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Distributions Flat At Suntec REIT

This year marks the 10th anniversary of Suntec REIT’s (SGX: T82U) listing.

The real estate investment trust currently owns Suntec City Mall and a portion of the office units in Suntec Towers One, Two, and Three. It also owns the whole of Suntec Towers Four and Five. In addition, the REIT has interests in Park Mall, Marina Bay Link Mall, 1/3 interests in both One Raffles Quay and Marina Bay Financial Centre, and a 60.8% interest in Suntec Singapore Convention & Exhibition Centre. Together, all the aforementioned properties form the REIT’s portfolio in Singapore. That’s not all though; the REIT also has a property that’s under development in Sydney, Australia as a means to provide geographical diversity.

With yesterday’s announcement of its first quarter results, let’s see how it did.

How the REIT fared

Upon the completion of Phase One of the renovation works for Suntec City Mall and Suntec Singapore Convention and Exhibition Centre, the REIT’s gross revenue surged 32.8% year-on-year to S$66 million. Amazingly, due to a much milder increase in operating costs, net profit is up 74.4% to S$38 million for the quarter. However, due to tax credits and higher financial derivative gains that were earned in the corresponding period a year ago, Suntec REIT’s total income that’s attributable to unitholders only increased by 16%, ending the quarter at S$37million.

Income available for distribution had also increased to S$50.9 million, but at a much milder pace of 7%. Despite all the growth figures mentioned earlier however, the REIT’s distribution per unit (DPU) for the quarter had barely changed from 2.228 Singapore cents a year ago to 2.229 cents currently. This was due mainly to the increase in the number of units in the REIT due to a March 2014 private placement that raised S$350 million for it.

Looking at its balance sheet, Suntec REIT has managed to completely refinance its debts that are due within the next two years. The REIT had managed to raise capital recently from a number of sources to aid in the refinancing: 1) It had issued S$310 million 6-year notes with an annual interest of 3.35%; 2) It had raised S$350 million from the private placement as mentioned earlier; and 3) it had just inked a deal for an S$800 million 5-year loan facility yesterday.

Its total debt outstanding as a group stands at S$3.311 billion while its debt-to-asset ratio clocks in at 37.3%. With a net asset value of S$2.076, the REIT is trading at 0.83 times its book value.

Other developments

The REIT is still undergoing asset enhancement initiatives in Suntec City and Suntec Singapore Convention and Exhibition Centre. The REIT is planning to improve the retail space and tenant mix of those properties, and those asset enhancement initiatives should help enhance the value of the real estate. Suntec REIT is currently being managed by the publicly-listed asset manager, Ara Asset Management (SGX: D1R).

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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 Stanley Lim doesn’t own shares in any companies mentioned.