Suntec REIT (SGX:T82U), with retail and office properties in Singapore, Australia, and recently in the United Kingdom as well, released its financial results for the fourth quarter, and for the full-year 2020 ended 31 December 2020 this morning (26 January 2021.)

As a unitholder of the REIT, I have gone through all the documents that were released by the REIT and in this post, you will find key pointers about its latest set of financial results, portfolio occupancy and debt profile, as well as its distribution payout to unitholders to take note of, along with my personal thoughts to share (which I hope you find useful.)

Let’s begin…

Financial Results (Q4 FY2019 vs. Q4 FY2020, and FY2019 vs. FY2020)

First, let us take a look at the REIT’s latest set of financial results, both on a quarter-on-quarter (q-o-q) basis, as well as on a year-on-year (y-o-y) basis, to find out if they have improved or deteriorated:

Q4 FY2019 vs. Q4 FY2020:

In the REIT’s documents, they only provided statistics for the second half of the financial year (for both FY2019 and FY2020.) As such, I have done my own computations for the REIT’s results for the fourth quarter (based on results published for the previous quarters), and you can find it below:

Q4 FY2019Q4 FY2020% Variance
Gross Revenue
(S$’mil)
$96.7m$109.1m+12.8%
Property Operating
Expenses (S$’mil)
$33.4m$34.7m+3.8%
Net Property
Income (S$’mil)
$63.3m$61.7m-2.5%
Distributable
Income to
Unitholders (S$’mil)
$66.0m$64.2m-2.8%

On a q-o-q basis, the REIT’s latest set of results was a mixed one – its gross revenue saw a 12.8% increase due to contributions from the newly acquired properties in 55 Currie Street (on 10 September 2019) and 21 Harris Street (on 06 April 2020), contributions from the completed Olderfleet, 477 Collins Street from 01 August 2020, and a higher revenue from 177 Pacific Highway.

On the other hand, its net property income fell by 2.5% due to rental assistance granted to Suntec City retail tenants and also from the losses incurred at Suntec Singapore.

FY2019 vs. FY2020:

FY2019FY2020% Variance
Gross Revenue
(S$’mil)
$366.7m$315.4m-14.0%
Property Operating
Expenses (S$’mil)
$130.5m$115.5m-11.5%
Net Property
Income (S$’mil)
$236.2m$199.9m-15.4%
Distributable
Income to
Unitholders (S$’mil)
$262.7m$209.2m-20.4%

On a y-o-y basis, compared to the previous year (which was before the pandemic), results were poorer, largely due to the retail industry being adversely affected by the 2 month ‘circuit breaker’ period implemented by the Singapore government to stem the further community spread of the Covid-19 pandemic (where most retail businesses had to shut during the period), and the REIT had to provide rental rebates (of 2 months) to the affected tenants, along with the temporary closure of Suntec Singapore.

My Thoughts: The retail industry was severely affected by the Covid-19 pandemic, and Suntec REIT was not spared. As such, the latest y-o-y results were not unexpected.

Moving forward, as Singapore is now in Phase 3 of the safe transition, with almost all the retail shops allowed to resume businesses once again, plus contributions from the newly acquired properties, I am of the opinion that the REIT’s results for the coming financial year ahead (i.e. 2021) will be a better one (provided if the community cases continue to stay under control and there are no further re-tightening of any of the safe distancing measures required.)

Portfolio Occupancy Profile (FY2019 vs. FY2020)

Moving on, let us take a look at the REIT’s latest portfolio occupancy profile for the current financial year under review (i.e. FY2020 ended 31 December 2020), compared against the REIT’s portfolio occupancy profile for the previous financial year (i.e. FY2019 ended 31 December 2019):

FY2019FY2020
Singapore:
– Retail
– Office

99.5%
99.1%

90.2%
96.7%
Australia:
– Retail
– Office

92.8%
97.8%

91.7%
94.0%
United Kingdom:
– Office

N.A.

100.0%

My Thoughts: Its not surprising to find that the REIT’s portfolio occupancy rate for its Singapore and Australia properties have weakened as a result of the ongoing Covid-19 pandemic.

Other than its portfolio occupancy for its Singapore retail, which, at 90.2%, is below the secondary market occupancy of 92.6%, all the others are above the market occupancy rate – its Singapore office occupancy is above the overall CBD occupancy of 93.2%, its Australia office occupancy is above Australia’s Nationwide CBD 3Q20 office occupancy of 87.8%, and its United Kingdom office occupancy is above the Central London 3Q20 office occupancy of 94.1%.

With Singapore slowly recovering from the pandemic, I am of the opinion that the retail spaces be once again filled – even though its rent may be at a lower rate. I will continue to monitor the overall occupancy rate of the REIT’s Singapore retail in the quarters ahead.

Debt Profile (FY2019 vs. FY2020)

For those of you who have been following my writeups, you are probably aware that its rising aggregate leverage, along with its low interest coverage ratio, are of particular concern to me, and I have been keeping a close watch on these two statistics very closely over the past quarters.

So, compared to FY2019, has the REIT’s debt profile for FY2020 improved? Let us check it out in the table below:

FY2019FY2020
Aggregate Leverage
(%)
37.7%44.3%
Interest Coverage
Ratio (times)
2.9x2.6x
Average Term to Debt
Maturity (years)
3.1 years3.0 years
Average Cost of
Debt (%)
3.1%2.5%

My Thoughts: Other than improvements in its average cost of debt (by 0.6 percentage points to 2.5% for FY2020), I am disappointed to learn that the REIT’s aggregate leverage have moved into the 40+% territory, which is dangerously close to the regulatory limit of 50.0%. Also, its interest coverage ratio have further declined compared to the year before.

Distribution Per Unit (Q4 FY2019 vs. Q4 FY2020, and FY2019 vs. FY2020)

On a full-year basis (i.e. FY2019 vs. FY2020), Suntec REIT’s distribution per unit have slipped by 22.1% to 7.402 cents/unit (FY2019: 9.507 cents/unit) due to a lower distributable income from operations and the absence of capital distribution.

For the fourth quarter, compared to the same time period last year (i.e. Q4 FY2019), its distribution fell by 3.7% to 2.261 cents/unit (Q4 FY2019: 2.347 cents/unit.)

If you are a unitholder of the REIT, do take note of the following dates for the distribution payout of 2.261 cents/unit declared in Q4 FY2020:

Ex-Dividend: 02 February 2021
Record Date: 03 February 2021
Payout Date: 26 February 2021

In Conclusion

While I am optimistic on the REIT recording a better set of financial results in the financial year ahead (i.e. 2021), along with improvements to its distribution payouts to unitholders, I continue to have concerns about its high aggregate leverage (something I will continue to keep a close watch on in the quarters ahead.)

With that, I have come to the end of my review of Suntec REIT’s latest results update. As always, I hope you find the share useful and do take note that the opinions within are solely mine, which I am sharing for educational purposes only. They do not represent any buy or sell calls for the REIT’s units.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Suntec REIT.

 

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