Suntec REIT DPU for the second quarter drops 15%

Reversionary rent for its office portfolio was down 2.8% from the last quarter due to tenants taking larger spaces which would command lower rates.

A Phillip Securities Research report showed Suntec REIT posting 2Q10 revenue of $62.9 million (-3.3% y-y, -0.1% q-q), net property income of $47.4 million (-2.8% y-y, -0.8% q-q) and distributable income of $45.9 million (-3.7% y-y, +1.2% q-q). DPU for the second quarter of 2010 was 2.528 cents (-15.1% y-y, +0.6% q-q).

Despite the fall in DPU, Phillip Securities Research noted 2Q10 results were pretty much stable from a quarter ago. The report said, “There were slight improvements in occupancy rates for both the office and retail portfolio. Management shared that it was the practice to negotiate on renewal of leases 6-9 months ahead of expiry and they are now working on FY2011 leases."

Suntec REIT's office portfolio has 97.6% occupancy while the retail portfolio has 98.7% occupancy.

Phillip Securities Research meanwhile is holding its forecasts and projections and maintains the Hold recommendation with fair value of $1.34. “We think management has done a good job in maintaining occupancy for the retail portfolio and improving the occupancy for the office portfolio. Note that office portfolio occupancy improved from 94.8% in 2Q09. Although reversionary rents probably softened in the wake of this, nonetheless leases were secured and mitigated the risk of tenants migration.”