Suntec Reit Q4 DPU slips 0.5% to 2.59 cents on bigger unit base

SINGAPORE - Suntec Real Estate Investment Trust (Suntec Reit) will pay a distribution per unit (DPU) of 2.59 cents for the fourth quarter to Dec 31, 2018, the manager has announced.

This is down from 2.604 cents in the previous year on an enlarged unit base, as new units were issued to the manager as partial satisfaction of asset management fees. There had also been also a conversion of convertible bonds into new units in the last quarter of the preceding year.

Distributable income edged up by 0.3 per cent to $69.5 million, as net property income rose by 2.3 per cent to $60.7 million, according to financial statements on Wednesday (Jan 23).

The gains came on a 7 per cent increase in gross revenue to $93.5 million on higher contributions from the Reit's office, retail and convention businesses, mainly at the eponymous Suntec properties in Singapore and 177, Pacific Highway in Australia.

On top of its stakes in Suntec City shopping centre and Suntec Singapore Convention & Exhibition Centre, Suntec Reit also has 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 per cent interest in 9, Penang Road, as well as retail and commercial interests in Sydney and Melbourne.

Suntec Reit had a committed occupancy rate of 98.7 per cent for its office portfolio and 99.1 per cent for its retail assets, as of Dec 31, 2018, the manager reported. The weighted average lease expiry was 3.8 years for offices and 2.47 years for the retail properties. Gearing was 38.1 per cent as of the same date.

For the full year, net property income slipped by 1.4 per cent to $241 million, mainly on sinking fund contributions, while gross revenue rose by 2.6 per cent to $363.5 million.

Distributable income was up for the 12 months by 1.4 per cent to $266.8 million, with DPU for the 12 months at 9.988 cents, slightly down from 10.005 cents the previous year.

The manager said in its outlook statement that its flagship Suntec City mall "is poised to continue to perform well, notwithstanding the continuing challenges in the retail sector" in the year ahead, after finishing what it described as a "multi-pronged strategy to reposition" the shopping centre.

The manager had carried out a $410 million asset enhancement initiative at Suntec City from 2012 to 2015. It then launched what it dubbed its "next phase of growth" with initiatives that included a space redesign in the North Wing to increase net lettable area, as well as a redesignation of that wing as a fitness and wellness zone to woo consumers.

"Looking ahead, given the limited supply coming on-stream in 2019, the occupancy and rental levels for the Singapore office portfolio are expected to further improve," the manager added in its outlook statement, saying that it would continue with its proactive asset management strategy in this space.