Suntec Reit to divest office strata units, acquire London building

SUNTEC Reit is divesting a portfolio of strata units at Suntec City Office for S$197 million and acquiring a Grade-A office building in London for £353 million (S$667.2 million), the Reit manager ARA Trust Management (Suntec) said on Tuesday.

The Suntec City Office units are being divested at an 8.9 per cent premium over the independent valuation of S$180.9 million for the 78,491 square feet of space, with a net gain on divestment of S$13.9 million. The net property income yield was 3.1 per cent.

The London property is the Minster Building, an 11-storey Grade A office development with ancillary retail built in 1990 and refurbished in 2018. It has an income yield of 4.5 per cent and long weighted average lease expiry of 12.3 years.

Overall, the building has a committed occupancy of 96.7 per cent, with the ancillary retail fully leased. The office component is 96.2 per cent leased to "quality office tenants from diversified sectors", and the weighted average lease expiry is 11.3 years.

The property has a two-year income guarantee for vacant spaces and retail leases, and an approximately one-year income guarantee for the co-working lease.

Chong Kee Hiong, chief executive officer of the Reit manager, said the Minster Building is a strategic fit with Suntec Reit's existing portfolio, and will enhance its resilience, diversification and income stability.

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He added that the divestment of the Suntec City Office strata units, the recent sale of 9 Penang Road and the acquisition of the Minster Building are part of active portfolio management to enhance unitholders' value.

"The proceeds from divestments and the recent perpetual securities issuance have improved our financial flexibility and enabled us to pursue growth opportunities for high quality and accretive assets in good locations," he said.

Following the divestments and acquisition, Suntec Reit's assets under management will grow from S$11.5 billion to S$11.7 billion across 10 properties in Singapore, Australia and the United Kingdom.

The office sector will continue to contribute more than 85 per cent to the Reit's total income contribution, and the office portfolio weighted average lease expiry will be lengthened to 5.55 years. The retail portfolio weighted average lease expiry will be extended to 3.18 years.