Suntec REIT reports 27% fall in DPU amid COVID-19 slump

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Suntec REIT has reported distributable income from operations of SGD55.1 million for its 1Q 2020, which is 6.5% lower than 1Q 2019.

The REIT’s distribution per unit (DPU) came in at 1.760 cents for 1Q 2020, 27.7% lower year-on-year.

Suntec REIT has attributed the decline in operational performance to measures that have been enacted amid the COVID-19 outbreak.

These include the postponement and cancellation of events at Suntec Convention, and steep drop in income from Suntec City Mall.

A weakened Australian dollar also contributed to the REIT’s operational weakness.

Better performance from Suntec City Office, Suntec City Mall, Southgate Complex and contribution from 55 Currie Street helped to mitigate the impact of the decline that resulted, said the REIT.

“As the crisis deepens in the second quarter with continued weakness in the convention and retail business, the manager has retained 10% of the distributable income from operations and held back its capital distribution in 1Q 2020”, said Chong Kee Hiong, CEO of the REIT’s manager.

“This resulted in a DPU of 1.760 cents to unitholders. This is necessary as we need to achieve a balance between providing a reasonable return to unitholders, building cash reserves as well as assisting our tenants to weather this period”, he said.

“While we are pleased to report that Suntec City Mall recorded positive rent reversion of 16.1% in the first quarter, the committed occupancy for the mall dropped to 98.3% as at 31 March 2020, with footfall and tenants’ sales declining significantly by 22.0% and 20.2% year-on-year respectively because of COVID- 19”, he added.

Suntec City will be waiving the rents of all retail tenants in April 2020, including tenants providing essential services such as supermarkets, pharmacies, food courts and restaurants.

Related: Suntec REIT sees possible dearth of SGD7.2 million from ‘circuit breaker’ measures

The REIT’s Singapore office portfolio remained stable in 1Q 2020, with Suntec City Office achieving rent reversion of 13.1%.

Overall committed occupancy for the Australia office portfolio remained stable at 97.7% with less than 2.0% of the Australia’s portfolio leases by net lettable area expiring in the year.

On 6 April 2020, Suntec REIT completed the acquisition of 21 Harris Street, a newly completed freehold Grade A office building in Pyrmont, Sydney for AUD295 million.

The accretive acquisition at an initial net property income yield of 5.5%, will improve earnings and distributions to unitholders with growth from the long leases with annual rent escalations, said the REIT.

Suntec REIT expects office rent reversion is expected to remain positive for the rest of the year.

However, Suntec City Mall is expected to register a substantial decline in shopper traffic in the second quarter of 2020, and rental reversion for remaining quarters are likely to be in the negative range, the REIT cautioned.

Suntec REIT is trading on the Singapore Exchange (SGX) at SGD1.28, down 4.5% from its previous close.

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