OUE REIT

[cyclone]

Retail slump: One Raffles Place is latest to suffer

by Melissa Lin
Published May 24, 2017

When One Raffles Place shopping mall reopened in 2014 after a major makeover, it boasted a strong tenant line-up, much to the delight of office workers in the area.

But three years on, all but one of these crowd-pullers have shut or will move out by next month, as the retail slump claims yet another casualty. Lingerie brand Victoria's Secret, fashion retailer Uniqlo and cafe Paris Baguette have already closed their stores at the six-storey mall next to Raffles Place MRT station.

Travel products store Tumi, watch brand Swatch, jeweller Pandora and shoe brand Melissa have decided not to renew their leases and will shut soon. A check by The Straits Times last Friday found that of the 113 tenants, at least 14 have closed.

At least another 13 will be moving out by next month when their three-year lease ends - which means close to 25 per cent of the mall's retail space could be empty.

More details in http://www.straitstimes.com/singapore/re...-to-suffer

[CY09]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

[weijian]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

Hi CY09,

OPMIs should mostly keep a distance from most Godfathers, more so for those who sell OPMIs a lease out of their freehold asset on Orchard Rd.

You are mostly right that market discount generally tells the future of any sort of valuation increase/decrease. One needs to be more right than wrong if we think an outlier is wrong as determined by Mr Market.

[ghchua]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

Hi CY09,

I thought the discount to book value was mainly because they owned overseas assets. As you might have observed, Singapore listed REITs that had invested in China had suffered a discount from book value, especially those which only invested in China.

As for the sale value, do take note that property sale consideration of S$313.2 million represents a loss of 5% below the Independent Valuation of S$329.8 million. I don't know when the valuation was done from the number that you have observed from balance sheet date. Obviously, the leasehold tenure had shortened since then and valuation had dropped. The current supply overhang in the Shanghai market is not going to change anytime soon.

Going forward, this move might be better for OUE REIT as all their remaining assets are in Singapore. It remains to be seen whether the discount will be narrowed going forward.

[CY09]

Hi Ghchua,

OUE REIT did a Manulife US REIT for this China Sale. In end 2023 valuation, Lippo PLaza was at RMB$2,400 million. Magically on 18 December 2024, another valuation was done and valuer valued at RMB$1,769 million. Thereafter it is phrased as a 5% loss. on 3Q 2024, OUE REIT had a NAV of 60 SG cents based on end 2023 valuations. Do note Manulife US REIT did the same in their recent sale.

This is why in Para 4.2 of the announcment on SGX, the loss in equity marked by OUE is $90 million.

Secondly, with the disposal, OUE is now a full Singapore based REIT with NAV of SGD$0.59. Share price is now $0.28. Still a big discount to close since it is now all Singapore assets. Though when I looked through the valuations, I do find OUE Downtown Towers (its old, 1975, and older than most assets in Manulife US REIT) and Hilton Singapore Orchard being rather richly valued despite a short lease and rather old buildings which is now undergoing more and more freuqent refurbishments.

[weijian]

OUE produces relatively detailed MoM, so detailed that a reader of these minutes will be able to sense the amount of "distrust" in the Sponsor/REIT Manager from its OPMIs. Nonetheless, it is wise to be wary when you are swimming with the Indo Godfathers, although I would suggest that it is even wiser to avoid swimming alongside them to start with.

On another note, one of the ppt slides show that OUE REIT has a ~30% TSR over the last 12 months, and that is some decent return. But to fully capture that IRR in our own investing, it would certainly require a lot of brain damage though.

MINUTES OF EXTRAORDINARY GENERAL MEETING HELD ON 4 SEPTEMBER 2026

A Unitholder ("Unitholder A") commented that selling CPCA was sensible, but considered the proposed sale price to be too low. The price of S$498.5 million equated to approximately S$867,000 per room.

A Unitholder ("Unitholder B") noted that CPCA was bought by OUE REIT less than ten years ago. He asked whether the Manager had considered, at the time of buying the property, whether it was going to sell it when there were only 57 years left on the lease. He commented that 57 years was a significantly longer tenure compared to the lease of Hilton Singapore Orchard ("HSO"), which had only about 30 years remaining. As such, he felt that the reason that CPCA was "too old" was unfounded.

Separately, Unitholder B then noted that during the CEO's presentation, the CEO had mentioned that OUE REIT had sold Lippo Plaza Shanghai before acquiring an interest in Salesforce Tower, Sydney. He questioned if the comparison to the Shanghai property was a good one as the Shanghai property market was facing a downturn, so it was sensible to sell the asset there. However, in this case, OUE REIT was selling a "good" property which still has a lease of 57 years remaining (longer than Lippo Plaza Shanghai), leading to questions on whether Management was confident that it could recycle the proceeds into buying
an even better property to replace CPCA.

A Unitholder ("Unitholder C") noted that the net property yield was approximately 4.5% and the average cost of debt was around 3.6% per annum. He noted that it is generally the market practice to borrow and increase gearing in order to buy properties to improve the yield, but the Manager appeared to be doing the reverse by selling a high-yielding asset to pare down debt.

Unitholder E said that instead of focusing on increasing distributions, the CEO should focus on strengthening investors' trust and faith in OUE REIT. He expressed the view that, if investors had greater confidence in OUE REIT, they may be willing to accept a lower distribution yield, which could support a higher Unit price.

A Unitholder ("Unitholder H") commented that the most important factor relating to property was location. She commented that CPCA was a good asset at a good location and that she could not understand why OUE REIT wanted to sell the asset. She raised an example of another Singapore REIT which sold a good hotel asset. She asked the Manager to consider revamping CPCA into a luxury hotel.

https://links.sgx.com/FileOpen/OUE_REIT_...eID=905880