1H DPU despite higher distributable income to conserve cash amid Covid-19 uncertainties

Samantha Chiew
Samantha Chiew • 3 min read
OUE C-REIT posts 40.5% drop in 1H DPU despite higher distributable income to conserve cash amid Covid-19 uncertainties
OUE C-REIT posts 40.5% lower DPU for 1H20 despite higher distributable income
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The manager of OUE Commercial REIT (OUE C-REIT) says that its 1H20 DPU has fallen by 40.5% to 1.0 cent from 1.68 cents in 1H19.

However, the REIT’s amount distributable to unitholders saw a 12.1% increase to $54.5 million from $48.6 million a year ago.

The reason for the lower DPU despite the higher amount distributable to unitholders is $13.8 million of distribution comprising tax-exempt income and capital distribution was retained to preserve financial flexibility in view of uncertainties posed by the Covid-19 situation.

Typically, OUE C-REIT’s distribution policy is to distribute at least 90% of its taxable income on a semi-annual basis, with the actual level of distribution to be determined at the manager’s discretion.

Revenue for the period was 32.4% higher at $142.0 million from $107.2 million a year ago.

The REIT’s commercial segment recorded higher revenue mainly due to the inclusion of income from Mandarin Gallery upon completion of the merger with OUE Hospitality Trust (OUE HT) in September 2019. This was partially offset by rental rebates granted to tenants under the New Rental Relief Framework for SMEs as part of the Fortitude Budget in 1H20. As a result of the rental rebate, net property income was lower compared to last year.

Meanwhile, revenue and net property income from the hospitality segment was contributed by Mandarin Orchard Singapore and Crowne Plaza Changi Airport upon completion of the merger.

In September 2019, OUE C-REIT completed the merger with OUE HT (comprising OUE Hospitality Real Estate Investment Trust (OUE H-REIT) and OUE Hospitality Business Trust) by way of a trust scheme of arrangement. Following the merger, OUE H-Trust was delisted from SGX and is now an unlisted sub-trust of OUE C-REIT.

Due to a larger portfolio (7 properties in Singapore and Shanghai), OUE C-REIT saw a 54.9% y-o-y increase in manager’s management fees to $9.8 million, 66.7% growth in other expenses to $1.6 million, while trustee fees increased by more than half y-o-y to $0.7 million.

With a 28.8% y-o-y increase in property operating expenses to $29.9 million, net property income was 33.4% higher at $112.5 million from $84.3 million last year.

As at end-June, OUE C-REIT’s cash and cash equivalents stood at $64.9 million.

Lee Yi Shyan, chairman of the board of the manager says “The various tenant support schemes, as well as the retention of distribution in 1H20, are necessary measures to achieve a balance between providing sustainable returns to unitholders while maintaining flexibility to address the challenges ahead.”

Tan Shu Lin, CEO of the manager adds, “Given the uncertain business and economic outlook, we remain focused on proactive asset management and tenant retention to sustain occupancy. To maintain financial flexibility, the Manager will continue to prioritise cost management and cash conservation. OUE C-REIT is anchored by a high-quality portfolio of assets in strategic locations which, together with the wide and diversified tenant base, will continue to underpin the resilience of the portfolio.”

Units in OUE C-REIT closed 2.6% higher on Thursday at 40 cents.

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