Lower Distributions at Suntec Real Estate Investment Trust

suntec logo Suntec Real Estate Investment Trust (SGX: T82U), or Suntec REIT, posted a 5.3% growth in gross revenue for third quarter of 2013 (3Q 2013) to S$65.9 million as compared to the previous year. The increase was mainly due to the opening of Suntec Singapore following the completion of its asset enhancement initiative (AEI) works. The net property income was at S$40.3 million for 3Q 2013. This was 4.7% higher year-on-year. The total distribution of S$51.8 million and distribution per unit of 2.289 cents for the latest quarter was 1.8% and 2.6% lower respectively as compared to 3Q 2012.

Suntec REIT owns Suntec City mall and certain office units in Suntec Towers One, Two and Three, the whole of Suntec Towers Four and Five (collectively known as Suntec City), Park Mall, 60.8 per cent effective interest in Suntec Singapore Convention & Exhibition Centre (known as Suntec Singapore), a one-third interest in One Raffles Quay and a one-third interest in Marina Bay Financial Centre Towers 1 and 2, and the Marina Bay Link Mall.

Suntec City is currently undergoing AEI and the official opening of Phase 1 was on 12 September 2013. The estimated dates of completion for Phase 2 and Phase 3 are the end of this year and the end of next year, respectively. Following opening of Phase 1, there has been 99.6% committed occupancy. For Phase 2, there is a pre-committed occupancy of 83.7% to-date. The manager of Suntec REIT, ARA Trust Management (Suntec) Limited, is aiming for a 10.1% return on investment for its AEI. Mr. Yeo See Kiat, Chief Executive Office of the Manager, said, “Based on our leasing progress, our projected rental enhancement and return on investment of 10.1% are on track.”

As of 30 September 2013, the overall committed occupancy for the retail portfolio stood at 98.3% and that for the office portfolio was at 99.8%. For the retail portfolio, “the committed occupancy for Suntec City mall (Phase 1) was 99.6% while the committed occupancy for the rest of mall unaffected by the AEI works was 95.0%.”

As of 30 September 2013, the gearing ratio for Suntec REIT is at 38.6% and the interest cost is at 2.67%. The net asset value is at S$2.053. Suntec REIT does not have any refinancing requirement till 2014.

Mr. Yeo, commenting on the performance of Suntec REIT, mentioned, “During the third quarter of 2013, despite the closure of Suntec City mall (Phase 2), the distribution income of S$51.8 million in 3Q 2013 was a marginal decline of 1.8% year-on-year. With the opening of Suntec City mall (Phase 1) and Suntec Singapore, we utilized only S$4.5 million from the sale proceeds of Chijmes for capital distribution and we are pleased to deliver a DPU of 2.289 cents for this quarter.”

The shares closed at $1.725 on Thursday. The price-to-book ratio is at 0.84 and the distribution yield is at 5.27%, taking into account the latest declared distribution and the last three quarters’ distributions.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.