OUE C-REIT

[cyclone]

Retail slump: One Raffles Place is latest to suffer

by Melissa Lin
Published May 24, 2017

When One Raffles Place shopping mall reopened in 2014 after a major makeover, it boasted a strong tenant line-up, much to the delight of office workers in the area.

But three years on, all but one of these crowd-pullers have shut or will move out by next month, as the retail slump claims yet another casualty. Lingerie brand Victoria's Secret, fashion retailer Uniqlo and cafe Paris Baguette have already closed their stores at the six-storey mall next to Raffles Place MRT station.

Travel products store Tumi, watch brand Swatch, jeweller Pandora and shoe brand Melissa have decided not to renew their leases and will shut soon. A check by The Straits Times last Friday found that of the 113 tenants, at least 14 have closed.

At least another 13 will be moving out by next month when their three-year lease ends - which means close to 25 per cent of the mall's retail space could be empty.

More details in http://www.straitstimes.com/singapore/re...-to-suffer

[CY09]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

[weijian]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

Hi CY09,

OPMIs should mostly keep a distance from most Godfathers, more so for those who sell OPMIs a lease out of their freehold asset on Orchard Rd.

You are mostly right that market discount generally tells the future of any sort of valuation increase/decrease. One needs to be more right than wrong if we think an outlier is wrong as determined by Mr Market.

[ghchua]

https://links.sgx.com/FileOpen/OUE_REIT_...eID=828552

OUE REIT has divested its remaining China asset. Though one thing which stood out and was not mentioned in the circular was that the sale of the building was 20% off its 2.4 billion RMB valuation on OUE balance sheet. No doubt OUE REIT leverage will fall but the question is if the valuation of assets in the REIT's balance sheet is sound, may warrant why the REIT has been always trading at 0.5-0.6 times book value

Hi CY09,

I thought the discount to book value was mainly because they owned overseas assets. As you might have observed, Singapore listed REITs that had invested in China had suffered a discount from book value, especially those which only invested in China.

As for the sale value, do take note that property sale consideration of S$313.2 million represents a loss of 5% below the Independent Valuation of S$329.8 million. I don't know when the valuation was done from the number that you have observed from balance sheet date. Obviously, the leasehold tenure had shortened since then and valuation had dropped. The current supply overhang in the Shanghai market is not going to change anytime soon.

Going forward, this move might be better for OUE REIT as all their remaining assets are in Singapore. It remains to be seen whether the discount will be narrowed going forward.

[CY09]

Hi Ghchua,

OUE REIT did a Manulife US REIT for this China Sale. In end 2023 valuation, Lippo PLaza was at RMB$2,400 million. Magically on 18 December 2024, another valuation was done and valuer valued at RMB$1,769 million. Thereafter it is phrased as a 5% loss. on 3Q 2024, OUE REIT had a NAV of 60 SG cents based on end 2023 valuations. Do note Manulife US REIT did the same in their recent sale.

This is why in Para 4.2 of the announcment on SGX, the loss in equity marked by OUE is $90 million.

Secondly, with the disposal, OUE is now a full Singapore based REIT with NAV of SGD$0.59. Share price is now $0.28. Still a big discount to close since it is now all Singapore assets. Though when I looked through the valuations, I do find OUE Downtown Towers (its old, 1975, and older than most assets in Manulife US REIT) and Hilton Singapore Orchard being rather richly valued despite a short lease and rather old buildings which is now undergoing more and more freuqent refurbishments.