7 things I learned from the 2022 Suntec REIT AGM

Suntec REIT owns a portfolio of retail malls and office buildings in Singapore, Australia, and the United Kingdom. Some of Suntec REIT’s well-known properties in Singapore include Suntec City, One Raffles Quay, and Marina Bay Financial Centre (MBFC) Towers 1 and 2. As of 31 December 2021, the REIT’s assets under management accounted for a value of S$12.2 billion.

Here are seven things I learned from the 2022 Suntec REIT AGM.

1. Gross revenue in the FY2021 increased 13.5% year on year to S$358.1 million, and net property income (NPI) grew 27.4 % to S$ 254.6 million. The increase in gross revenue was mainly due to contributions from new assets in the United Kingdom, such as Nova Properties and The Minster Building, higher contributions from assets in Australia and higher retail income at Suntec City Mall contributed to solid performance.

2. Distributable income grew 18.2% year on year to S$247.2 million in FY2021 from S$209.2 million in FY2020, while distribution per unit (DPU) grew 17.1% year on year to 8.666 cents in FY2021 from 7.402 cents in FY2020. Based on Suntec REIT’s FY2021 DPU and closing share price of S$1.76 (as of 19 May 2022), its distribution yield in is 4.9%. (You can compare Singapore REIT yields here.)

Source: Suntec REIT

3. Suntec REIT has further expanded its presence in London with the acquisition of the Minster Building, a grade-A office development located within the City’s heart with a property value of £353 million. This acquisition was funded by divestment in 9 Penang Road, Suntec City Office strata unit, and the issuance of S$150 million perpetual securities.

4. Suntec REIT’s portfolio occupancy rates have done reasonably well in FY2022. Suntec REIT Singapore office properties — Suntec City Office, One Raffles Quay, MBFC Towers 1 and 2 — have high occupancy rates of at least 97%, above the overall CBD occupancy rate of 93.3%. In particular, Suntec City Office has achieved a 97.2% committed occupancy rate.

Source: Suntec REIT

Suntec REIT’s Australia office properties have an overall occupancy rate of 94.2 %, higher than the national CBD occupancy rate of 86.3%. While Suntec REIT’s UK office properties have an overall occupancy rate of 98.3%, higher than the national CBD occupancy rate of 92.4%. 

5. Suntec REIT’s leverage ratio decreased to 43.7% from 44.3%. Average cost of debt is 2.35% p.a. and 51% of debt is hedged at fixed interest rates. Average weight debt maturity is 2.92 years. CEO Chong Kee Hiong said that Suntec REIT is financially healthy for FY2022. All existing debt maturing in FY2022 has been refinanced to FY2027 and beyond.

6. Singapore’s retail industry had benefited from the gradual re-opening of the economy and high national vaccination rates. Despite the tightened restrictions during certain periods in 2021, the recovery of the retail business at Suntec City Mall was encouraging. Recovery in tenant sales, particularly during December 2021, exceeded pre-pandemic December 2019. Suntec Mall tenants that have benefited from the rent assistance program will have their rent increased in tandem with their sales recovery.

Suntec City Mall shopper traffic and tenant sales. Source: Suntec REIT

7. Suntec’s convention business is expected to remain impacted in the near term as the meetings, incentives, conventions, and exhibitions (MICE) industry in Singapore remained weak as many event organisers remained hesitant to go through with large-scale events due to the lengthy planning time required. To support Suntec’s convention business recovery, management is proactively identifying new revenue streams while simultaneously reducing operating expenses.

The fifth perspective

Suntec REIT’s properties continue to be desirable due to the prime location of their office buildings and malls. As Singapore and the world prepares to reopen their offices and borders, Suntec REIT is well-positioned to capitalise on the resumption of business activities.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Choon Leo Wang

Choon Leo is a growth-focused investor with an interest in innovative platform businesses that connect users and fix market inefficiencies. He believes that companies with the most competitive business models will compound in value over the long term. He currently holds CFA Level I qualifications.

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