UPDATE: Suntec REIT reports 3Q19 net property income increased 3 percent

Suntec City mall entranceSuntec City mall entrance

This article was originally published on Wednesday, 23 October 2019 at 8:39 A.M. SGT; it has since been updated with more details.

Suntec REIT reported Wednesday its third quarter net property income rose 3.2 percent to S$58.36 million, mainly on higher retail and office revenue from Suntec City, offset by lower contributions from Suntec Convention. The net property income missed a Daiwa forecast.

Gross revenue for the quarter ended 30 September increased 3.5 percent on-year to S$91.94 million, the REIT said in a filing to SGX.

“The improved results were mainly driven by the continued strong performance of Suntec City, higher contribution from MBFC Properties, better performance of Southgate Complex and contribution from 55 Currie Street which was acquired in September. This was partially offset
by higher financing costs,” Chong Kee Hiong, CEO of the REIT’s manager, said in the statement.

The distribution per unit (DPU) for the quarter was 2.365 Singapore cents, down 5.1 percent from 2.491 Singapore cents in the year-ago quarter, the REIT said. That included 2.133 Singapore cents from operations, up 0.8 percent on-year, and 0.232 Singapore cent from capital, down 38 percent on-year, the REIT said.

Daiwa had forecast net property income of S$63 million on gross revenue of S$91.2 million, with a DPU of 2.31 Singapore cents.

As of end-September, the committed occupancy for the Singapore office portfolio was at 99 percent, with Suntec City Office posting six straight quarters of positive rental reversions, the REIT said.

Suntec City’s retail component posted nine straight quarters of positive rental reversions, underpinning a 4.6 percent increase in revenue.

The 9 Penang Road property is expected to be completed by the fourth quarter, with the office component fully pre-leased to UBS, which is expected to take up occupation in the second half of 2020, the filing said.

In Australia, the office portfolio’s committed occupancy was 97.8 percent at end-September, the REIT said.

For the nine-month period, Suntec REIT reported net property income of S$172.92 million, down 4.1 percent on-year, on gross revenue of S$270.01 million, flat on-year. The nine-month DPU was 7.16 Singapore cents, down 3.2 percent from 7.398 Singapore cents in the year-ago period, the REIT said.

Outlook

Suntec REIT was upbeat in its outlook.

“Suntec REIT’s Singapore office portfolio will continue to perform well resulting from positive rent reversions in the recent quarters,” the REIT said. “The Singapore retail market remained stable in the third quarter of 2019. Demand for retail space continued to be driven by new-to-market brand and expansion of existing brands. Looking ahead, the Suntec City Mall is expected to perform well notwithstanding the continuing challenges in the retail sector.”

In Australia, the REIT pointed to data showing national central business district office occupancy was unchanged at 91.7 percent in the second quarter of this year.

“Sydney office market is expected to remain stable while the office market in Melbourne continues to be tight for the next 12 months. The Adelaide market is expected to improve further, driven by long term infrastructure investments,” the REIT said.

Suntec REIT’s Singapore 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 9 Penang Road.

In Australia, the REIT owns the 177 Pacific Highway property in Sydney, the 55 Currie Street property in Adelaide, a 50 percent interest in Southgate Complex in Melbourne and a 50 percent interest in the building under development at 477 Collins Street in Melbourne.

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