OUE insists that its $15m cost hike was just a one-off phenomenon

It points to its latest acquisitions.

According to CIMB, in the 1Q13 earnings call, management clarified a few key issues: 1) the rise in admin expenses was largely one-off, 2) principal approval to partially convert 6 Shenton Way into a serviced apartment has been obtained, and 3) it plans to go ahead with the REIT plan.

OUE clarified that of the increase of c.S$15m yoy in costs, around S$13m is considered a one-off charge, largely pertaining to expenses incurred for the F&N and US Bank Tower acquisitions.

Here's more from CIMB:

This was the key reason for the weak earnings in 1Q13. At the operational level, OUE’s assets continue to produce credible results.

OUEB is 94%-leased at S$10.33psf while ORP 1 & 2 are 80+% and 71% occupied at S$9psf and S$9.40psf, respectively. Mandarin Gallery (MG) is achieving S$22.9psf in rents and is seeing around 10% rental reversions for leases expired in 1Q13.

OUE has guided that it plans to go ahead with the proposed REIT and pointed out that the cap rate for Mandarin Orchard (MO) of 7+% is believed to be more attractive than the 4.5-5.5% implied NPI yields seen in comparable REITs.

A principal approval has been obtained to convert 163k sf of NLA in its 6 Shenton Way asset into a serviced apartment.

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