OUE Real Estate Investment Trust (“OUE REIT”) plans to issue a new 7-year SGD senior unsecured green bonds at the initial price guidance (“IPG”) of 3.05%. The new bond is expected to be issued on 8 October 2025, with a maturity date on 8 October 2032. The new issue is also expected to be rated “BBB-” by S&P Global Rating. OUE REIT indicated that the net proceeds will be used to finance or refinance new or existing eligible green projects.
OUE REIT is one of the largest diversified REITs in Singapore with a total asset of SGD 5.8b as of 30 June 2025. It primarily invests in office, retail, and hospitality properties in Singapore. As of 30 June 2025, OUE REIT’s portfolio comprises six prime quality properties located in Singapore: OUE Bayfront, OUE Downtown Office, One Raffles Place, Hilton Singapore Orchard, Mandarin Gallery, and Crowne Plaza Changi Airport.
For the first quarter ended 30 June 2025 (“1H25”), OUE REIT’s revenue fell by -10.6% to SGD 131.1m (1H24: SGD 146.7m) while net property income fell by -10.1% to SGD 105.3m (1H24: SGD 117.1m). This was largely due to the absence of revenue contributions from Lippo Plaza Shanghai, which the REIT divested in late December 2024 to cut its exposure to the Chinese property market. The REIT recorded a -15.7% decline in net income of SGD 44.8m in 1H25 (1H:24 SGD 53.1m).
In 1H25, office properties accounted for the lion’s share (52.0%) of the REIT’s revenue, followed by hospitality (31.1%) and retail (16.9%). With the divestment of Lippo Plaza Shanghai, the REIT’s remaining assets are in Singapore, which we deem stable and more defensive. The REIT recorded a broad decline in occupancy rate, rental reversion, and revenue per available room (REVPAR) in 1H25, reflecting the moderating momentum in Singapore’s property market.
Singapore office properties - OUE Bayfront, OUE Downtown Office, One Raffles Place - achieved an occupancy rate and positive rental reversion of 95.5% and 9.1% in 1H25. The occupancy rate fell slightly by 0.8 ppt quarter-on-quarter (“QoQ”) but remained higher than the 94.7% average for Singapore’s Core Central Business District (“CBD”) Grade A offices. Given the prime location of OUE’s office properties in the core CBD, we think rents and occupancy remain supported by the ongoing flight-to-quality trend from a diverse tenant pool.
The REIT’s retail property - Mandarin Gallery - recorded an occupancy rate of 99%, slightly higher than the long-term average, and a healthy rental reversion of 34.3%. Lastly, the hospitality properties - Hilton Singapore Orchard and Crowne Plaza Changi Airport - saw a 13.4% YoY decrease in revenue per available room (REVPAR). This was largely weighed down by softer RevPAR from Hilton Singapore Orchard due to a greater hotel room supply in the Orchard area as well as a normalisation of room rates and occupancy.
OUE REIT reported a healthy aggregate leverage ratio for OUE REIT was 40.3% as of 30 June (31 Mar: 40.6%), below MAS’ limit of 50%. The REIT plans to use proceeds from the divestment of Lippo Plaza to repay loans, which should lower the aggregate leverage ratio to 37.2%. The REIT also recorded a lower total debt of SGD 2,394m in the same period (31 Mar: SGD 2,412m).
In August 2025, OUE REIT successfully refinanced OUE Allianz Bayfront LLP’s loan (included in the total debt), which will lengthen the weighted average term of debt to 2.9 years from 2.7 years, with only 22.5% of total debt due in 2026. We expect little near-term refinancing risk for the REIT, and as maturing near-term debt is repaid, aggregate leverage should improve further. Should any refinancing risk arise, the REIT should have ample funding means, which include tapping into the debt market or taking on secured lending, with a high 87% of assets unencumbered.
The REIT also reported a healthy interest coverage ratio of 2.2x of 30 June (31 Mar: 2.1x), above MAS’ threshold of 1.5x. Encouragingly, the REIT’s interest expense has declined, with the cost of debt being unchanged at 4.2% per annum.
Overall, the credit profile for OUE REIT remains stable in our opinion. Despite softer property income, the REIT has a relatively healthy balance sheet and debt metrics. Amongst OUE REIT’s SGD notes, the 2032 new issue seems fairly priced - assuming the final price guidance ("FPG") will be adjusted downwards from the 3.05% IPG. Amongst peer bonds with similar years to maturity, OUE REIT’s new issue looks slightly attractive. We expect the FPG to provide a higher yield (estimated 30 – 50 bps) than other comparable SGD real estate issuances with similar years to maturity (Table 1).
Table 1: Issuances from OUE REIT and comparable peers
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report holds nil position hold a NIL position in the abovementioned securities.