Suntec Reit posts 27.7% fall in DPU for Q1; retains 10% of distributable income as virus crisis deepens in Q2

Singapore

SUNTEC Real Estate Investment Trust (Suntec Reit) on Wednesday posted a 27.7 per cent drop in distribution per unit to 1.76 Singapore cents for the first quarter ended March 31, down from 2.434 cents a year earlier.

This was due to lower distributable income from operations, retention of distribution totalling S$5.5 million, absence of a S$6.5 million capital distribution and an enlarged unit base, the Reit manager said.

Distribution for the first quarter will be paid on May 28, after books closure on April 30.

Chong Kee Hiong, chief executive of the manager, said: "As the crisis deepens in the second quarter with continued weakness in the convention and retail business, the manager has retained 10 per cent of the distributable income and held back its capital distribution in Q1 2020... This is necessary as we need to achieve a balance between providing a reasonable return to unitholders, building cash reserve, as well as assisting our tenants to weather this period."

Distributable income from operations fell 6.5 per cent to S$55.1 million, from S$58.9 million previously. While business started off well in January, operational performance declined once mandatory measures were put in place to curb the spread of the novel coronavirus, the manager said.

It added that one immediate impact was the postponement and cancellation of events at Suntec Convention, which resulted in a loss of dividend contribution from Suntec Singapore.

"The steep drop in advertising and promotion income for Suntec City Mall and the weakened Australian dollar added to the decline in distributable income from operations," the manager noted.

Nonetheless, these were partially offset by better performance from Suntec City Office, Suntec City Mall, Southgate Complex in Melbourne and contribution from 55 Currie Street in Adelaide.

For the first quarter, net property income fell 7.2 per cent to S$54 million, from S$58.2 million earlier, while gross revenue slipped 3.1 per cent to S$86.9 million.

Overall, the manager noted that the Singapore office portfolio is expected to remain resilient in 2020, given the properties' diverse tenant base and a limited office supply. The overall committed occupancy for the Reit's Singapore office portfolio stood at 98.8 per cent as at March 31.

On the retail front, Suntec City Mall is expected to register a "substantial decline in shopper traffic" in Q2 due to safe distancing and "circuit-breaker" measures, while a gradual recovery from Q3 is expected if the situation improves, the manager said.

It added that rent reversions for the remaining quarters are likely to be in the negative range, due to weaker market demand from retailers.

Added Mr Chong: "While we are pleased to report that Suntec City Mall recorded positive rent reversion of 16.1 per cent in the first quarter, the committed occupancy for the mall dropped to 98.3 per cent as at March 31, with footfall and tenants' sales declining significantly by 22 per cent and 20.2 per cent year-on-year, respectively because of Covid-19."

Separately, tenant relief measures will also impact the mall's rental revenue this year, as Suntec City will be waiving the rent of all its retail tenants in April 2020.

"However, this will be partially offset by the positive rent reversions achieved for the past 11 consecutive quarters and the renewal of one-third of the mall's expiring leases for 2020 in Q1 at strong double-digit rent reversion," the manager said.

Suntec Reit units closed at S$1.29 on Wednesday, down S$0.05 or 3.8 per cent.