Suntec REIT (SGX:T82U), with retail and office properties located in Singapore, Australia, and in the United Kingdom, released its financial results for the second half, as well as for the full-year ended 31 December 2021 (i.e. FY2021) this morning (26 January 2022.)
As a unitholder of the Singapore-listed REIT (or S-REIT for short) since February 2020, one of the concerns that I have is its high aggregate leverage and low interest coverage ratio (in fact, the REIT has one of the highest aggregate leverage and lowest interest coverage ratio among S-REITs) – so, did these 2 statistics improve in the current period under review?
On top of my review on the REIT’s debt profile, you’ll also read about my review of its latest financial performance, portfolio occupancy profile, as well as its distribution payout to unitholders in this post – this is on top of my thoughts about the REIT’s latest set of results from the perspective of a unitholder of it.
Let’s begin…
Financial Performance (2H FY2020 vs. 2H FY2020, Q4 FY2020 vs. Q4 FY2021, and FY2020 vs. FY2021)
In this section, you’ll find the REIT’s financial performance from the following angles – 2H FY2020 vs. 2H FY2021, Q4 FY2020 vs. Q4 FY2021 (which I have manually computed based n figures for the third quarter and for the second half of the respective financial years), as well as FY2020 vs. FY2021:
2H FY2020 vs. 2H FY2021:
| 2H FY2020 | 2H FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $165.9m | $191.3m | +15.3% |
| Property Operating Expenses (S$’mil) | $57.0m | $49.3m | -13.5% |
| Net Property Income (S$’mil) | $109.0m | $142.0m | +30.3% |
| Distributable Income to Unitholders (S$’mil) | $116.4m | $129.0m | +10.8% |
Compared to the second half of the financial year 2020 (period between 01 July and 31 December 2020), the REIT’s results for the second half of the financial year 2021 (period between 01 July and 31 December 2021) is an improved one – with the 15.3% and 30.3% growth in its gross revenue and net property income respectively due to contributions from the newly acquired The Minster Building (located in the United Kingdom) on 28 July 2021, contributions from the completed Olderfleet, 477 Collins Street (located in Australia) from 01 August 2020, along with higher revenue contribution from 21 Harris Street, 177 Pacific Highway (both properties located in Australia), and Suntec City (located in Singapore.) As a result of an increased gross revenue and net property income, its distributable income to unitholders went up by 10.8%.
Q4 FY2020 vs. Q4 FY2021:
The following is the REIT’s fourth quarter results which I’ve computed based on its third quarter financial results, and also that for the second half of the financial year:
| Q4 FY2020 | Q4 FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $86.3m | $98.6m | +14.2% |
| Property Operating Expenses (S$’mil) | $24.7m | $25.4m | +2.9% |
| Net Property Income (S$’mil) | $61.7m | $73.2m | +18.7% |
| Distributable Income to Unitholders (S$’mil) | $64.2m | $65.3m | +1.7% |
Similar to its results for the second half of the year, the REIT’s top- and bottom-line for the fourth quarter of the current financial year under review was also an improved one when compared against the same time period last year (i.e. fourth quarter of the previous financial year 2020.)
FY2020 vs. FY2021:
| FY2020 | FY2021 | % Variance | |
| Gross Revenue (S$’mil) | $315.4m | $358.1m | +13.5% |
| Property Operating Expenses (S$’mil) | $115.5m | $103.4m | -10.5% |
| Net Property Income (S$’mil) | $199.9m | $254.6m | +27.4% |
| Distributable Income to Unitholders (S$’mil) | $209.2m | $247.2m | +18.2% |
On a y-o-y basis, the REIT’s gross revenue and net property income also saw improvements by 13.5% and 27.4%, which can be attributed to contributions from The Minster Building, Olderfleet, 477 Collins Street, along with higher revenue contribution from 21 Harris Street, 177 Pacific Highway, and Suntec City. However, this was offset by lower revenue from Suntec Singapore (convention centre.)
The improved gross revenue and net property income led to the distributable income to unitholders going up by 18.2% compared to last year.
Portfolio Occupancy Profile (Q3 FY2021 vs. Q4 FY2021)
Moving on, let us take a look at the occupancy profile of the REIT’s properties by property types and geographical locations – where you’ll find a comparison of the stats recorded for the current quarter under review (i.e. Q4 FY2021 ended 31 December 2021) against that recorded in the previous quarter 3 months ago (i.e. Q3 FY2021 ended 30 September 2021) to find out whether it has continued to remain resilient, or has deteriorated:
| Portfolio Occupancy | Q3 FY2021 | Q4 FY2021 | Difference (in Percentage Points – pp) |
| Retail (Singapore) | 94.9% | 94.6% | -0.3pp |
| Office (Singapore) | 96.1% | 97.5% | +1.4pp |
| Retail (Australia) | 85.6% | 85.6% | +0.0pp |
| Office (Australia) | 92.8% | 94.2% | +1.4pp |
| Office (United Kingdom) | 98.3% | 98.3% | +0.0pp |
My Observations: On the whole, Suntec REIT’s portfolio occupancy profile for the current quarter under review, when compared against the previous quarter, was largely positive. The only property type that recorded a slightly weaker occupancy rate was its retail property in Singapore (down by 0.3pp to 94.6%, as the occupancy in Suntec City Mall dipped slightly from 95.0% to 94.7%; despite of that, the occupancy rate of its Singapore retail was still slightly higher than the secondary market occupancy at 94.0%.)
