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Suntec REIT reports FY2023 DPU of 7.135 cents, 19.7% lower y-o-y

Felicia Tan
Felicia Tan • 4 min read
Suntec REIT reports FY2023 DPU of 7.135 cents, 19.7% lower y-o-y
Distributable income for the year fell by 19.1% y-o-y to $206.8 million. Photo: Samuel Isaac Chua/The Edge Singapore
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Suntec REIT has reported a distribution per unit (DPU) of 7.135 cents for the FY2023 ended Dec 31, 2023, 19.7% lower y-o-y. DPU for the 4QFY2023 fell by 6.2% y-o-y to 1.866 cents.

Distributable income for the year fell by 19.1% y-o-y to $206.8 million due to higher financing costs, lower contributions from the REIT’s overseas properties and the weaker Australian dollar (AUD), which fell by 6.6% against the Singapore dollar (SGD). The lower contributions arose from vacancies at 55 Currie Street, Adelaide, Southgate Complex, Melbourne and The Minster Building, London.

Meanwhile, operational performance at the REIT’s Singapore office, retail and convention portfolios continued to improve.

During the year, the REIT divested $94.4 million of strata units at Suntec City Office Towers at an average price of 31% above book value. The proceeds were used to pare down debts and the transactions were accretive to the REIT’s earnings as the divested yield were lower than current borrowing costs.

Gross revenue for the FY2023 increased by 8.3% y-o-y to $462.7 million thanks to the increases in gross revenue for the REIT’s properties in Singapore and The Minster Building. This was offset by higher contributions to the REIT’s maintenance fund and the commencement of sinking fund contribution in 2023 as well as lower gross revenue from the REIT’s Australian properties.

Net property income (NPI) fell by 0.8% y-o-y to $313.2 million as property expenses for the year grew.

See also: Fortress Minerals reports 7.6% lower y-o-y earnings for 1QFY2025

Income from joint ventures (JV) for the year fell by 20.9% y-o-y to $94.0 million due to higher interest expenses at the REIT’s properties at Marina Bay Financial Centre (MBFC) and One Raffles Quay, lower contributions from Southgate Complex in Melbourne and a weaker AUD. These were mitigated by stronger operating performances at MBFC and One Raffles Quay.

As at Dec 31, 2023, the REIT’s committed occupancy stood at 94.9% for its office portfolio and 95.2% for its retail portfolio. Its weighted average lease expiry (WALE) stood at 4.2 years for its office portfolio and 2.1 years for its retail portfolio.

“On the operating front, the Singapore office and retail portfolios continued to post better revenue performance, achieving strong double-digit rent reversions across all the quarters of the year. The recovery of the convention business was another bright spot, with revenue and income both surpassing pre-Covid levels, and earlier than expected,” says Chong Kee Hiong, CEO of the manager.

See also: Temasek’s net portfolio value up 1.83% y-o-y to $389 bil on its 50th anniversary

“Going forward, though we expect better operating performances from the Singapore portfolio, the elevated interest rates and leasing downtime for the vacancies at 55 Currie Street, Southgate Complex and The Minster Building would continue to impact our distributable income,” he adds. “Suntec REIT will continue to focus on divestment of our mature assets and strata units at Suntec City Office to deliver accretive earnings, lower our gearing and deliver long-term value to our unitholders.”

Looking ahead, the REIT expects to see positive rent reversions for its Singapore office portfolio although rent growth is expected to moderate amid geo-political tensions and economic headwinds that will continue to weigh on the Singapore office market.

Meanwhile, revenue from Suntec City Mall is expected to improve, underpinned by higher occupancy, rent and marcoms revenue. The continued recovery in Singapore’s tourism is expected to be the key driver for mall traffic although inflationary pressures and a higher GST and cautious domestic consumption is likely to temper sales growth.

Suntec Convention is expected to see higher dividend contributions with Singapore’s meetings, incentives, conferences and exhibitions (MICE) industry continuing to drive and benefit from the country’s tourism recovery.

In Australia, revenue is likely to remain lower from the leasing downtime of the vacancies at 55 Currie Street and Southgate Complex. Higher incentives seen in Adelaide and Melbourne will also impact revenue performance of 55 Currie Street and Southgate Complex.

In the UK, the REIT sees revenue remaining resilient albeit weighed down by the leasing downtime of the vacancies at The Minster Building in the short term. Global uncertainties and economic challenges are expected to continue to weigh on business sentiments although the office occupancy rate in Central London is expected to improve amidst limited office supply.

Unitholders will receive their DPUs on Feb 28.

Units in Suntec REIT closed 1 cent higher or 0.84% up at $1.20 on Jan 23.

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