Suntec Real Estate Investment Trust (SGX: T82U), or Suntec REIT for short, holds commercial and retail properties in both Singapore and Australia. It is one of the oldest REITs in Singapore, being listed in December 2004. Its portfolio includes Suntec City, Suntec Singapore Convention and Exhibition Centre, a one-third interest in One Raffle Quay and a commercial building located at 177 Pacific Highway, Sydney, to name just a few.
When reviewing REITs, investors should look out for key numbers, ratios, and metrics which help them to better understand the REIT. So I’ll present nine numbers, what they mean for Suntec REIT, and what investors can learn from them. All numbers stated here relate to the first-quarter 2019 (Q1 2019) earnings for Suntec REIT.
1. Portfolio Occupancy on a committed basis hit 98.9% for the REIT’s office component, and 97.4% for its retail component. Occupancy is expressed as a percentage and shows how much of a property’s net lettable area (NLA) has been leased to tenants. Obviously, a higher number is better for the REIT as it signifies more income for the REIT.
2. Net Asset Value (NAV) per unit stands at S$2.092, and represents the difference between total (revalued) assets for the REIT (less all its liabilities) divided by the number of issued units.
3. Suntec’s aggregate leverage ratio stands at 38.6%, which is below the statutory limit of 45% for REITs. This represents the amount of debt the REIT can take up with respect to the value of its deposited property (i.e. portfolio).
4. Weighted average debt maturity is around 3.3 years, but will be extended to 3.72 years once Suntec draws down on its S$400 million loan facility. Having a longer debt maturity means that the REIT is not pressured to roll over its loans so quickly, and in a rising interest rate environment, it is also beneficial for the REIT to be able to lock in favourably low rates.
5. All-in-financing cost is 3.04% with interest coverage of 2.9x. Financing cost refers to the overall interest rate which the REIT is paying to their lenders, and the lower this is, the better for the REIT. Interest coverage measures how well the operating income of the REIT can cover the interest payments for the loans taken up by the REIT – a higher number means the REIT is less at risk of not being able to service the interest on their loans.
6. Tenant retention ratio was 80% for the REIT. This is the proportion of tenants who renewed their leases with the REIT, divided by the total NLA of the properties. A higher ratio means that more tenants were able to renew, lessening the need for the REIT to market the empty space to new tenants.
7. Weighted average lease expiry (WALE) was 3.64 years for Suntec’s portfolio. WALE measures the lease expiry period for tenants and is “weighted” according to each tenant’s share of total NLA. A longer WALE is beneficial for the REIT as it ensures more certainty of rental income.
Making sense of the numbers
Understanding and appreciating these nine numbers enable an investor to gain deeper insights into what makes a REIT attractive. Investors can seek out these nine numbers for any REIT which they study, as part of a quick and broad overview of the REIT’s attributes.
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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 Royston Yang owns shares in Suntec Real Estate Investment Trust.