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Suntec Real Estate Investment Trust Sees Distributions Fall

Suntec Real Estate Investment Trust (SGX: T82U), the second largest retail REIT listed in Singapore, released its full-year results yesterday. The largest retail REIT listed here is CapitaMall Trust (SGX: C38U), which released its latest quarter earnings on Wednesday.

Suntec REIT saw its gross revenue dip 11% year-on-year to S$234 million for the whole of 2013. Meanwhile, net property income fell 9% to S$149 million and total distributions dipped 1% to S$211 million. The REIT’s distribution per unit (DPU) dropped 2% to 9.33 Singapore cents as a result. Suntec REIT owns a variety of commercial and retail properties in Singapore, which includes 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; a 60.8% 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.

The REIT is managed by ARA Trust Management (Suntec) Limited, a wholly-owned subsidiary of real estate fund management outfit ARA Asset Management (SGX: D1R).

The drop in revenue of 11% was due to “partial closure of Suntec City mall for asset enhancement works during the financial year, which was partially offset by higher revenue from Suntec City Office”. Suntec City is currently undergoing Phase 2 of its asset enhancement works and the estimated date of completion will be the end of the first quarter this year. There will be a third and last phase and that will be completed by the coming September to December.

Mr. Yeo See Kiat, Chief Executive Officer of the Manager, said, “On the marketing front, we are pleased to report that for Phase 2 of the remaking of Suntec City, we have achieved a pre-committed occupancy of 97.0% to-date. Based on our leasing progress, our projected rental enhancement and return on investment of 10.1% are on track.”

The DPU of 9.33 Singapore cents includes a capital distribution of 0.893 Singapore cents from part of the sale proceeds from the divestment of CHIJMES in 2011.

As of 31st December 2013, Suntec REIT’s gearing ratio stood at 39.1% and its financing cost was at 2.5%. The weighted average term to expiry of the REIT’s various loans is 2.4 years. The net asset value per unit turned out to be S$2.13.

Mr. Yeo added, “For the financial year ended 2013, notwithstanding the major asset enhancement works at Suntec City, the distribution income of S$211.2 million was a marginal decline of 0.9% year-on- year. Following the completion of Phase 1 of the remaking of Suntec City and the better than expected performance of the office portfolio and jointly controlled entities, we utilized only S$19.0 million from the sale proceeds from CHIJMES for capital distribution and we are pleased to deliver a DPU of 9.328 cents for 2013.”

The units last changed hands at S$1.585 on Thursday. This translates to a historical PB ratio of 0.7 and a distribution yield of 5.9%.

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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 owns shares in ARA Asset Management.