Suntec REIT 4Q18 net property income rises amid higher Suntec Singapore revenue

An entrance to Suntec City mall; taken October 2018.An entrance to Suntec City mall.

Suntec REIT reported on Wednesday that its net property income for the fourth quarter rose 2.3 percent on-year to S$60.73 million, boosted by higher revenue from the Suntec Singapore, 177 Pacific Highway and Suntec City Mall properties.

That was partly offset by a sinking fund contribution of S$4.8 million in the fourth quarter for Suntec City Office upgrading works, it said, adding that excluding that, net property income would have risen 10.4 percent on-year.

Gross revenue for the quarter ended 31 December was up 7.0 percent on-year at S$93.45 million, it said in a filing to SGX before the market open on Wednesday.

The distribution per unit (DPU) for the quarter for 2.59 Singapore cents, down 0.5 percent from 2.604 Singapore cents in the year-ago quarter, it said.

Daiwa had forecast fourth quarter net property income of S$66.1 million, up 11.3 percent on-year, on revenue of S$90.7 million, up 3.9 percent on-year; it had projected a DPU of 2.55 Singapore cents, down 2.2 percent on-year.

For the full year, net property income fell 1.4 percent on-year to S$240.98 million on gross revenue of S$363.50 million, up 2.6 percent on-year, Suntec REIT said. DPU for the full year was 9.988 Singapore cents, down 0.2 percent on-year from 10.005 Singapore cents in the previous year, it said.

Suntec REIT said the full-year gross revenue rise was mainly on higher contributions from Suntec Singapore and Suntec City Mall, partially offset by lower revenue from Suntec City Office on transitory downtime and lower revenue from 177 Pacific Highway due to a weaker Australian dollar. The decline in full-year net property income was due to the Suntec City Office sinking fund contribution and a weaker Australian dollar, it said.

For the full year, JPMorgan had forecast net property income of S$249 million on revenue of S$361 million, with a full-year DPU of S$0.10.

JPMorgan had pointed to concerns that a weaker Australian dollar could weigh on the REIT’s distributions, as its Australian office assets typically make up around 18 percent of net property income, and that it faced higher interest costs.

Chong Kee Hiong, CEO of ARA Trust Management (Suntec), the REIT’s manager, was positive on the full-year results.

“Suntec City Mall has performed well with improved occupancy, higher footfall and tenants’ sales. The acquisition of the additional 25 percent interest in Southgate Complex also contributed to the stronger performance,” he said in the statement. “This was however offset by higher financing costs, transitory downtime for the Singapore office leases and the weakened Australian dollar.”

Looking ahead, the REIT expected the Singapore office portfolio’s performance would improve further this year as limited new supply was coming into the market.

Committed occupancy for the Singapore office portfolio was at 98.5 percent on 31 December, while the retail portfolio in the city-state had occupancy at 99.6 percent, it said. In Australia, the office portfolio’s occupancy improved to 99.4 percent, it said.

Suntec REIT’s Singapore portfolio comprises Suntec City, which includes one of Singapore’s largest retail malls and five office towers, a 60.8 percent interest in Suntec Singapore Convention & Exhibitiion Centre, a one-third interest in office building One Raffles Quay, a one-third interest in office development Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall, and a 30 percent interest in office development 9 Penang Road.

In Australia, the REIT holds all of a commercial building at 177 Pacific Highway in Sydney, a 50 percent stake in Southgate Complex in Melbourne, and a 50 percent interest in a commercial building under development at Olderfleet 477 Collins Street in Melbourne.

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