The manager of Suntec REIT has reported distribution per unit (DPU) of 1.848 cents for 3QFY2020 ended Sept, some 21.9% lower than the 2.365 cents posted a year ago, on lower distributable income from operations and absence of capital distribution of some $6.5 million.
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Distributable income for the quarter fell 12.6% y-o-y to $52.2 million due to rental assistance for Suntec City Mall, Marina Bay Link Mall and Southgate Complex Retail. The lower sum was also brought about by the absence of contribution from Suntec Singapore and one-off compensation received at MBFC Properties in 3QFY2019.
The lower distributable income was slightly mitigated by the better performances and contributions from the REIT’s Australia office portfolio, stronger performance of One Raffles Quay and lower financing costs.
Gross revenue for 3QFY2020 fell 13.4% y-o-y to $79.6 million mainly due to rent assistance and lower occupancy, lower marcoms revenue and gross turnover rent for Suntec City Mall, as well as lower revenue from MICE events at Suntec Convention.
This was mitigated slightly by higher rent from Suntec City Office, higher rent from Suntec City Mall due to positive rent reversion in previous quarters, as well as contributions from its Australia office portfolio.
The quarter’s net property income (NPI) and JV income contribution for its office total grew 11.3% y-o-y to $64.9 million on higher revenue, occupancy and contributions from its Australia portfolio. Its retail NPI and JV income contribution, on the other hand, plunged 63.8% y-o-y to $8.4 million on lower revenue and rental assistance.
Overall CBD occupancy for 3QFY2020 stood at 92.4%.
Committed occupancy rate for Suntec Office stood at 97.0% for the quarter, 1.1% percentage points lower q-o-q with a weighted average lease expiry (WALE) of 3.01 years.
For 3QFY2020, the REIT’s retail portfolio had an overall committed occupancy of 93.4% with a WALE of 2.21 years.
As at Sept 30, Suntec REIT’s Australia portfolio has a committed occupancy of 94.0%, with a WALE of 6.40 years.
In its outlook statement, the manager expects demand to remain subdued due to economic uncertainties, with TMT, insurance and pharmaceutical sectors expected to be key demand drivers.
It also expects downward pressure on rents, renewal of leases based on smaller areas and a gradual return of workforce from 4Q2020.
The manager of the REIT says it will be passing on government rental relief to tenants by 4Q2020 but will not be providing further rent relief then.
Positive rent reversions from the REIT’s previous 10 quarters will help provide stability to its rental revenue with rental reversions likely to be moderate in 4Q2020.
The manager also expects Singapore’s MICE industry to remain “challenging”, and that income contribution from Suntec Convention will be “significantly affected” for FY2020.
Its Australia portfolio, says the manager, will remain resilient underpinned by strong occupancy, long lease tenure with minimum lease expiries in 2020 and 2021. New contributions from 477 Collins in Melbourne and 21 Harris in Sydney, will improve the overall income of the portfolio.
“The 3Q results is underpinned by the resilience of our office portfolio in Singapore and Australia. There are encouraging signs of recovery in our retail business in 3QFY2020 as tenant sales recovery at Suntec City Mall has been stronger than improvement in footfall. As a result, there will be a full distribution of the 3Q distributable income,” says Chong Kee Hiong, CEO of the manager.
On its UK acquisition on Oct 8, Chong adds that the Nova properties are a “strategic fit “with the REIT’s existing portfolio of high quality commercial assets in Singapore and Australia. The NPI yield of 4.6% will provide a DPU accretion of 3.4% upon completion of the acquisition in December 2020.
“We will continue to manage risks proactively to enhance the resilience of our properties and undertake active capital management to strengthen our balance sheet. We will continue to source for good quality assets that are accretive and further enhance the income stability of the REIT,” concludes Chong.
Unitholders can expect to receive payment by Nov 25.
Units in Suntec REIT closed flat at $1.46 on Oct 21.
