SUNTEC real estate investment trust (Reit) reported on Friday (Oct 20) a 14 per cent year-on-year decline in distribution per unit (DPU) amid higher financing costs and the weaker Australian dollar.

DPU for the three months ended Sept 30, 2023 fell to S$0.01793, down 14 per cent from S$0.02084 in the same period a year earlier. Even so, the manager noted the third-quarter DPU still represented a 3.1 per cent improvement from Q2 FY2023.

Chong Kee Hiong, chief executive officer of the manager, said: “The operating performance of our portfolio improved, in particular, the convention business whose recovery is ahead of schedule. However, high interest rates and energy costs continue to impact our distribution income.”

Distributable income fell 13.3 per cent to S$52 million from S$60 million in Q3 FY2022.

Gross revenue for the Reit’s portfolio climbed 15 per cent to S$123.4 million, while net property income (NPI) rose 9.7 per cent to S$84.6 million.

The manager said this was mainly due to higher contribution from the Suntec City office and mall as well as Suntec Convention.

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Softening demand

Gross revenue and NPI for the Singapore office portfolio both increased in the third quarter. However, the Reit’s office joint venture income fell 19.7 per cent to S$15.5 million amid higher interest expense at One Raffles Quay and MBFC Properties.

The manager noted that office demand is expected to soften with rent growth slowing.

“Occupiers are expected to focus on cost containment in view of global macroeconomic uncertainties,” the manager said, but added that rent reversion for its Singapore office portfolio will remain positive with revenue strengthening on the back of the past 21 consecutive quarters of positive rent reversions.

Suntec Reit’s Singapore’s retail portfolio also showed an improvement. Gross revenue rose 7.7 per cent to S$33.5 million, while NPI climbed 10.8 per cent to S$24.7 million, amid higher occupancy and rent, as well as a one-off property tax refund at Suntec City Mall.

The convention business also posted a recovery, with gross revenue surging 87.4 per cent to S$22.3 million, while NPI jumped to S$7.8 million from S$2.8 million.

The manager noted that the meetings, incentives, conventions and exhibitions (Mice) industry will continue to drive and benefit from the country’s tourism recovery.

“The convention-business recovery is ahead of schedule and future growth will be driven by international, domestic and consumer events,” it said. “The recovery of Mice events and the return of tourists will boost mall traffic and tenant sales. While growth in retail sales is likely to be moderated, overall tenant sales is expected to remain above pre-Covid levels.”

Suntec Reit noted that its Australia portfolio operational performance “remained stable” in the third quarter, but said leasing momentum is expected to slow amid macroeconomic uncertainties.

As at Sep 30, the Reit’s aggregate leverage ratio stood at 42.7 per cent, slightly higher than the 42.6 per cent three months earlier. Its adjusted interest coverage ratio, meanwhile, fell to two times, from 2.1 times over the same period.

The Reit had total debt outstanding of S$4.3 billion, with 55 per cent of its borrowings on fixed rates. The trust said its all-in financing cost as at Sept 30 was 3.78 per cent per annum, higher than the 3.64 per cent per annum in June.

Net asset value per unit slipped to S$2.09 from S$2.12 over the same period.

Suntec Reit units closed at S$1.12 on Friday, down S$0.02, or 1.8 per cent, before the announcement.