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Suntec REIT reports 1QFY2024 DPU of 1.511 cents, 1.8% lower y-o-y

Felicia Tan
Felicia Tan • 4 min read
Suntec REIT reports 1QFY2024 DPU of 1.511 cents, 1.8% lower y-o-y
Net property income (NPI) fell by 3.8% y-o-y to $73.4 million. Photo: Suntec City
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The manager of Suntec REIT has reported a distribution per unit (DPU) of 1.511 cents for the 1QFY2024 ended March 31, 1.8% lower y-o-y.

Gross revenue for the quarter rose by 1.0% y-o-y to $109.8 million due to stronger operating performance from Suntec City office, Suntec Mall and Suntec Convention and offset by lower contributions from 55 Currie Street in Adelaide, Australia, 177 Pacific Highway in Sydney, Australia and The Minster Building in London.

Net property income (NPI) fell by 3.8% y-o-y to $73.4 million.

Joint venture (JV) income rose by 8.8% y-o-y to $24.8 million thanks to stronger operating performance at the JV’s Marina Bay Financial Centre (MBFC) properties and One Raffles Quay. The higher JV income was also thanks to higher contribution from Nova Properties in London and offset by lower contribution from Southgate Complex in Melbourne, Australia. and the weaker Australian dollar (AUD) against the Singapore dollar (SGD).

Distributable income also fell by 1.1% y-o-y to $44.0 million. This was due to the completion of capital distributions of $5.8 million, higher financing costs of $2.4 million and vacancies at 55 Currie Street, Southgate Complex and The Minster Building. The figure was offset by better operating performances from Suntec City Office, Suntec City Mall, the MBFC properties, One Raffles Quay and Nova Properties, as well as dividend contribution from Suntec Convention.

As at March 31, portfolio committed occupancy stood at 95.1% for the REIT’s office portfolio and 95.5% for its retail portfolio. Weighted average lease expiry (WALE) stood at 4.2 years for the office portfolio and 2.2 years for the retail portfolio.

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As at the same period, gearing stood at 42.2%, 0.1 percentage points lower from Dec 31, 2023. Adjusted interest coverage ratio (ICR) stood at 1.9 times, down 0.1 times q-o-q.

“The Singapore office and retail portfolios’ achieved double-digit rent reversions while the convention business registered strong growth year-on-year. In London, about a third of the vacant space at The Minster Building has been backfilled within six months reflecting an improving market. Commitment of our vacancies in Australia was slow due to the weak market conditions,” says Chong Kee Hiong, CEO of the manager.

“Suntec REIT continues 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 adds.

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Looking ahead, the REIT manager sees the prospect of higher revenue for its Singapore offices on the back of high occupancies and positive rent reversions in the “past many quarters”.

The continued growth of tourism and MICE (or meetings, incentives, conferences, and exhibitions) events is expected to be the key drivers for traffic to Suntec City Mall’s traffic and tenant sales. Tenant sales are likely to remain stable while rent reversion is expected to be strong. The REIT manager also expects revenue from Suntec City Mall to improve thanks to higher occupancy, rent and revenue from marketing communications.

High dividend contributions from Suntec Convention are also to be expected with the expected growth in MICE events and tourism, says the REIT manager.

In Australia, CBD market occupancy across the country is expected to decline due to onstream supply in 2024. Revenue for the REIT’s Australian portfolio is likely to decline due to the leasing downtime at 55 Currie Street and Southgate Complex. Higher landlord’s incentives for new and renewal leases will also impact the revenue performance of these two assets.

Occupancy and rental growth in Central London are likely to improve thanks to the tight supply and increase in the utilisation of offices. According to the REIT manager, good quality office assets in prime locations remain well sought after. That said, revenue for its UK portfolio will be weighed down by leasing downtime of the remaining 8.7% vacancy at The Minster Building.

The ex-date for distributions is on May 3 while the record date is on May 6. Unitholders will receive their DPUs on May 30.

Units in Suntec REIT closed at $1.10 on April 24.

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