The manager of Suntec REIT has announced a distribution per unit (DPU) of 4.154 cents for the 1HFY2021 ended June, up 26.1% from 3.293 cents the previous year.
This is inclusive of the DPU of 2.045 cents it had previously paid out for the 1QFY2021. Excluding this amount, the REIT will pay out a DPU of 2.109 cents for the period between April 1 to June 30.
The 1HFY2021 DPU is underpinned by a 27.3% increase y-o-y in the amount available for distribution of $118.2 million, up from $92.8 million previously. The manager had retained 10% of distributable income the previous year in view of the Covid-19 outbreak, which was fully paid out in February.
Excluding this, the REIT saw a 14.6% y-o-y increase in distributable income, up from $103.1 million previously.
The higher distributable income follows a boost in gross revenue by 11.6% y-o-y to $166.8 million for the 1HFY2021 from $149.4 million previously.
The manager attributes the stronger performance to the resilience of the office portfolio in Singapore, Australia and United Kingdom, underpinned by contributions from newly acquired assets and completed developments as well as lower rent assistance for retail tenants and stronger Australian dollar.
“On the retail front, while we saw steady recovery of mall traffic and tenant sales in Suntec City over January to April, Heightened Alert measures hampered recovery in May and June. However, our efforts in strengthening the mall with strong brands and concepts have helped to cushion the impact on retail revenue with tenant sales being less affected than footfall,” says Chong Kee Hiong, CEO of the manager.
To that end, the REIT recorded a surge in net property income of 23.9% y-o-y to $112.6 million for the 1HFY2021.
Broken down by segments and including share of profits from joint ventures, Suntec REIT’s office portfolio saw a 28.8% increase in income y-o-y to $145.2 million, while income from its retail portfolio grew 18.1% y-o-y to $33.2 million. Its convention centre, however, continued to report losses of $5.5 million, widening 34.1% from $4.1 million previously.
The REIT reported a cash and cash equivalents balance of $393 million as at June 30, compared to $227.5 million the previous year.
The DPU of 2.109 cents is expected to be paid on August 27.
See also: Suntec REIT unlocks value and lowers gearing with 9 Penang Road divestment: analysts
In June 2021, Suntec REIT announced the divestments of a portfolio of Suntec City Office strata units and its 30% interest in 9 Penang Road for $197 million and $295.5 million respectively. It had also announced the acquisition of 100% interest in a Grade A office development with ancillary retail (”The Minster Building”) located in the heart of City of London for an agreed property value of FBP353 million ($667.2 million).
“The proceeds from these divestments and the recent perpetual securities issuance have improved our financial flexibility and enabled us to pursue growth opportunities for high quality and accretive assets in good locations. The Minster Building is higher yielding than the divested assets and we achieved DPU and NAV accretions of 3.6%3 and 0.7%4 respectively for the unitholders,” says Chong.
Looking ahead, the manager believes the REIT’s Singapore office portfolio revenue will remain stable, underpinned by positive rent reversions achieved in the past twelve quarters.
For Suntec City Mall, mall traffic and tenant sales are “likely to be slow”, given the recent wave of community cases. While rent reversion in the upcoming quarters is expected to be weak as retailers remain cautious in their business plans, mall occupancy is anticipated to remain on track to increase around 95% by the end of the year.
Income contribution from Suntec Convention is expected to remain significantly impacted for the year, given the ongoing border restrictions. The REIT will continue focusing on hybrid domestic events, with plans to host events for fully-vaccinated participants in the future.
For its international portfolio, the manager believes revenue from the Australia portfolio is expected to remain resilient underpinned by strong occupancy, annual rent escalations and long lease tenures with minimal lease expiries in 2021 and 2022. For the UK, while retail revenue is expected to remain impacted by the pandemic, office revenue is expected to be stable supported by full occupancy and long WALE with no lease expiry until 2027.
Units in Suntec REIT closed 1 cents or 0.68% lower at $1.47 on July 21.
Photo: Bloomberg