The REIT’s office properties saw its occupancy rate improved to 97.5% as a result of an improvement in occupancy rate in all of its properties (Suntec City Office from 95.5% in Q3 FY2021 to 97.2% in Q4 FY2021, One Raffles Quay from 97.2% in Q3 FY2021 to 98.5% in Q4 FY2021, and MBFC Towers 1 & 2 from 96.8% in Q3 FY2021 to 97.3% in Q4 FY2021.) The improvement in the occupancy rate for its office properties in Australia can be attributed to 21 Harris Street (where its occupancy went up from 80.7% in Q3 FY2021 to 91.0 in Q4 FY2021), and 55 Currie Street (where its occupancy went up from 95.2% in Q3 FY2021 to 95.7% in Q4 FY2021.)
Also, its good to note (from the point of view of a unitholder) that apart from its Australian retail, all the other property types had their occupancy rate maintained at above 90.0%.
Debt Profile (Q3 FY2021 vs. Q4 FY2021)
Next, let us take a look at the REIT’s debt profile – just like how I reviewed its portfolio occupancy in the previous section, you’ll also find a comparison of its debt profile recorded for the current quarter under review against that recorded in the previous quarter in the table below:
| Q3 FY2021 | Q4 FY2021 | |
| Aggregate Leverage (%) | 44.3% | 43.7% |
| Interest Coverage Ratio (times) | 2.7x | 2.6x |
| Average Term to Debt Maturity (years) | 3.1 years | 2.9 years |
| Average Cost of Debt (%) | 2.3% | 2.4% |
My Observations: As far as the REIT’s debt profile is concerned, its a little of a mixed bag in my opinion – one thing to note is its aggregate leverage – no doubt it is still on the high side (above 40.0%), but I’m encouraged to note that it has come down slightly compared to the previous quarter (by 0.6pp to 43.7%.)
On the other hand, its cost of debt have pipped up slightly to 2.4% (from 2.3% in Q3 FY2021), and its interest coverage ratio have edged down slightly to 2.6x (from 2.7x in Q3 FY2021.)
Finally, in terms of its debt maturity profile, I must say that they are quite well-staggered – with S$500m due in the coming FY2022 ahead, S$1,019m in FY2023, S$900m in FY2024, S$885m in FY2025, and the remaining S$1,640m due in FY2026 and beyond.
Distribution Payout to Unitholders
Suntec REIT is one of the few S-REITs that has continued to declare a distribution payout to its unitholders on a quarterly basis.
For the current quarter under review, the REIT’s management have declared a payout of 2.28 cents/unit, a 0.8% improvement from the 2.261 cents/unit declared in Q4 FY2020.
Together with the REIT’s payout for the current quarter under review, for the full-year, its distribution payout have amounted to 8.666 cents/unit – compared to 7.402 cents/unit the previous year (i.e. FY2020), this is an improvement of 17.1%.
If you are a unitholder of the REIT, here are some of the dates regarding its distribution payout you need to take note of:
Ex-Date: 04 February 2022
Record Date: 07 February 2022
Payout Date: 28 February 2022
Closing Thoughts
On the whole, I must say it is a decent set of results reported by the REIT – with improvements in its financial performances both on a q-o-q, as well as on a y-o-y basis – mainly due to contributions from a newly acquired property in the United Kingdom, contributions from a completed development in Australia, along with improving performances from its other existing properties.
In terms of its portfolio occupancy profile, I must say that they have continued to remain resilient – where, apart from its retail mall in Australia, all its other property types (Singapore retail and office, Australia office, and United Kingdom office) have logged a high occupancy rate of above 95.0%.
Finally for its debt profile, even though its aggregate leverage is still on the high side, but I’m encouraged to note that it has improved a bit compared to the previous quarter. I will continue to keep a close watch on it in the coming quarters ahead.
Looking at the REIT’s overall prospects ahead, I must say it is still a bright one – with Singapore’s economy slowly reopening up, and more people returning to their workplaces – this bodes well for the REIT’s office space, and retail (where they are located in the heart of the CBD.) I’m also of the opinion that in the year ahead, we might see some MICE (Meetings, Incentives, Convention, and Exhibition) events coming up, which will benefit Suntec Convention.
With that, I have come to the end of my review on Suntec REIT’s latest results for the second half, as well as for the full year ended 31 December 2021. Before I end, do take note that the opinions expressed above are purely my own which I’m sharing for educational purposes only. They should not be taken as recommendations to buy or sell units of the REIT. As always, you’re strongly encouraged to do your own due diligence before you make any investment decisions.
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Disclaimer: At the time of writing, I am a unitholder of Suntec REIT.
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