Suntec Real Estate Investment Trust: 3 Things Investors Should Know From Its Latest Earnings

Suntec Real Estate Investment Trust (SGX: T82U) is one of the largest REITs in Singapore’s stock market and it currently has interests in retail malls and offices in Singapore and Australia. Its portfolio, which is concentrated more toward Singapore, comprises of Suntec City, One Raffles Quay, two commercial buildings in Australia (one in Sydney and the other in Melbourne), and more.

Two weeks ago, the REIT reported its 2017 first quarter results. Let’s look at three useful pieces of information that investors may want to know from the announcement:

1. The overall result

The table below shows some important financial numbers from Suntec REIT’s income statement for the first quarters of 2017 and 2016:

Source: Suntec REIT 2017 first quarter earnings release

We can see that the REIT enjoyed growth in the reporting quarter, as it brought in higher gross revenue, net property income, and distribution per unit.

2. Occupancy rate

The occupancy rate of a REIT’s portfolio is an important indication of the level of demand for its properties. Suntec REIT ended the reporting quarter with an occupancy rate of 98.9% for its office portfolio. Its retail portfolio was not far behind with an occupancy rate of 98.0%.

For the office portfolio, Suntec REIT’s Singapore properties saw their occupancy rate improve from 98.3% a year ago to 99.4%. The Australian properties, meanwhile, had committed occupancy rates of 97.0%.

For the retail portfolio, the REIT’s properties in Singapore achieved an occupancy rate of 98.3%, down slightly from 98.6% a year ago. The Australian properties had a lower occupancy rate of 88.4%.

3. What lies ahead

Regarding its performance for the next 12 months, the REIT gave the following comments about its office and retail properties in its earnings release:

“The Singapore office market remained stable in the first quarter of 2017. Net take-up improved slightly as landlords continued to offer attractive rents and leasing incentives. The overall CBD rents declined slightly by 1.2% to S$8.44 psf/mth while the overall CBD occupancy improved by 0.8% to 94.1%.

Looking ahead, the Manager will continue its proactive asset management to maintain its high occupancy level as the Singapore office market is expected to remain under pressure given the impending office supply and shadow space.

The market sentiments for the Singapore retail sector remained weak in the first quarter of 2017 as retailers continued to consolidate poorer performing outlets.

Despite the challenging retail market, Suntec City mall’s overall committed occupancy improved to 98.4% as at 31 March 2017. The Manager will continue its active tenant adjustments to fine tune the trade mix and further strengthen the positioning of Suntec City mall…

…In Australia, the national office CBD occupancy improved by a marginal 0.1% to 88.1% in the fourth quarter of 2016. Driven by centralisation and expansionary activities, occupier demand remains positive in the Sydney, North Shore and Melbourne office markets. Looking ahead, occupancy and rents are expected to strengthen given the strong occupier demand coupled with the limited new supply and stock withdrawal.”

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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 Lawrence Nga doesn’t own shares in any companies mentioned.