Some insights of Suntec REIT’s portfolio, Tenants and Net Property Income from their annual report and key pointers to take note.

This post was originally posted here. The writer, Jun Yuan Lim is a veteran community member and blogger on InvestingNote, with username known as ljunyuan and has 886 followers.

 

Suntec REIT (SGX:T282U), another long-term investment of mine, released their annual report for the financial year ended 31 December 2019 last Thursday (09 April 2020.)

I have gone through the report, identify key pointers to take note of, and am going to present them in today’s post for the benefit of those who do not have the time to go through it:

Suntec REIT’s Key Figures in FY2019 at a Glance:

• Net Property Income: Decreased 2.0% year-on-year (y-o-y) to S$236.2mil due to the sinking fund contribution from Suntec City upgrading works (excluding it, the Net Property Income would be 1.3% higher y-o-y)
• Distributable Income from Operations: Increased 3.9% y-o-y to S$236.7mil due to increase in contributions from Suntec City, Southgate Complex (Australia), MBFC properties, and contribution from 55 Currie Street (Australia)
• Distributable Income to Unitholders: Down by 1.5% y-o-y to S$262.7mil as increase in distributable income from operations was offset by lower capital distribution
• Distribution Per Unit: Decreased by 4.8% y-o-y to 9.507 Singapore cents/unit due to the enlarged unit base and lower capital distribution
• Portfolio Occupancy: 98.7% (office), 99.1% (retail)
• Aggregate Leverage: 37.7% (31 December 2018: 38.1%)
• All-In Financing Cost: 3.05% per annum, with approximately 75.0% of their debt fixed or hedged
• Weighted Average Debt Maturity: 3.1 years

Chairperson & Non-Executive Director Chew Gek Khim’s Report:

• In July 2019, Suntec REIT announced the acquisition of 21 Harris Street in Pyrmont, Sydney, a freehold, Grade A office development currently under construction; pre-committed occupancy as at 31 December 2019 was 65.3%. The acquisition is expected to be completed in April 2020 when the property achieves practical completion

• In September 2019, the REIT further expanded its footprint in Australia with the acquisition of 55 Currie Street, a freehold, Grade A office building in Adelaide’s Central Business District. The initial net property income yield of 8.0% provided unitholders with immediate distribution per unit accretion

• 9 Penang Road (located at the former Park Mall site) has obtained Temporary Occupation Permit on 30 October 2019, with both office towers fully leased to UBS

• Development works for Olderfleet, 477 Collins Street in Melbourne, Australia, is on schedule to complete by mid-2020. As at 31 December 2019, pre-commitment, including Heads of Agreement for the property was at 95.6%

• The REIT also embarked on asset enhancement initiative works to upgrade the lobbies and restrooms of the five office towers in Suntec City Office; upgrading works for Tower 5 have been completed, and works for the remaining four towers will be progressively completed by end-2021.

• Moving forward in 2020, Ms Chew opined that the REIT’s Singapore office properties will continue to perform well due to proactive lease management and tight office supply. The same goes for the REIT’s office portfolio in Australia, underpinned by strong occupancy and long weighted average lease expiry of more than 5 years (with minimal lease expiry in 2020)
• Additional rental rebates are also given to tenants from the months of March to June 2020However, the REIT’s retail sector is adversely underpinned by the Covid-19 outbreak (and this is expected to last for some time.) The REIT have introduced various measures to help their retail tenants cope with the impact to their businesses, among them include:
  • Complementary parking, transport rebates for shoppers and double reward points for Suntec+ members in an attempt to bring shoppers back to the mall and spur spending
  • Tenants were given the flexibility to shorten operating hours (to help them reduce operating costs), draw down a month of their security deposit to offset their rental payments (to help them ease cashflow pressures)
  • Passing on full property tax rebates to tenants ahead of the REIT receiving them from the Inland Revenue Authority of Singapore

Suntec REIT’s Property Portfolio as at 31 December 2019:

Suntec REIT has properties in two geographical locations – in Singapore as well as in Australia:

Singapore:

