OUE Commercial REIT - Annual Report 2021

The lower net property income was further offset by the recognition of OUE Bayfront’s performance as share of joint venture results from 1 April 2021 and lower interest expense, resulting in amount available for distribution of S$131.6 million. Augmented by capital distribution of S$10.4 million, comprising the release of S$5.0 million of distribution previously retained in FY 2020 to preserve financial flexibility and partial distribution of divestment gain from OUE Bayfront of S$5.4 million, FY 2021 amount to be distributed was S$142.0 million. We are also pleased to share that OUE C-REIT was included in the FTSE EPRA Nareit Global Real Estate Index Series (Global Developed Index) with effect from 20 September 2021. The inclusion has enhanced OUE C-REIT’s visibility amongst global investors and increased trading liquidity. The average daily volume of units traded in 2021 increased by about 20.0% as compared to 2020, while the unit price rose 14.3% during the year to close at S$0.440 on 31 December 2021. Taking distributions into account, OUE C-REIT has delivered total returns of 22.0% in FY 2021. RESHAPING THE PORTFOLIO The Divestment at an agreed value of S$1,267.5 million or S$3,170 per square foot (“psf”) for OUE Bayfront represented a premium of 26.1% over the property’s purchase consideration at listing. The transaction is in line with the Manager’s investment management strategy to capitalise on opportunities for portfolio reconstitution while maintaining significant exposure to the resilient office market in Singapore. Consequently, the net divestment proceeds of approximately S$262.6 million has provided the opportunity to optimise OUE C-REIT’s capital structure, leading to increased financial flexibility after paring down outstanding borrowings. As a result of the Divestment, the value of OUE C-REIT’s investment properties decreased to approximately S$6.0 billion as at 31 December 2021. Excluding the Divestment, the valuation of OUE C-REIT’s properties was stable YoY. While there were mild valuation declines for the hospitality and retail segments of the portfolio due to the sustained adverse impact of the pandemic, this was mitigated by higher valuations for the Singapore office properties which saw fair value increases ranging from 0.2% to 7.5% YoY. Consequently, net asset value per Unit was S$0.57. Nonetheless, OUE C-REIT’s portfolio performance in FY 2021 continues to be underpinned by its high-quality Grade A office assets with a diversified blue-chip tenant base. The hospitality segment’s minimum rent component of S$67.5 million has also provided significant downside protection to OUE C-REIT’s earnings. Overall, the office segment remains the major contributor at 59.2% of revenue, while the hospitality segment contributed 26.0%, with retail making up the remaining 14.8% (based on OUE C-REIT’s proportionate interest in the respective properties). COMMERCIAL SEGMENT – FOCUS ON ACTIVE ASSET MANAGEMENT The frequent recalibration of COVID-19 restrictions in Singapore amid uncertainty in the economic outlook weighed on leasing sentiment for both the office and prime retail segment, as occupiers maintained their focus on cost efficiency. As at 31 December 2021, Despite the uncertain environment, the Manager is pleased to present a creditable set of results for FY 2021. On the operational front, we focused on proactive asset management and made strategic decisions to safeguard the long-term value of our assets. We pushed ahead with our plans to make OUE C-REIT more nimble, resilient and ready to tap new opportunities while maintaining a prudent and disciplined capital management approach. 17 A N N U A L R E P O R T 2 0 2 1