OUE Commercial REIT's OUE Bayfront in Singapore. (Photo: REITsWeek)OUE Commercial REIT's OUE Bayfront in Singapore. (Photo: REITsWeek)

OUE Commercial REIT announced on 2 August that it has achieved a distribution per unit (DPU) of 1.36 Singapore cents for its 2Q 2016, an increase of 34.7% compared to the 1.01 cents recorded for 2Q 2015 when counting in the 393 million new units that were issued in August that year.

The results came on the back of a 132.2% and 139.8% increase year-on-year in gross revenue and net property income that came in at SGD45.7 million and SGD35.2 million respectively.

Correspondingly the period’s distributable income increased by 38.6% to SGD17.7 million from the SGD12.8 million recorded for 2Q 2015.

“While One Raffles Place contributed significantly to the increased distribution, the uplift in earnings was also driven by robust organic growth from the initial portfolio comprising OUE Bayfront and Lippo Plaza, where 2Q 2016 net property income growth grew 15.9% year-on-year”, said Tan Shu Lin, CEO of the REIT’s manager.

However the Singapore-listed office REIT’s portfolio committed occupancy dipped slightly to 94.5% as at 30 June 2016 compared to 94.8% a quarter ago albeit higher average passing rents at all three properties year-on-year.

Weighted average lease expiry (WALE) was 2.7 years by net lettable area, and 2.8 years by gross rental income as at the end of the quarter.

“Despite declining market rents, 1H 2016 office rental reversions were positive at 1.8% and 2.1% for OUE Bayfront and One Raffles Place respectively, while Lippo Plaza recorded a 9.0% rental reversion”, added Tan.

As at 30 June 2016, OUE Commercial REIT’s leverage was at 40.2%, with a weighted average cost of debt of 3.53% per annum.

The REIT has indicated in its results that it expects demand for office spaces in Singapore and Shanghai to be muted in the quarters ahead given the completion of major new office developments in these cities.

“The manager will continue its proactive efforts to attract new tenants as well as retain existing tenants. Together with our prudent and disciplined approach to capital management, we will remain focused on delivering stable and sustainable returns for our unitholders”, said Tan.

Units of OUE Commercial REIT finished its trading day on the Singapore Exchange slightly higher by about 0.7% to end at SGD0.69.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.