2 Things That Investors Should Know About Suntec Real Estate Investment Trust’s Retail Properties

Suntec Real Estate Investment Trust (SGX: T82U) is one of the largest REITs in Singapore and currently has interests in retail malls and offices in Singapore and Australia. Its portfolio includes Suntec City, a one-third interest in One Raffles Quay, a commercial building in Sydney and a 25% stake in Southgate Complex in Melbourne.

Given that the REIT has exposure to both retail and office properties, it might be useful for investors to view these two type of properties separately. In this article, I will look at two slides from Suntec REIT’s 2017 fourth quarter earnings and give an overview of the retail properties’ performance.

We will start with a quick summary of a number of performance metrics for the properties.

Source: Suntec Real Estate Investment Trust 4Q 2017 presentation

From the above, we can see that Singapore retail properties contributed 99% of retail properties income in 2017 while Australia retail properties contributed 1% of the retail income.

Out of the three retail properties owned by Suntec REIT, only one of the properties was fully owned as at December 2017, namely Suntec City Mall. In fact, this mall alone accounted for 94% of income contribution in 2017.

In short, though Suntec REIT has exposure to three retail properties, the bulk of the income derived from the retail segment is concentrated in Suntec City Mall.

Next, we will look at a summary of lease expiry profile for the retail properties.

Source: Suntec Real Estate Investment Trust 4Q 2017 presentation

What’s useful to note from the above is that the Suntec REIT’s lease expiry profile is mostly concentrated in the next three years, accounting for 83% of the net lettable area. In general, the Singapore properties have a shorter lease expiry profile of 2.24 years while the Australia properties have longer expiry profile of 6.31 years.

Having a relatively short weighted average lease expiry profile of 2.24 years means that the REIT will have significant leases to renew in the short-term, which might lead to earnings volatility.

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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.