One of the REITs in my long-term investment portfolio, Suntec REIT (SGX:T82U), released its annual report for the financial year ended 31 December 2021 before market hours yesterday (29 March 2022.)

For those of you who are unfamiliar with the REIT, its property portfolio comprises of retail and office properties in Singapore (Suntec City, 66.3% interest in Suntec Singapore Convention & Exhibition Centre, one-third interest in One Raffles Quay, one-third interest in Marina Bay Financial Centre Towers 1 and 2, and the Marina Bay Link Mall), Australia (177 Pacific Highway and 21 Harris Street in Sydney, 50% interest in Southgate Complex and 50.0% interest in Olderfleet, 477 Collins Street in Melbourne, and 55 Currie Street in Adelaide), as well as in the United Kingdom (50.0% in Nova North, Nova South, and the Nova Building, and The Minster Building in London.)

In this post, you’ll find some of the key pointers to take note of from the REIT’s latest annual report (which I have compiled for the benefit of those who do not have the time to go through it), along with details about its upcoming Annual General Meeting (AGM):

Financial Performance:

• Gross revenue of S$358.1m in FY2021 was 13.5% higher compared to the corresponding period in FY2020 (S$315.4m), mainly due to new contribution from The Minster Building, increased contributions from Olderfleet, 477 Collins Street and 21 Harris Street, less rent assistance granted to retail tenants and Suntec City Mall, and one-off Surender fee received at 177 Pacific Highway, partially offset by lower revenue at Suntec Convention and Suntec City Office due to divestment of strata units and lower occupancy.
• Net property income climbed 27.4% to S$254.6m (FY2020: S$199.9m), mainly attributable to contribution from The Minster Building, higher revenue from 21 Harris Street, Suntec City Mall, and 177 Pacific Highway, lower sinking fund, as well as lower provision and recovery of doubtful debts at Suntec City Mall and the strengthened Australian Dollar, partially offset by lower revenue from Suntec Convention.
• Distributable income to unitholders increased by 18.2% to S$247.2m (FY2020: S$209.2m) as a result of new contributions from Nova Properties and The Minster Building, higher contribution from its Australian assets, and higher income from Suntec City Mall, partially offset by the divestment of 9 Penang Road (where the agreed property value represented a 5.7% premium over the latest valuation and 30.3% higher than the total land and development cost), and higher financing cost to fund acquisitions of Nova Properties and The Minster Building. As a result, its distribution per unit went up by 17.1% to 8.666 cents/unit (FY2020: 7.402 cents/unit.)

Portfolio Performance:

Singapore Office:

• Achieved 14 consecutive quarters of positive rent reversion
• Committed occupancy of 97.5% as at 31 December 2021 was also well above the market occupancy of 93.3% for Core CBD offices
• AEI works to upgrade the lifts, lobbies, and restrooms of Suntec City Office Towers 1, 4, and 5 have been completed, with works for the remaining 2 office towers expected to be completed by June 2022

Australian Office:

• Committed occupancy remained healthy at 94.2% as at 31 December 2021, higher than the nationwide CBD office occupancy of 86.3%
• Vacancies at 21 Harris Street (occupancy rate: 91.0%), and 477 Collins Street (occupancy rate: 96.3%) continue to be protected by rent guarantees provided by the respective vendors

United Kingdom Office:

• Committed occupancy at Nova Properties was maintained at 100.0%, and for The Minster Building, it was at 96.7% as at 31 December 2021 – both higher than the Central London office occupancy of 92.4%

Singapore Retail:

• Despite the tightened restrictions during certain periods in 2021, the recovery of retail business at Suntec City Mall was encouraging – with sales in December 2021 exceeding that recorded before the pandemic (in December 2019); Committed occupancy at the mall also improved to 94.7% as at 31 December 2021 (compared to 90.1% as at 31 December 2020)

Capital Management:

• Balance sheet remains healthy with an aggregate leverage ratio of 43.7%, within the regulatory limit of 50.0%
• Average financing cost for FY2021 (as at 31 December 2021) was 2.35% per annum, with approximately 53.0% of the interest expense fixed or hedged, and a weighted average debt maturity of 2.9 years

Sustainability Management:

• The REIT’s commitment towards sustainable operations and sound practices in areas of ESG were recognised as it was being awarded GRESB’s (one of the leading ESG benchmarks for real estate and infrastructure investments globally) highest accolade of Global Sector Leader for the “Office-Listed” category and was ranked top in Asia (Office.)
• On top of that, the REIT also retained GRESB’s highest 5-star rating.
• Sustainability will continue to be an important aspect of the REIT’s long-term business strategy, and they will continue to prioritise responsible management of ESG pillars in their business strategies and operations.

Outlook Ahead:

Singapore Office:

• Income contribution expected to strengthen further, driven by cumulative positive rent reversions achieved in the past 14 quarters, and full impact of revenue from leases committed in 2021
• However, high expiry rents across the portfolio may result in modest positive rent reversion

Singapore Retail:

• Further easing of restrictions is expected to improve Suntec City Mall’s revenue, supported by higher occupancy and higher gross turnover rents
• However, rent reversion is likely to be negative as retailers remain cautious

Singapore Convention:

• Recovery will continue to be slow as resumption of international business and leisure travel is likely to remain weak
• Domestic market, which is highly dependent on the further easing of restrictions on large-scale corporate and consumer events, will remain the key driver

Australian Office:

• Expected to remain resilient, underpinned by strong occupancy, annual rent escalations, and long lease tenure with minimal expiries in 2022

United Kingdom Office:

• Revenue expected to be stable supported by high occupancy and long weighted average lease expiry with minimal lease expiries until 2027

Details of Suntec REIT’s Upcoming AGM:

Suntec REIT will be conducting its AGM on Wednesday, 20 April 2022, at 2.30pm.

Due to the current safe management measures in place, the meeting will be conducted virtually (no physical attendance allowed), and if you are a unitholder of the REIT, you can register to attend the meeting here (do take note that the deadline for you to sign up will be on Monday, 18 April 2022, at 2.30pm.)

For your information, I will NOT be attending the meeting as it clashes with another REIT’s AGM which I will be attending. As such, there will be NO summary for the REIT this time round.

Related Documents:

• Annual Report
• Notice of AGM
• Proxy Form

Disclaimer: At the time of writing, I am a unitholder of Suntec REIT.