Suntec Reit to increase Singapore focus, sell three Australia properties
The plans come after a review that could help improve the real estate investment trust’s capital structure
[SINGAPORE] Suntec Real Estate Investment Trust (Suntec Reit) will focus on growing its Singapore assets, while reducing its overseas exposure, starting with Australia, following a strategic review of its portfolio.
“The macroeconomic and political stability, together with the relative strength of the Singapore dollar… continues to support a compelling case for growing Suntec Reit’s investment in Singapore,” said the manager on Monday (Sep 21).
At the same time, the Reit manager intends to sell three properties in Australia, at 177 Pacific Highway, 21 Harris Street and 477 Collins Street.
These divestments are “supported by improving conditions in Australia’s capital markets” and continued investor interest, said the manager.
With the sales, Suntec Reit’s aggregate leverage is expected to fall to below 40 per cent, said Chong Kee Hiong, CEO of the Reit’s manager. This will provide room for “future acquisition opportunities, unit buyback and/or capital distribution”.
The sales are also expected to offset an earnings drag from the “high-interest-rate environment in Australia”. Australia’s benchmark interest rate currently stands at 4.35 per cent.
Singapore strength
Suntec Reit has S$12.2 billion in total assets under management, with three properties in Singapore, five in Australia and two in the UK. About 74 per cent of its income is contributed by its Singapore portfolio, followed by 15 per cent from Australia and 11 per cent from the UK.
The latest announcement comes after Suntec Reit’s new sponsor, Tang Organization, launched a review of the Reit’s portfolio in March this year. The review was aimed at strengthening portfolio performance and enhancing capital efficiency.
Tang Organization, which took over ESR Trust Management (Suntec) from ESR Asset Management, had said that the initiatives could support higher distributions in the coming years, while balancing Suntec Reit’s capital management needs and long-term sustainability.
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The Reit in July reported a first-half distribution of S$0.03936, up 24.8 per cent from S$0.03155 in the previous corresponding period. Distributable income rose 25.5 per cent to S$116.5 million, up from S$92.8 million in the same period the year before.
Revenue rose 1.9 per cent to S$238.9 million for the half-year period, up from S$234.5 million.
The manager had attributed the improved distribution to the stronger operational performance of its Singapore office and retail portfolio.
Units of Suntec Reit rose 0.7 per cent to close S$0.01 higher at S$1.38 on Friday.
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