Suntec ecosystem has huge potential, says Reit manager

Mr Chan Kong Leong in front of the Fountain of Wealth at Suntec City, Singapore's largest integrated commercial development. Last year, the mall attracted a footfall of 39.9 million, while its convention and exhibition centre hosted more than 1,400 t
Mr Chan Kong Leong in front of the Fountain of Wealth at Suntec City, Singapore's largest integrated commercial development. Last year, the mall attracted a footfall of 39.9 million, while its convention and exhibition centre hosted more than 1,400 trade and consumer events.PHOTO: SGX

Urban spaces hold a particular fascination for real estate specialist Chan Kong Leong.

The chief executive of the manager of Suntec Real Estate Investment Trust (Reit) said: "I'm fundamentally a real estate guy - I'm always interested to see how the physical asset can be used to generate economic and social benefits, and how different communities develop around a space.

"You get a lot of ideas by looking at what others have done."

Mr Chan, who graduated from the National University of Singapore with a Bachelor of Science in Building with first-class honours, has 19 years of private and public sector experience in managing investment, development, operations, strategic planning and stakeholder relations.

He was appointed chief executive of ARA Trust Management (Suntec), the manager of Suntec Reit, in January after holding the role of chief operating officer from June to December last year.

Prior to joining the Reit, Mr Chan held senior management positions in CapitaLand between 2010 and last year.

Mr Chan noted that China took 10 years to achieve what other markets took a lifetime to develop, largely because it leapfrogged legacy systems. Over that period, in terms of number of malls, the country went from near-zero to an oversupplied market. China also has the highest number of super high-rise office towers being constructed globally.

"Through that process, you see a lot of innovation - for example, how retailers and operators responded to the rapidly changing profile of shoppers. China's consumer base has evolved very quickly over that short span of time."

In comparison, Singapore is grappling with retail headwinds, not because personal consumption levels are declining, but because traditional businesses have not stepped up to meet changing consumer demands, he said.

"Look at how China has embraced the digital revolution - they moved quickly into mobile payment gateways and now they are way ahead of Singapore in digital payments."

Listed on SGX in December 2004, Suntec Reit is the first composite Reit in Singapore, owning income-producing real estate primarily used for office and/or retail purposes. Its Singapore portfolio comprises five prime office towers in Suntec City - the city-state's largest integrated commercial development that includes one of Singapore's biggest malls - and a 60.8 per cent interest in the world-class Suntec Singapore Convention & Exhibition Centre.

The Reit also owns a one-third interest in One Raffles Quay (ORQ), a one-third interest in Marina Bay Financial Centre (MBFC) Towers 1 and 2, and the Marina Bay Link Mall, as well as a 30 per cent interest in 9 Penang Road.

Spanning a total net lettable area of 3.9 million sq ft, these properties derive a steady stream of income from a well-diversified pool of office and retail tenants. The committed occupancy of its Singapore office and retail portfolios stood at 99.4 per cent and 98.3 per cent respectively as at March 31, 2017.

Suntec Reit has a market capitalisation of nearly $5 billion. Its shares have generated a total return of 15.7 per cent in the 2017 year-to-date, compared with the broader Straits Times Index's 13.2 per cent and the FTSE ST All-Share Index's 12.9 per cent.

While the conditions in Singapore's retail sector have drawn much attention, more than 65 per cent of Suntec Reit's income is derived from its prime office portfolio, which has remained resilient through economic cycles, Mr Chan said.

"The Grade A offices at Suntec City cater to a diversified mix of tenants ranging from IT, finance and trading to government bodies, while premium grade offices at ORQ and MBFC are at the top of the list for companies seeking prestigious addresses," he added.

As for Suntec City, the Reit's maiden asset, its physical transformation has been nothing short of phenomenal. It is now the only place with two MRT stations that connect commuters to all subway routes in Singapore within four minutes of travel. "There is a huge latent potential that can be tapped within the Suntec ecosystem, by using technology to connect all the communities together," Mr Chan said, adding that the Suntec Rewards system, launched in 2015, aims to do just that.

Suntec Rewards is a cardless lifestyle programme that allows Suntec City shoppers to earn as they spend in the mall. Members receive shopping e-vouchers, birthday treats, bonus points and other perks.

