Suntec Reit expects better performance in second half of year

Singapore

THE manager of Suntec Real Estate Investment Trust (Suntec Reit) expects the trust's performance in the second half of the year to improve as Singapore eases out of the "circuit breaker" and on additional contribution from completed developments.

The manager was responding to shareholder questions - submitted in advance of Suntec Reit's annual general meeting on June 16 - about the impact of the Covid-19 pandemic on its properties.

Rental revenue for Suntec Reit's Singapore office portfolio is expected to remain "robust" due to the completion of 52 per cent of FY2020 renewals and strong rent reversions achieved in previous quarters, the manager said on Tuesday.

Rent reversions are also expected to remain strong for FY2020, underpinned by a limited office supply while portfolio occupancy is expected to remain within a "healthy" market range of 95 per cent.

Early terminations by tenants in vulnerable sectors can be anticipated but this potential exposure constitutes less than one per cent of the Singapore office portfolio's net lettable area, the manager added.

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As for the space to be vacated by UBS in One Raffles Quay and Suntec City Office, while 43 per cent of the space has been pre-committed, the remaining vacant space "is likely to take a longer time to backfill", the manager said. It added that it would "continue to proactively manage the expiring leases amid the current market slowdown, with tenant retention a key focus".

For Suntec City Mall, the manager said that rental revenue for the mall will be impacted due to the rental assistance given to tenants.

It is granting tenants that face an extended closure period such as those in the entertainment segment with additional rent assistance on top of the four months of total rent assistance it has provided. This includes property tax rebates and cash rebates granted by the government.

Qualifying small and medium enterprise (SME) tenants will also be granted rent deferments under a new rental relief law.

To help tenants manage cash flow, the manager is giving them the option to draw down one month of their cash-security deposit. They will also have access to an SME Help Fund launched by the manager's parent company ARA Asset Management, Straits Trading and JL Family Office.

Due to non-renewals, overall mall occupancy may trend closer to the nationwide average of low 90 per cent, the manager said.

Although it achieved "double-digit positive rent reversion" in the first quarter from the renewal of about one-third of expiring leases, rent reversion for remaining quarters is likely to be in the negative range due to weaker market demand.

As for retail sales, the drop in sales due to low tourist arrivals was partially shielded thanks to the mall's primary catchment of office workers and local residents.

Shopper traffic fell significantly, but has seen gradual recovery in the third quarter as safe-distancing measures are eased, the manager said.

Suntec Reit units on Tuesday ended seven cents or 4.8 per cent higher at S$1.53.