OUE Commercial REIT: 3 Things Investors Should Know From Its Latest Earnings

OUE Commercial REIT (SGX: TS0U) is a commercial/retail REIT whose portfolio currently consists of three buildings, namely, OUE Bayfront, One Raffles Place, and Lippo Plaza. The first two are located in Singapore whereas the third is in Shanghai.

In early May, OUE Commercial REIT reported its 2017 first quarter results. Let’s look at three useful pieces of information investors may want to know from the announcement:

1. The overall result

Here’s a table showing some of the important items from OUE Commercial REIT’s income statements for the first quarters of 2017 and 2016:

Source: OUE Commercial REIT 2017 first quarter earnings presentation

As you can see, the REIT had turned in a mixed performance in the first quarter of 2017. Although revenue and net property income were both up, the amount available for distribution to unitholders and the distribution per unit (DPU) both declined.

OUE Commercial REIT’s lower amount available for distribution was due mainly to “an adjustment for the amount set aside for the transfer of China-sourced profits from Lippo Plaza to statutory reserve.” A March 2017 private placement had increased the REIT’s unit count, which led to the steeper decline in DPU compared to the amount available for distribution.

2. The occupancy rate

The occupancy rate is a strong signal for the demand of a REIT’s properties, so it’s worth keeping an eye on. The chart below shows the occupancy rates of OUE Commercial REIT’s portfolio going back to 2013:

Source: OUE Commercial REIT 2017 first quarter earnings presentation

We can observe that the overall occupancy rate in the first quarter of 2017 was higher than throughout 2016. Stronger performances from OUE Bayfront and One Raffles Place helped.

3. The market’s performance

For REIT investors, it is important to also watch the developments within a REIT’s real estate sector. Here’s a chart showing changes in the rent and occupancy for the Grade A office markets in Singapore and Shanghai going back to 2010 and 2011, respectively (the top part is for the Singapore market while the bottom part is for the Shanghai market):

Source: OUE Commercial REIT 2017 first quarter earnings presentation

In Singapore, although the occupancy rate has been resilient, the rental rate has been clearly falling. It’s a different dynamic in Shanghai, where rents have climbed in recent quarters despite a decline in the occupancy rate.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.