Listed since December 2004, Suntec REIT (SGX: T82U) owns retail and office properties in Singapore, Australia, as well as in the United Kingdom.

Properties that are in the Singapore-listed REIT's portfolio include:

Singapore: Suntec City (Retail and Office), 66.3% interest in Suntec Singapore Convention & Exhibition Centre, one-third interest in One Raffles Quay, Marina Bay Financial Centre Towers 1 and 2, as well as the Marina Bay Link Mall

Australia: 100% interest in 177 Pacific Highway and 21 Harris Street in Sydney, 50.0% interest in Southgate Complex and Olderfleet, 477 Collins Street in Melbourne, along with a 100% interest in 55 Currie Street in Adelaide

United Kingdom: 50.0% interest in Nova Properties, and a 100% interest in The Minster Building, both located in London

One of the major news development surrounding the REIT recently was in December 2024, when property tycoons Gordon and Celine Tang, through their investment vehicle, Aelios Pte Ltd, initiated a mandatory conditional cash offer to acquire all units of Suntec REIT they do not already own, at S$1.16 per unit (the amount was increased to S$1.19 on 08 January 2025).

This move was triggered after Aelios Pte Ltd increased its stake in the REIT from 29.31% to 31.45% after purchasing approximately 62.5 million units of the REIT at S$1.16 per unit on 05 December 2024, and under Singapore's takeover regulations, surpassing a 30% ownership threshold necessitates a mandatory general offer to acquire the remaining units.

Also, according to reports, it intends to maintain the listing status of the REIT on the Singapore Exchange following the completion of the offer.

(My thoughts? The offer price was as such because there was no intention at all for the REIT to be privatised.)

Shortly after market hours in the evening (23 January), Suntec REIT also released its results for the 4th quarter, as well as for the full year ended 31 December 2024 (i.e., FY2024). In this post, you'll find my review of its latest financial figures, portfolio occupancy and debt profile, as well as its distribution payout to unitholders:

Financial Figures (4Q FY2023 vs. 4Q FY2024, and FY2023 vs. FY2024)

In this section, you'll find a review of Suntec REIT's financial figures reported for the 4th quarter, as well as for the full year of 2024, compared against the figures reported for the respective periods a year ago:

4Q FY2023 vs. 4Q FY2024:

The REIT did not provide financial statistics for the 4th quarter. The following figures were self-computed based on the numbers for the 3rd quarter, as well as for the 2nd half of the respective financial years:

My Observations: A small positive here in that its gross revenue and net property income saw a low- to mid-single digit percentage improvement – compared to results recorded in the past 3 quarters, the percentage improvement this time round was the best in 4 quarters.

FY2023 vs. FY2024:

My Observations: For the full year, apart from its distributable income to unitholders, Suntec REIT's gross revenue and net property income were more or less the same as last year.

Suntec REIT's gross revenue inched up by 0.2% year on year to S$463.6 million due to higher revenue from Suntec City, Suntec Singapore, as well as from 177 Pacific Highway and 21 Harris Street. However, this was partially offset by lower revenue from 55 Currie Street, Olderfleet, 477 Collins Street, and The Minster Building.

Net property income dipped by 0.8% year on year to S$310.8 million, due to a higher percentage increase in its property operating expenses (by 2.1% year on year) as compared to improvements in its gross revenue (by just 0.2% year on year), along with the absence of a one-off property tax refund recorded in the previous year at Suntec City Mall.

Finally, distributable income to unitholders fell by 12.5% year on year to S$180.9 million due to the completion of capital distribution (of S$23.0 million) last year, higher financing cost, as well as vacancies at 55 Currie Street and The Minster Building.

Portfolio Occupancy Profile (3Q FY2024 vs. 4Q FY2024)

One of the things I like about Suntec REIT is its rather resilient portfolio occupancy profile – where, over the quarters, it has recorded at least a 90% occupancy rate in the 3 geographical locations it has properties in.

