3 Major Highlights Investors Should Know From Suntec Real Estate Investment Trust’s Latest Annual Report

This is the season for annual reports. Suntec Real Estate Investment Trust  (SGX: T82U), an owner of retail malls and offices predominantly in Singapore, is one of the many companies or real estate investment trusts (REIT) that have released their latest annual reports over the past few weeks.

The annual report is a great place to learn more about a stock. For Suntec REIT, I had picked out three major highlights from its latest 2015 annual report that investors may want to know:

1. Completion of Asset Enhancement Initiative (AEI)  

“The remaking of Suntec City commenced in June 2012 and was completed in June 2015 with the opening of Phase 3. After the remaking, Suntec City is now an exciting lifestyle destination offering a well-selected range of specialty retail stores, new food and beverages concepts and entertainment options. Suntec City now houses over 360 retail establishments.”

Suntec City is a major contributor to Suntec REIT’s total revenue base. For 2015, the REIT recorded gross revenue of $329.5 million. Of this, Suntec City’s retail segment brought in $86.4 million. The completion of the AEI is significant as it is expected to attract more shoppers to Suntec City. This will be one area to watch for Suntec REIT in the years ahead.

2. The divestment of Park Mall into a joint venture

“In line with Suntec REIT’s proactive approach in reviewing and evaluating asset plans of its portfolio, Park Mall was divested for S$411.8 million. Park was purchased at a cost of S$245.1 million.

The divestment will enable Suntec REIT to realise the value of the almost 50 year old property and drive value creation via its 30% interest in the joint venture through the redevelopment of the property into a new commercial development. The redevelopment will unlock the underlying value of the property by further enhancing the gross floor area of the site.”

Another recent major milestone for Suntec REIT was the divestment of its Park Mall property into a joint venture. Suntec REIT will have a 30% share in the new joint venture, which is expected to redevelop Park Mall into two office blocks with an ancillary retail component. The redevelopment is also expected to increase the total permissible gross floor area to 450,000 square feet.

For 2015, the Park Mall property contributed to 7% each to Suntec REIT’s gross revenue and net property income (NPI).

3. Suntec Rewards Loyalty Programme

“In July 2015, we launched Suntec Rewards, Suntec City’s new cardless loyalty programme which rewards members with e-vouchers for their spending in Suntec City. Through collaboration with retailers, Suntec Rewards brings exciting shopping and dining perks with additional privileges to enhance the shopping experience, making shopping at Suntec City more fun and rewarding.”

Chew Gek Khim, the chairman of Suntec REIT’s manager, had written the statement above in the Chairman’s Report section of Suntec REIT’s annual report. Notably, CapitaLand Limited (SGX: C31) has a similar loyalty programme with 800,000 members in Singapore.

Wilson Tan, the chief executive of CapitaLand Mall Trust’s (SGX: C38U) manager, had said in a recent interview that the loyalty programme allows CapitaLand Mall Trust to gain deeper insight into shoppers’ preferences (CapitaLand Mall Trust is a part of CapitaLand and is a real estate investment trust that focuses on retail malls in Singapore). This is also done to attract shoppers to its malls. These could be the benefits that Suntec REIT is aiming for with the launch of its Suntec Rewards programme.

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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 Chin Hui Leong owns units in Suntec Real Estate Investment Trust.