"Last year, Suntec City Mall attracted a footfall of 39.9 million. Our convention and exhibition centre hosted more than 1,400 trade and consumer events. We're working on how to open access to this pool of potential customers for the business-to-consumer tenants in our office towers," said Mr Chan.

"Think about the value proposition when a lease of office space at Suntec City comes with access to this huge pool of customers."

And with the completion of Stage 3 of the Downtown Line in October this year, expect changes in commuting habits, particularly for those living in the eastern end of the island. "Suntec will be in a good position to capture those shifts," he added.

Essentially, the future of real estate is not just about physical assets, Mr Chan noted.

To boost economic value, the Reit intends to drive utilisation of space through asset turns.

"The mall operates from 10am to 10pm. In other words, the asset sleeps when we do. But physical concrete doesn't need rest, so the question is how do we raise utilisation rates during those periods?"

Last year, Mr Chan leveraged digital technology to roll out a 24/7 laundry locker feature, and an intra-city, same-day delivery service for Suntec City office tenants and shoppers. WashBox24 allows customers to drop their laundry off at their convenience, track its progress and pick it up any time - 24 hours a day, seven days a week.

"We plan to extend this locker service to other products, not just laundry. By harnessing the power of digital networks, we can upscale our service levels and make the asset work harder in delivering returns."

The mall's same-day delivery service enables shoppers to buy from multiple merchants and have their purchases delivered anywhere in Singapore within the day. "The key is how to use technology to enhance the shopper's experience, and meet the customer's expectations of speed and convenience."

Clearly, Mr Chan is an "optimist" when it comes to technology. "There's no doubt technology can disrupt the market, but it can also open up opportunities," he noted.

He remains sanguine about the outlook for Suntec City. "We're one of the few malls in Singapore whose footfall is still increasing at a very healthy rate."

Consumer expectations have also evolved - rather than drive from mall to mall on weekends, most families prefer a one-stop shop where each member's needs can be fulfilled. "Carparks in suburban malls tend to fill up quickly on weekends. Rather than spend an hour looking for a lot in the suburban shopping centre, some families prefer to drive into the city, where carpark charges are also very competitive," he noted.

Obviously, there is no magic bullet for the domestic retail sector. "Expect some form of consolidation in the industry to continue. Those who survive are the ones who can address what consumers want today, and are able to mobilise relevant resources to meet those goals," he said.

Retailers will also need to reinvent themselves in the way they sell their products and engage their customers.

In this aspect, the Reit has benefited from its exposure to Australia, which boasts far more mature office and retail markets.

Suntec Reit holds a 100 per cent interest in 177 Pacific Highway, a landmark office development in Sydney.

And last November, it completed the acquisition of an initial 25 per cent stake in Southgate Complex, an integrated waterfront development along Melbourne's Yarra River.

"Australia is more advanced in terms of how space is used, the design of its buildings, and service quality," said Mr Chan.

The Reit aims to build further on its exposure in these two geographies. "We will continue to seek opportunities to add to our portfolio, focusing on prime real estate that offers long-term sustainable returns, with capital appreciation potential," he added.

Meanwhile, to stay ahead in the industry, it's important to weed out distractions, Mr Chan said.

"For example, in the area of technology, particularly e-commerce, if you continue to focus on the drawbacks, you will miss out on the opportunities it can create," the 45-year-old noted.

Meanwhile, being adaptable and staying relevant amid shifting trends is always uppermost in Mr Chan's mind, both in and out of the office. The maxim of learning and relearning, upheld by American writer, futurist and sociologist Alvin Toffler, resonates deeply. According to Toffler, "the illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn".

Said Mr Chan: "In our rapidly changing environment, if you're doing things the same way as you did five years ago, there's a high probability you're doing it wrong. The goal is to reinvent ourselves, and to learn continuously."

•This is an excerpt from Singapore Exchange's Kopi-C: The Company Brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX's My Gateway website

A version of this article appeared in the print edition of The Straits Times on July 17, 2017, with the headline 'Suntec ecosystem has huge potential, says Reit manager'. Print Edition | Subscribe