Has the REIT managed to maintain this feat? Let us find out in the table below, where I will be comparing the statistics reported for the current quarter under review (i.e., 4Q FY2024 ended 31 December 2024) against that reported in the previous quarter 3 months ago (i.e., 3Q FY2024 ended 30 September 2024):

My Observations: Suntec REIT's portfolio occupancy at the various geographical locations continue to remain at a very high level of above 90%.

The occupancy rate of its properties in Australia inched up by 0.3 percentage points (pp) to 90.9%, from an improvement in the occupancy rate of Southgate Complex (from 89.2% in 3Q FY2024 to 90.1% in 3Q FY2024).

On the other hand, the occupancy rate of its Singapore office properties dipped by 0.4pp to 98.7% from a decline in occupancy in Suntec City Office (from 99.9% in 3Q FY2024 to 98.8% in 4Q FY2024). The occupancy rate of its office properties in the United Kingdom also edged down by 0.2pp to 95.1% from a decline in occupancy rate in The Minster Building (from 91.3% in 3Q FY2024 to 90.8% in 4Q FY2024).

As far as the occupancy rates of the individual properties goes, apart from 55 Currie Street (61.4%), the other properties in Suntec REIT's portfolio have an occupancy rate of above 90%.

Debt Profile (3Q FY2024 vs. 4Q FY2024)

For those of you who have been following my quarterly updates about Suntec REIT, you should aware of concerns I have regarding it – particularly, its aggregate leverage (of slightly above 40%) is on the high side, coupled with its interest coverage ratio (of just 1.9x in 3Q FY2024) one of the lowest among the Singapore-listed REITs.

On top of that, it also has a relatively low percentage of borrowings hedged at fixed rates (at just approximately 61% in 3Q FY2024). As such, it was adversely impacted by a series of aggressive interest rate hikes a few years ago. However, with some interest rate cuts already announced in the final quarter of 2024, and more to follow in the next 1-2 years ahead, the REIT is among the first to benefit.

That said, how is Suntec REIT's debt profile this time round?

Let us have a look at the table below, where you'll find a comparison of its debt profile recorded for the current quarter under review (i.e., 4Q FY2024 ended 31 December 2024) against that recorded in the previous quarter 3 months ago (i.e., 3Q FY2024 ended 30 September 2024):

My Observations: Compared to the previous quarter, its debt profile is more or less the same.

As far as the REIT's aggregate leverage is concerned, on 28 November 2024, Monetary Authority of Singapore (MAS) has announced the revision of the limit to 50%, if they are able to maintain their interest coverage ratio at 1.5x or higher – with that, at its current level (of 42.4%), there is now some debt headroom for Suntec REIT before the regulatory limit is reached (unlike in the past, where its aggregate leverage limit is at 45.0%, as its interest coverage ratio is below 2.5x).

Another thing to note is the low percentage of borrowings hedged to fixed rates – at just about 58%. Considering the US Federal Reserve have cut benchmark borrowing rates by 1% in 2024, the REIT is among the first to benefit, as it has about 42% of borrowings at floating rates. In the coming quarters, I expect to see its average cost of debt coming down gradually, and this could potentially result in an improvement in its distribution payout to unitholders.

Finally, in terms of the REIT's debt profile, it is well-spread out, with the percentage of borrowings due for refinancing each year (in brackets) over the next 5 years as follows: FY2025 (14.6%), FY2026 (12.1%), FY2027 (21.3%), FY2028 (24.7%), FY2029 (27.3%).

Distribution Payout to Unitholders

Suntec REIT is one of the few remaining REITs that have continued to declare a distribution payout to the unitholders on a quarterly basis.

While its distribution payout has been impacted by higher borrowing costs, but since 1Q FY2024, I've noticed that it has been gradually recovering, from 1.511 cents/unit then, to 1.531 cents/unit in 2Q FY2024, and then to 1.580 cents/unit in 3Q FY2024.

In 4Q FY2024, a distribution payout of 1.57 cents/unit has been declared, a 15.9% decline from its payout of 1.866 cents/unit in the same time period last year, as well as a slight 0.6% dip when compared to its payout of 1.580 cents/unit in the 3rd quarter – a slight disappointment here in my opinion, considering its distribution payout has improved in success quarters since the first quarter.

