SUNTEC Real Estate Investment Trust’s (Suntec Reit) distribution per unit (DPU) for the first quarter ended March declined 13 per cent year on year to S$0.01511, in the absence of the Reit’s capital distribution that concluded in end-2023.
The distribution will be paid out to unitholders on May 30 after the record date on May 6.
Distribution for the quarter stood at S$44 million, down 12.5 per cent from the prior year.
Suntec Reit’s manager on Thursday (Apr 25) said DPU for the quarter was 1.8 per cent lower on an operational basis, which would exclude factoring in last year’s capital distribution.
Based on this, distributable income from operations would have been 1.1 per cent lower on the year.
Both the declines in operational DPU and distributable income were also due to higher financing costs, as well as vacancies at the Reit’s overseas assets, namely 55 Currie Street in Adelaide, Southgate Complex in Melbourne and The Minster Building in London.
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The manager noted that operational performance from the Reit’s Singapore office, retail and convention portfolio nonetheless “continued to strengthen”.
Gross revenue from the Singapore office portfolio grew 1.1 per cent year on year to S$36.4 million, due to higher occupancy and rent at Suntec City Office. Net property income (NPI) remained unchanged at S$27.3 million.
Joint venture income from the portfolio rose 11.3 per cent on the year to S$16.8 million as One Raffles Quay and the Reit’s Marina Bay Financial Centre properties also booked higher occupancy and rent.
The Singapore retail portfolio performance also improved on a year-on-year basis over Q1, with gross revenue up 3 per cent to S$34.3 million and NPI rising 1.3 per cent to S$23.6 million.
Suntec Reit’s convention revenue grew 26.1 per cent to S$11.6 million with a 160 per cent growth in NPI to S$1.3 million amid higher revenue from meetings, incentives, conferences and exhibitions, long-term licences, and advertising.
Chong Kee Hiong, chief executive of the manager, noted that both the Singapore office and retail portfolios had achieved double-digit rent reversions over the quarter, while the convention business’ year-on-year growth was “strong”.
He said during a briefing on the financial results on Thursday that the rental reversion for Suntec City was above 20 per cent for Q1 FY2024. However, he expects full-year reversion for the mall to be in the range of mid-teens.
He added that the lower reversion projection for the full year was based on the combination of tenants who are due for a lease renewal, and the final mix of renewed and new tenants.
Elaborating further on the retail space within Suntec City, Chong said that about 20 per cent, or 8,000 square feet (sq ft) of the space left vacant due to the closure of Pure Fitness and Pure Yoga gym branches had been backfilled, mostly on the first floor.
He added that traffic for the location on the first floor had “improved drastically” as the drop-off point for tourist buses, such as Big Bus Tours Singapore, had also moved to the location.
However, the remaining space on the third floor would take a longer time to fill, he said. “We do have interested tenants. We are just working out which tenant makes more sense for the mall.”
The relocation of One World International School’s Suntec campus following the end of its lease in June this year will also free up about 20,000 sq ft in the convention centre. The school had been granted temporary permission by the Urban Redevelopment Authority to use the convention and exhibition facilities at Suntec, which is zoned for commercial activities, until Jul 1, 2024.
“We’ll take back the space and I believe it’ll come in handy in running our events,” he added.
On the Reit’s office portfolio, Chong said in response to a question that the Reit manager was not concerned about the current 50 per cent office occupancy rate, even with the upcoming implementation of flexible work arrangement guidelines.
Chong added that companies now want more flexibility in their leases as they are unable to confirm if they want a lease that caters to a work-from-home plan or office growth plan. Therefore, such leases will be considered on a case-by-case basis.
“If they want flexibility, then the rent must be higher right? And I guess that works into our rent reversion as well,” he said.
As at end-March 2024, the Reit’s net asset value per unit stood at S$2.09, down from S$2.10 as at end-2023.
Its gearing was 42.2 per cent compared with 42.3 per cent at end-2023, while weighted average debt maturity stood at 3.57 years versus three years.
The manager estimated that Suntec Reit’s refinancing of S$950 million of loans due in FY2024 and FY2026 resulted in savings of about S$3.1 million per annum.
Chong said that the Reit will continue to work on “divesting our mature assets and strata units at Suntec City Office so as to lower our gearing and deliver long-term value to our unitholders”.
He said the Reit manager has no plans at the moment to distribute capital to unit holders out of the gains from strata sales. He added that gains will be used to pare down Suntec Reit’s debts first.
Units of Suntec Reit : T82U 0% ended Thursday flat at S$1.10.
