OCBC maintains ‘Hold’ rating on OUE Commercial REIT after CPPU redemption

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OCBC Investment Research has maintained a ‘Hold’ rating on OUE Commercial REIT in the wake of news that the latter will redeem 75 million convertible perpetual preferred units (CPPUs) at the issue price of SGD1.00 each.

The CPPUs were previously issued to OUE Commercial REIT’s sponsor, OUE Limited, as partial payment for the purchase consideration of the REIT’s stake in One Raffles Place.

The redemption will be largely funded by OUE Commercial REIT’s existing loan facilities.

Based on the REIT’s pro-forma balance sheet position as at 30 June 2017, its aggregate leverage is expected to be approximately 38.7% upon the CPPU redemption exercise.

“The [REIT’s] manager is carrying out the redemption as part of its proactive capital management strategy to continually review and optimise OUE Commercial REIT’s capital structure for sustainability over the longer-term”, the REIT said in its statement on 2 October.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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