- Suntec REIT (SGX:T82U)’s 1H23 gross revenue grew 10.2% y-o-y to S$224.3m but net property income (NPI) increased at a much smaller magnitude of 0.3% to S$153.3m. This was attributed to lower contributions from its Australian assets, higher maintenance fund contribution and commencement of sinking fund contribution at Suntec City and Suntec Singapore.
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Healthy rental reversions in Singapore and Australia but some pressure on occupancy in Australia
- Operationally, Suntec REIT recorded an increase in its Singapore office portfolio occupancy by 0.4 percentage points (ppt) q-o-q to 99.3%, but its Australia office assets saw a q-o-q dip of 0.7 ppt to 96.6%. This could weaken further ahead given supply pressures in Sydney, Melbourne and Adelaide, coupled with an imminent departure of a tenant at its 55 Currie Street property.
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- While rental reversions are expected to remain positive in 2H23 for its Singapore office assets, market rental growth appears to be flattening out. There are also renewal risks in FY24, mainly coming from its Technology, Media and Telecommunications (TMT) tenants, but management believes that not more than 10% of its FY24 Singapore office lease expiries are at risks of non-renewals.
- For retail, Suntec REIT recorded stable occupancy of 98.2%, and rental reversions were healthy at 17.5% in 1H23. Tenants’ sales at Suntec City Mall rose 8% y-o-y, although there was a decline of 1% y-o-y for both May and Jun, which could be due to outbound travel during the school holidays period.
- For Suntec REIT’s convention business, margins were impacted by higher fixed costs as some expenses have to be incurred upfront in preparation of an expected increase in events ahead.
Balance sheet remains stretched with need for more divestments
- Read more at SGinvestors.io.
