2019 First Quarter Financial Results (09 May 2019)

Financials Archive

Statements of Total Return

Statements of Financial Position

Review of Performance

Review of OUE C-REIT Group's performance 1Q 2019 vs 1Q 2018

1Q 2019 net property income of S$43.6 million was 23.5% higher compared to S$35.2 million achieved in 1Q 2018. This was due mainly to the inclusion of OUE Downtown Office's income which was acquired in November 2018 and one-off income from OUE Bayfront and One Raffles Place.

Other income for current quarter increased to S$5.0 million with the inclusion of income support in relation to OUE Downtown Office from the Sponsor Group.

The inclusion of OUE Downtown Office also resulted in higher current period base management fees, trustee fees and amortisation of intangible assets.

Net finance cost increased S$2.5 million year-on-year mainly attributable to higher interest cost of S$3.7 million, resulting from higher level of borrowings for the acquisition of OUE Downtown Office.

Consequently, total return for 1Q 2019 increased 52.5% to S$24.7 million, compared to S$16.2 million in 1Q 2018.

Commentary on the competitive conditions of the industry in which the Group operates and any known factors or events that may affect the Group in the next reporting period and the next 12 months


Singapore's 1Q 2019 GDP growth slowed slightly to 1.3%(1) in 1Q 2019, based on advance estimates by the Ministry of Trade and Industry ("MTI"), from 1.9% in the previous quarter. On a quarter-on-quarter ("QoQ") seasonally adjusted annualised basis, GDP growth was 2.0%, higher than the 1.4% growth of the previous quarter. Growth in the manufacturing sector contracted 1.9% year-on-year ("YoY") in 1Q 2019, a reversal of the 5.1% YoY growth in 4Q 2018, due to output declines in the precision engineering and electronics clusters. The services sector expanded by 2.1% YoY in 1Q 2019, slightly ahead of the 1.8% YoY growth in 4Q 2018. While the overall outlook remains cautious given Singapore's small and open economy, policy stimulus from China and stable monetary policy by global central banks are expected to provide the backdrop for a pick-up in growth performance in the latter half of 2019. The official 2019 GDP growth forecast is maintained between 1.5% and 3.5%.

According to CBRE, leasing activity in the Singapore CBD was stable, driven by technology and co-working sectors, which led to higher Grade A core CBD occupancy of 95.2%(2) as at 1Q 2019, up 0.3 ppt QoQ. Grade A CBD core office rents rose 3.2% QoQ in 1Q 2019 to S$11.15 psf per month in the seventh consecutive quarter of growth, representing a 24.6% increase from the previous trough in 2017. Consequently, the gap between market rents and expiring rents in OUE C-REIT's Singapore properties has narrowed significantly. Given the benign medium term supply outlook, we continue to expect positive operational performance in 2019.


China's 1Q 2019 GDP growth was 6.4%(3), at the same pace of growth as 4Q 2018. The economy showed recent signs of stabilisation after being impacted by weaker business and consumer sentiment on the back of the trade conflict with the US. Fixed asset investment was up 6.3% QoQ for 1Q 2019, while retail sales grew 8.3% YoY. March industrial production rose 8.5% YoY, as steel producers ramped up operations amid better prospects for demand. The stabilisation of the Chinese economy is expected to continue, underpinned by government-led infrastructure spending, with further stimulus measures to bolster consumption spending in the pipeline.

According to Colliers International, Shanghai CBD Grade A office occupancy declined 2.4 ppt QoQ to 87.6%(4) as at 1Q 2019, as demand softened on the back of slower economic growth. With increased competition for tenants amid higher office supply, Shanghai CBD Grade A office rents edged down 0.4% QoQ to RMB10.32 psm per day as at 1Q 2019. In Puxi, Grade A office occupancy fell 2.8 ppt QoQ to 89.7% as at 1Q 2019, with rents 0.1% higher QoQ at RMB 9.55 psm per day.

With a significant amount of new office supply scheduled to enter the Shanghai market in 2019, coupled with softer demand from a slower economy, rental growth is expected to be subdued in the near-term. As supply abates in the longer term from 2020, stable demand is expected to underpin steady rental growth.

Proposed merger with OUE Hospitality Trust

On 8 April 2019, the Managers of both OUE C-REIT and OUE Hospitality Trust ("OUE H-Trust") announced the proposed merger of C-REIT and OUE H-Trust (the "Proposed Merger"). The Proposed Merger will be effected through the acquisition by DBS Trustee Limited (in its capacity as trustee of CREIT) (the "C-REIT Trustee") of all the issued and paid-up stapled securities in H-Trust (the "Stapled Securities") held by the stapled securityholders of H-Trust (the "Stapled Securityholders") by way of a trust scheme of arrangement (the "Trust Scheme") in compliance with the Singapore Code on Take-overs and Mergers (the "Takeover Code").

(1) Singapore Ministry of Trade and Industry Press Release, 12 April 2019
(2) CBRE, Singapore MarketView 1Q 2019
(3) National Bureau of Statistics of China Press Release, 17 April 2019
(4) Colliers International, Shanghai Office Property Market Overview 1Q 2019