Riady dangles payout for OUE shareholders

Riady dangles payout for OUE shareholders
PHOTO: Riady dangles payout for OUE shareholders

SINGAPORE - A special dividend awaits shareholders of Overseas Union Enterprise (OUE). The property firm's executive chairman Stephen Riady said in an interview with BT that it will make a payout to shareholders following the listing of its hospitality and retail real estate investment trust (Reit), which is expected to be launched soon pending market conditions.

"Our shareholders are waiting excitedly and would want to be rewarded. So the first thing we must think of is our shareholders, and reward them. Then, of course, you will also look at the extra money you've got and think of expansion.

"We have to balance this, rewarding shareholders and growth," he said.

OUE has yet to announce the size of the listing, but reports have placed it at between US$600 million and US$800 million. Sources have told BT that the plan is for the Reit to be priced and listed in July, though the current uncertain market conditions may change that.

Mr Riady also shared his asset enhancement plans for the US Bank Tower, located in downtown Los Angeles and is the tallest building in California. OUE snapped it up for US$367.5 million (S$462.7 million) and the acquisition of the building, which has an area of 1.4 million square feet, was completed yesterday.

It currently comprises 72 floors of office space and six levels of underground parking, and is about 56.3 per cent occupied.

Mr Riady said OUE has no plans to increase office tenancy in the building for the top floors, where much of the vacancy is.

This is because it intends to transform the top floors into a hospitality and food & beverage space.

The highest three levels, he said, will be turned into an observatory for people to "go up and eat, drink and see the view".

And that observatory alone is expected to generate good returns on OUE's investment.

Said Mr Riady: "We are looking at probably at least one million visitors a year. So let's say you collect US$20 per person, that is a nice US$20 million just from entrance fees for them to go up."

It also plans to open two restaurants on the 60th floor, which will be surrounded by big decks, he said.

And filling up the rest of the higher floors may be anything from serviced apartments to a hotel or even residential units.

"I think the sector that will go higher in value in a few years' time will, frankly speaking, be serviced apartments or hotels or residential, rather than office. A lot of people now want to live in the downtown area (in Los Angeles) and so there will be a shortage (of such space going forward), and it will take time to convert old buildings.

"And ours, being an iconic one, can you imagine if the top floor is turned into residential or serviced apartments? That will make it unique," he said.

So the US Bank Tower being half empty currently is good, he added. "It gives us opportunity to convert it."

Analysts have predicted that OUE's move to snap up the US Bank Tower is the start of a plan to expand aggressively outside of Singapore, but Mr Riady dismissed such talk yesterday.

"We are Singapore-focused so 90 per cent (of our assets) remains in Singapore. Only 10 per cent is outside and that can be in China or the US. That will continue," he said.

OUE has, in the past few years, sought to buy at least one asset a year and most have been in Singapore. In 2010, it purchased two 99-year leasehold blocks, DBS Tower One and DBS Tower Two, for $870.50 million. The following year, it bought Crowne Plaza Changi Airport hotel for $224.50 million.

Last year, it tried to pick up Fraser and Neave Ltd but lost the fight for the conglomerate to Thai tycoon Charoen Sirivadhanabhakdi.

"So each year we try and make one acquisition that is really good, that can add a lot of value. Of course, we could buy more than one but we try for at least one acquisition a year," he said.

And there are always opportunities because OUE has its hands in office, retail, hospitality and residential developments. So when the residential market slows, the group simply looks into developments in other sectors.

Going forward, Mr Riady believes that the office market will show signs of recovery as early as the second half of next year.

"I think in the CBD area, most of the supply, particularly of Grade A office space, has been absorbed already compared to two to three years ago. Then, our own building (OUE Bayfront) was empty. Ocean Financial Centre was empty, and then you have Marina Bay Financial Centre and Asia Square.

"Now OUE Bayfront is 96 per cent occupied, and OFC and MBFC are almost fully let. So supply by next year, particularly for Grade A office space, is pretty much leased out. So, in the second half of next year, I think the office sector will pick up again."

He added that hotel assets have been doing well over the past few years and this will continue as tourist arrivals stay strong.

The residential property market will, however, slow down, he said, because of the government's aim to keep prices in check.

As the company seeks to entrench itself further in the property scene, it yesterday unveiled a new corporate identity that Mr Riady said will represent its desire to "move strategically and transform Singapore's urban landscape".

The change comes in the form of a new company logo that removes the coin that has represented the firm.

"The coin in the previous corporate logo was a legacy from OUE's historic links to a former bank. Since then, OUE has grown leaps and bounds and has emerged as one of the leading players in the property sector in Singapore," said OUE in a statement.

The new logo, it said, "represents the group's depth of experience and knowledge and its capabilities in developing mixed-use urban real estate and luxury spaces."

Yesterday, OUE's shares closed lower 0.7 per cent, or 2 cents, at $2.85.


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