The manager of Suntec REIT has announced a 35.1% drop in distribution per unit (DPU) to 1.53 cents for the 2Q20 ended June, from the DPU of 2.361 cents a year ago.
DPU for 1H20 fell 31.3% to 3.293 cents from the 4.795 cents a year ago.
Distributable income for 1H20 fell 21% y-o-y to $103.1 million. Some 10.0% of the distributable income for 1H20 was retained by the manager in view of the Covid-19 outbreak, which “significantly affected” the REIT’s convention and retail businesses.
Suntec Convention has been closed since April 7. The rental assistance granted to tenants and the weakened Australian dollar also contributed to the decline in distributable income.
The decline was slightly offset by better performance from the REIT’s Suntec City Office, Southgate Complex, and contributions from 21 Harris Street and 55 Currie Street in Australia.
“To maintain financial flexibility in view of the evolving COVID-19 situation, the Manager has retained 10% of the distributable income from operations and held back its capital distribution in 1H 2020… This is to achieve balance between providing a reasonable return to unitholders, building cash reserve as well as assisting our tenants to weather this period,” says Chong Kee Hiong, CEO of the manager.
Had the retention been included, the DPU for 1H20 would have been 3.659 cents per unit.
Gross revenue for 1H20 fell 16.1% to $149.4 million from the $178.0 million posted last year, mainly due to lower revenue from Suntec City and Suntec Singapore.
1H20 gross revenue for Suntec City declined 12.4% y-o-y to $104.9 million mainly due to the decrease in retail revenue, while gross revenue for Suntec Singapore fell 58.3% y-o-y to $16.2 million on rental assistance for eligible small- and medium-sized enterprise (SME) tenants.
Property expenses for 1H20 fell 7.8% to $58.5 million mainly due to lower staff costs and food and beverage-related costs due to lesser convention events.
Net property income for 1H20 fell 20.6% y-o-y to $90.9 million, mainly due to the rental assistance granted to retail tenants and eligible office tenants.
Total income contribution for the period from joint ventures comprising ORQ, MBFC Properties, and Southgate Complex was 5.8% lower y-o-y at $46.9 million. This was mainly due to one-off compensation received in 1H19, rental assistance granted to tenants at MBFC Properties and Southgate Complex.
Commenting on Suntec City Mall’s performance for 1H20, Chong Kee Hiong, CEO of the manager says the mall’s committed occupancy fell to 96.3%, while positive rent reversion in 1H20 fell to 8.4% due to negative rent reversion of most leases committed in the second quarter.
As at June 30, the REIT’s Singapore office portfolio has committed occupancy of 98.6%. Suntec City Office achieved rent reversion of 9.1%, extending the positive rent reversions to nine consecutive quarters.
Overall committed occupancy for the Australia office portfolio stood at 93.1%, higher than the nationwide Central Business District (CBD) occupancy of 91.6%.
In its outlook statement, Suntec REIT says it anticipates “stable rental revenue” in its Singapore office portfolio, albeit a moderated positive rent reversion for the rest of 2020.
The REIT also expects improvements in shopper traffic and tenant sales for Suntec City Mall following the lifting of the circuit breaker measures.
In June 2020, three new digital initiatives – Suntec+ Eats, Suntec+ Shop Live and Suntec+ eMall – were launched to cater to changing shopper behaviour and help increase tenant sales.
For Suntec Convention, the REIT says it is facing “unprecedented challenges” due to a standstill in events since April 2020. Some $40 million was injected into Suntec Singapore on July 1, 2020, to support its business needs.
The REIT says its Australia office portfolio remains resilient with its long lease tenure with less than 1.0% by net lettable area (NLA) expiring in 2020.
As at 9.16am, units in Suntec REIT are changing hands flat at $1.42.