For the full year, its payout of 6.192 cents/unit is 13.2% lower compared to its payout of 7.135 cents/unit a year ago.

Last but not least, if you are a unitholder of Suntec REIT, do take note of the following dates regarding the payout of its latest distribution for 4Q FY2024:

Ex-Date: 03 February 2025
Record Date: 04 February 2025
Payout Date: 28 February 2025

CEO Mr Chong Kee Hiong's Comments and Outlook (from the REIT's Press Release)

"Suntec REIT's continual advancement in the areas of ESG reflects our commitment to growing our business responsibly. We remain focused on strengthening the operating performance of our properties.

Capital Management:
The interest rates easing cycle is expected to be gradual for major economies. Loans that are due in 2025 are expected to be refinanced by first half of 2025. All-in financing cost is expected to increase by 10bp-20bp due to expiring hedges.

Singapore Office Portfolio:
Positive rent reversion is expected to be modest, in the range of 1% to 5%. The Singapore office portfolio is well positioned for future growth, supported by healthy occupancies and past quarters of robust rent reversions.

Suntec City Mall:
Committed occupancy is expected to remain high at more than 95% while positive rent reversion is expected to be in the range of 10% to 15%. Suntec City Mall is well poised for future growth, supported by higher occupancy, rent and marcoms activities.

Suntec Convention:
The Singapore MICE market is expected to grow at a 9% CAGR3 (from 2023 to 2030), bolstered by the growth in MICE activities. The performance of Suntec Convention is expected to be stable as the composition of event types is likely to remain largely unchanged.

Australia Portfolio:
The office market vacancies of Melbourne and Adelaide CBD are expected to remain elevated with incentive levels continuing to be in the range of 40% to 45%. Demand in Adelaide remains weak with vacancy at 55 Currie Street likely to increase by 10% to 12% in the medium term. The performance of the Australia portfolio is expected to remain stable supported by healthy occupancies of the Sydney and Melbourne properties.

United Kingdom Portfolio:
Occupancy and rental growth in Central London is expected to continue to improve, supported by tight supply and increase in office utilisation. Vacancy and upcoming expiry at The Minster Building is expected to be backfilled in 2025 with positive rent reversion expected to be in the range of 1% to 3%. The United Kingdom Portfolio is expected to be impacted by leasing downtime."

Closing Thoughts

Suntec REIT's latest set of results for the 4th quarter as well as for the full year ended 31 December 2024 was pretty much within my expectations.

Some aspects that I find desirable is the year-on-year improvements made in the 4th quarter (where its gross revenue and net property income recorded a low- to mid-single digit percentage increase). Another area I like is the occupancy rates of the properties in its portfolio, where, apart from 55 Currie Street (which has an occupancy rate of 61.4%), the rest of its properties have an occupancy rate of above 90%.

On the flip side, this is the second consecutive full year which its distribution payout has declined (first by 19.7% year-on-year in FY2023, and then by 13.2% year-on-year in FY2024).

As for the REIT's debt profile, I think the MAS announcement for aggregate leverage limit of the REITs to be at 50.0% if they are able to maintain their interest coverage ratio at 1.5x or higher comes as a welcome "relief" for the REIT. Despite having said that, I'm still closely monitoring the statistics and cautiously optimistic that its all-in borrowing cost could start coming down in the coming quarters (as the REIT has over 40% of borrowings at floating rates, and because of that, they are among the first to benefit from the US Federal Reserve's 1% interest rate cut made in 2024).

With that, I have come to the end of my review of Suntec REIT's latest results for the 4th quarter, as well as FY2024. Do take note that all the opinions expressed in this post are purely mine which I am sharing for educational purposes only. They do not constitute any buy or sell calls for the REIT's units. You are strongly advised to do your own due diligence before your make any investment decisions.

Related Documents

• Press Release
• Financial Results
• Presentation Slides
• FY2024 Review Report by Ernst & Young LLP

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

The post Suntec REIT's 4Q & FY2024 Results Review first appeared on The Singaporean Investor.