UPDATE: Suntec REIT reports 2Q19 net property income dropped 7 percent, missing Daiwa forecast

Suntec City mall in SingaporeSuntec City mall in Singapore

This article was originally published on Friday, 26 July 2019 at 8:05 A.M. SGT; it has since been updated with more details.

Suntec REIT reported Friday its second quarter net property income dropped 7.2 percent on-year to S$56.36 million, mainly on the Suntec City Office upgrading works. The results missed a forecast from Daiwa.

Gross revenue in the quarter ended 30 June fell 2.3 percent on-year to S$88.40 million on lower revenue from Suntec Convention, partially offset by increased retail and office revenue at Suntec City, the REIT said in a filing to SGX.

Convention revenue was down 22.7 percent on-year at S$14.0 million on fewer major convention events, the filing said.

The distribution per unit (DPU) was 2.361 Singapore cents, down 4.6 percent from 2.474 Singapore cents in the year-ago period, the filing said.

Daiwa had forecast net property income of S$58.5 million on revenue of S$90 million, with a DPU of 2.44 Singapore cents.

Chong Kee Hiong, CEO of ARA Trust Management (Suntec), the REIT’s manager, focused on improvement in distributable income from operations, which was up 4.7 percent on-year at S$58.66 million for the quarter.

“The improved results were mainly driven by the continued strong performance of Suntec City, higher contribution from MBFC Properties, better performance and additional 25 percent interest in Southgate Complex,” Chong said in the statement.

The retail portfolio had committed occupancy of 97.9 percent at end-June, down from 98.2 percent in the year-ago quarter, the filing said.  Suntec City Mall had occupancy of 98.3 percent at end-June, down slightly from 98.6 percent in the year-earlier period, while rental reversions for the first half were up 5.3 percent, the REIT said.

The office portfolio had committed occupancy of 99.1 percent at end-June, up slightly from 99.0 percent in the year-ago period, the REIT said.

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Suntec REIT was upbeat on its outlook.

“Suntec REIT’s Singapore office portfolio will continue to perform well due to positive rent reversions in the recent quarters. The manager will continue its proactive asset management to strengthen the office portfolio,” Suntec REIT said. The upgrading works are expected to be completed in 2021, the REIT said.

“The Singapore retail market was stable in the second quarter of 2019. Demand for retail space were driven by new-to-market and expansions of existing brands. Looking ahead, the mall is expected to continue to perform well, notwithstanding the continuing challenges in the retail sector,” the filing said.

In Australia, leasing activity for office markets in Sydney and Melbourne remained strong on flight-to-quality and expansionary activity, while in Adelaide, demand has been improving on increased infrastructure investments and a tight supply of Grade A office availability, Suntec REIT said.

“Underpinned by the strong performance of the Sydney and Melbourne office markets and an improving Adelaide market, the occupancy and rental levels are expected to remain high for Suntec REIT’s Australia office portfolio given the strong demand and limited new supply,” the REIT said.

For the first half, net property income fell 7..4 percent on-year to S$114.56 million on gross revenue of S$178.07 million, down 1.7 percent on-year, Suntec REIT said. DPU for the first half was 4.795 Singapore cents, down 2.3 percent from 4.907 Singapore cents in the year-ago period, the filing said.

Suntec REIT’s portfolio includes Suntec City, a 60.8 percent interest in Suntec Singapore Convention & Exhibition Centre, a one-third interest in One Raffles Quay, a one-third interest in Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall, and a 30 percent interest in the 9 Penang Road property under development.

In Australia, the REIT’s portfolio includes 100 percent of 177 Pacific Highway in Sydney, 50 percent of Southgate Complex in Melbourne and 50 percent of a commercial building underdevelopment at 477 Collins Street in Melbourne.

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