• Office and retail properties in Suntec City

• 60.8% interest in Suntec Singapore Convention & Exhibition Centre (“Suntec Singapore”)

• One-third interest in One Raffles Quay (“ORQ”)

• One-third interest in Marina Bay Financial Towers 1 & 2, and the Marina Bay Link Mall (“MBFC Properties”)

• 30.0% interest in 9 Penang Road

Australia:

• 177 Pacific Highway (Sydney)

• 50.0% interest in Southgate Complex (Melbourne)

• 50.0% interest in Olderfleet, 477 Collins Street (Melbourne)

• 55 Currie Street (Adelaide)

Net Property Income Contribution by Assets and by Segments:

The following is a breakdown of net property income and income contribution from joint ventures breakdown by assets as at 31 December 2019 (with their percentage contribution in brackets):

• Suntec City (51%)

• MBFC Properties (17%)

• 177 Pacific Highway (10%)

• Suntec Singapore (9%)

• One Raffles Quay (7%)

• Southgate Complex (5%)

• 55 Currie Street (1%)

The following is a breakdown of net property income and income contributions from joint ventures breakdown by segment as at 31 December 2019 (with their percentage contribution in brackets):

• Office (68%)

• Retail (28%)

• Convention (4%)

Suntec REIT’s Top 10 Tenants in its Office & Retail Portfolio as at 31 December 2019:

The following are the REIT’s top 10 tenants in its office and retail portfolio, along with the property they are located in, along with the percentage of total monthly gross rental income:

Office Portfolio – Top 10 Tenants:

Tenant	Properties	% of Total Monthly Gross Rental Income
Standard Chartered Bank	MBFC	3.5%
UBS AG	Suntec City Office	3.3%
CIMIC Group Limited	177 Pacific Highway	2.1%
Vodafone Hutchison Australia Pty Ltd	177 Pacific Highway	2.0%
Barclays	MBFC	1.7%
PayPal Pte Ltd	Suntec City Office	1.7%
Deutsche Bank	ORQ	1.7%
Commonwealth of Australia	55 Currie Street	1.6%
Ernst & Young	ORQ	1.4%
Jacobs Group (Australia) Pty Ltd	177 Pacific Highway	1.3%

Retail Portfolio – Top 10 Tenants:

Tenant	Properties	% of Total Monthly Gross Rental Income
Cold Storage Singapore (1983) Pte Ltd	Suntec City Mall, ORQ, MBLM	0.9%
Pure Yoga (Suntec) Pte Ltd	Suntec City Mall	0.8%
Golden Village Multiplex Pte Ltd	Suntec City Mall	0.8%
SuperPark Singapore SC Pte Ltd	Suntec City Mall	0.7%
Food Republic Pte Ltd	Suntec City Mall	0.5%
Cotton On Singapore Pte Ltd	Suntec City Mall	0.4%
RE&S Singapore Pte Ltd	Suntec City Mall, MBLM	0.4%
Pertama Merchandising Pte Ltd	Suntec City Mall	0.4%
Copitiam Pte Ltd	Suntec City Mall	0.4%
Uniqlo (S) Pte Ltd	Suntec City Mall	0.4%

 

Suntec REIT’s Portfolio Expiry Profile as at 31 December 2019:

Office: 10.4% of the REIT’s total monthly gross office rental income (from their office properties) is expiring in FY2020, 22.8% in FY2021, and 66.8% will expire in FY2022 and beyond

Retail: 28.3% of the REIT’s total monthly gross rental income (from their retail properties) is expiring in FY2020, 25.0% in FY2021, and 46.7% will expire in FY2022 and beyond

 

Extension of Time to Hold its Annual General Meeting (AGM):

In a note published on 01 April 2020, Suntec REIT have been granted a 2 month extension by SGX-ST until 30 June 2020 to hold its AGM for the financial year 2019 ended 31 December 2019. You can read the note in full here.

At the time of writing, the REIT have not announced any confirmed date they will be holding their AGM.

Disclaimer: At the time of writing, I am a unitholder of Suntec REIT.

Thanks for reading.

Once again, this article is a guest post and was originally posted on ljunyuan‘s profile on InvestingNote. 

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