OUE REIT Delivers Resilient 3Q 2025, Eyes Further Growth with Prudent Capital Moves and Hospitality Upside

Key Highlights for Investors

• Resilient performance from a Singapore-centric, diversified portfolio despite macroeconomic challenges and asset divestment.
• Robust capital management: Lower finance costs, active refinancing, and new green financing initiatives.
• Positive rental reversions across office and retail segments, supporting stable committed occupancy rates.
• Strategic divestment of Lippo Plaza Shanghai streamlines focus and improves portfolio metrics.
• Proactive debt optimisation: new green notes issued, extending debt maturity and supporting sustainability credentials.
• Hospitality segment steady: Resilient performance despite F1 calendar shift, with upside from tourism and events pipeline.
• Potential price-sensitive developments: Lower interest rate environment, prudent leverage, and plans for portfolio expansion in prime gateway cities.

Financial Performance and Capital Management

OUE REIT reported 3Q 2025 revenue of S\$70.5 million and Net Property Income (NPI) of S\$57.0 million, with year-on-year declines of 5.8% and 5.6% respectively, attributed mainly to the divestment of Lippo Plaza Shanghai. Critically, on a like-for-like basis (excluding Lippo Plaza), revenue and NPI increased by 1.2% and 2.0% YoY, underscoring the strength of the core Singapore portfolio.

Active capital management has delivered substantial results for shareholders. Finance costs dropped 19.7% YoY to S\$21.6 million thanks to a declining interest rate environment and strategic refinancing. The aggregate leverage stands at a prudent 40.9% and is expected to decline further to 37.7% once divestment proceeds are fully utilised to repay debt.

Notably, OUE REIT’s weighted average cost of debt fell 10bps to 4.1% per annum and the average term of debt was extended to 2.9 years, with expectations of moving to 3.3 years post-green notes issuance. The trust’s green financing now accounts for 85.1% of total debt, significantly enhancing its ESG profile and appeal to sustainability-focused investors.

Debt Optimisation and Green Financing: Potential Share Price Catalysts

A series of proactive capital actions in 2025 could be price sensitive:

• S\$150 million investment-grade Green Notes issued at 2.75% for 7 years—this move not only diversifies funding but extends average debt tenure, further de-risking the balance sheet.
• S\$600 million Green Loan for OUE Bayfront refinancing, supporting long-term sustainability and ESG goals.
• Commercial Paper Programme established to broaden funding sources and reduce overall cost of debt.

Should interest rates decrease by 25bps, the distribution per unit (DPU) would rise by 0.04 Singapore cents, directly benefiting shareholders.

Portfolio Performance: High Occupancy, Resilient Rents, and Hospitality Upside

OUE REIT’s 100% Singapore-based portfolio provides stability in a region with strong economic fundamentals.

• Office occupancy: 95.3% with positive rental reversion of 9.3% for 3Q 2025, and average passing rents still below market rate (S\$12.20 psf/month).
• Retail (Mandarin Gallery): Occupancy at 97.4%, rental reversion at 5.6%, and average passing rent up 1.4% QoQ to S\$22.52 psf/month.
• Hospitality: Despite the F1 Grand Prix moving to October, hospitality revenue and NPI held steady (down only 3.4% and 0.4% YoY), with Hilton Singapore Orchard and Crowne Plaza reporting strong RevPARs (S\$293 and S\$251 respectively).

Key tenants remain diversified, with the top 10 contributing just 27.5% of commercial segment GRI, and a wide mix of trade sectors supporting rental income stability.

Hospitality shows further upside: tourism arrivals remain below 2019 highs, but are trending up, and major upcoming events (concerts, F1, K-POP) should boost 4Q 2025 performance. No major new hotel supply is expected along Orchard Road, supporting healthy room rate growth.

Market Outlook & Strategic Growth Initiatives

OUE REIT is well-positioned to benefit from:

• Singapore’s tightening office supply: Grade A rents continue to rise (up 0.8% QoQ), supported by the flight-to-quality and flight-to-green trends.
• Retail rent recovery: Orchard Road retail rents rose 0.7% QoQ and are expected to reach pre-COVID levels, with a projected 2.3% increase for FY2025.
• Hospitality upside: Tourism Board expects 2025 visitor arrivals between 17.0 and 18.5 million with S\$29–30.5 billion in receipts, and new supply growth remains muted.

The REIT will continue to pursue value creation by reconstituting its portfolio, exploring expansion into prime gateway cities (Sydney, Tokyo), and tapping asset enhancement initiatives. The goal is to increase hospitality segment contribution to 40% of revenue.

Strategic Risks and Shareholder Considerations

• Interest rate declines are set to further lower finance costs and boost DPU, directly impacting shareholder returns.
• Debt maturity profile is well-managed, with only 16% due in 2026 after new green notes issuance.
• ESG credentials significantly improved, making OUE REIT attractive to a broader investor base, including institutional and sustainability-focused funds.
• Portfolio focused on Singapore’s prime CBD, which is projected to outperform due to limited supply and resilient demand.
• Potential acquisition and expansion into Sydney and Tokyo could be transformative, but may also introduce new risks and require close monitoring.

Conclusion: Key Takeaways for Shareholders

OUE REIT’s 3Q 2025 report signals resilience, strategic foresight, and upside potential from its Singapore-centric portfolio, prudent capital management, and hospitality segment recovery. The ongoing decline in interest rates, active debt optimisation, and new green financing initiatives all present potentially price-sensitive catalysts. Investors should watch for further asset enhancements, portfolio reconstitution, and strategic expansion plans as OUE REIT positions itself for long-term growth in prime Asian gateway cities.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with financial professionals before making investment decisions. OUE REIT’s future performance may be subject to risks, including market fluctuations, regulatory changes, and economic conditions.

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