OUE REIT Delivers Resilient 3Q 2025 Results: Finance Costs Plunge, Singapore Portfolio Outperforms

Key Highlights from OUE REIT’s 3Q 2025 Financial Report

• Finance costs plunged by 19.7% year-on-year (YoY) — a sharp decline driven by disciplined capital management and a lower Singapore Overnight Rate Average (SORA).
• Revenue and Net Property Income (NPI) climbed on a like-for-like basis, rising 1.2% and 2.0% YoY, respectively. This growth comes despite headline declines (due to the divestment of Lippo Plaza Shanghai in December 2024).
• Singapore commercial segment outperformed: Revenue and NPI up 4.2% and 3.8% YoY, with assets achieving positive rent reversions and high occupancy.
• Hospitality segment held steady, with a slight NPI dip of 0.4% YoY, impacted by the shift of the F1 Singapore Grand Prix to October.
• OUE Bayfront joint venture results soared 53.8% YoY.
• Capital management strengthened: Weighted average cost of debt fell to 4.1%, aggregate leverage at 40.9%, and 66.7% of debt hedged. Interest coverage ratio improved to 2.3x.
• Issued S\$150 million 7-year Green Notes at record low 2.75% coupon, extending average debt maturity and reducing refinancing risk.
• Singapore’s office and retail segments remain robust, with positive rental growth forecasted for 2025 and 2026.
• Active leasing and experiential initiatives at Mandarin Gallery drive footfall, supported by partnerships with high-profile brands and events.
• Tourism sector and hospitality outlook buoyed by strong visitor arrivals and major international events in the remainder of 2025.

In-Depth Analysis: What Investors Need to Know

1. Operational Resilience and Portfolio Strength

Despite headline revenue and NPI declines (down 5.8% and 5.6% YoY, respectively) due to the sale of Lippo Plaza Shanghai, OUE REIT’s Singapore-centric properties delivered solid growth on a like-for-like basis. The commercial segment’s revenue jumped 4.2% YoY, with NPI up 3.8%, driven by positive rent reversions (9.3% for office renewals), rising average passing rents (S\$10.91 psf for office, S\$22.52 psf for Mandarin Gallery retail), and robust occupancy rates (office: 95.3%, retail: 97.4%).

2. Hospitality Segment: Stable Amid Calendar Shifts

The hospitality segment was resilient, even with the F1 Grand Prix’s shift to October, which dampened Q3 room demand and rates. NPI dipped just 0.4% YoY to S\$24.5 million. RevPAR dropped 5.7% YoY to S\$279, but trading performance in July and August offset some impact. Hilton Singapore Orchard posted a strong S\$293 RevPAR, with Crowne Plaza Changi Airport at S\$251.

3. Capital Management: Major Reduction in Finance Costs and Record Green Note Issuance

OUE REIT’s proactive capital management is a potential game changer: finance costs plunged 19.7% YoY, the weighted average cost of debt dropped to 4.1%, and interest coverage ratio rose to 2.3x. The Manager issued S\$150M in 7-year Green Notes due 2032 at a record low coupon of 2.75%—the lowest ever for OUE REIT—extending debt maturity to 3.3 years (from 2.9 years) and limiting 2026 debt expiry to just 16% of the total. With 66.7% of debt hedged, OUE REIT is well positioned for further interest rate declines.

4. Sector Outlook: Positive Momentum in Office, Retail, and Hospitality

CBRE expects Singapore’s Core CBD (Grade A) office rents to rise 3% for 2025, with continued growth into 2026, driven by supply constraints and resilient occupier demand. Vacancy rates remain low (5.1%), and flight-to-quality and flight-to-green trends favour OUE REIT’s prime, green-certified assets.

Retail sales index rose by 3.1% and 3.0% YoY in July and August, with Orchard Road prime retail rents up 0.7% QoQ. Leasing demand is robust, especially from F&B, fashion, beauty, and wellness brands. CBRE forecasts overall prime retail rents to climb 2.3% in FY2025, returning to pre-COVID levels. OUE REIT is driving footfall at Mandarin Gallery through strategic collaborations (POP MART’s LABUBU installation, Rosé, Ed Sheeran, SG60 pop-ups).

Singapore’s tourism sector is rebounding, with international visitor arrivals (IVA) up 3.0% YoY in Q3 and projected to reach 17–18.5 million in 2025 (~S\$29–30.5B in receipts). The hospitality sector will benefit from a packed events calendar (Formula 1, K-POP concerts, major international acts like Ed Sheeran and Elton John), potentially boosting hotel occupancy and retail spending.

5. Strategic Positioning and Portfolio Overview

OUE REIT’s portfolio comprises six high-quality office, retail, and hospitality assets in Singapore, including three prime CBD office towers (OUE Bayfront, One Raffles Place, OUE Downtown Office; total 1.6M sq ft NLA), two upper-upscale hotels (Hilton Singapore Orchard and Crowne Plaza Changi Airport; total 1,655 rooms), and the Mandarin Gallery retail mall (126,294 sq ft).

The REIT is managed by OUE REIT Management Pte. Ltd., a subsidiary of OUE Limited, which also sponsors First REIT (Singapore’s first healthcare REIT). OUE Limited’s assets stood at S\$8.9 billion as of end-2024, with S\$7.8 billion managed across its REITs.

Price-Sensitive and Potential Share Price Drivers

• The sharp 19.7% YoY reduction in finance costs and lowest-ever bond coupon issuance directly improve distributable income and lower refinancing risk.
• Strong joint venture performance at OUE Bayfront (+53.8% YoY) may signal future income upside.
• Positive rental reversions and high occupancy in commercial and retail segments support stable or rising DPU (distribution per unit).
• Resilient hospitality segment performance and bullish tourism/event outlook could lift future quarters.
• Strategic divestment of Lippo Plaza Shanghai allows focus on higher-growth Singapore assets.
• Green credentials and flight-to-quality/green trends may attract ESG-focused investors and premium tenants.

Conclusion: OUE REIT Poised for Growth Amid Macro Uncertainties

OUE REIT’s disciplined execution, capital management, and Singapore-centric focus position it to benefit from improving office, retail, and hospitality fundamentals. The significant reduction in finance costs, record-low bond issuance, and prime asset performance are all price-sensitive factors that could drive investor interest and share price upside. With a robust pipeline of events and proactive asset management, OUE REIT is well placed to deliver sustainable returns for unitholders.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation. Investors should conduct their own due diligence and consult their financial advisers before making any investment decisions. The value of REIT units and income derived from them may fall or rise, and past performance is not indicative of future results.

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