Suntec REIT's NPI slid 7.2% to $54m in Q1

The REIT expects a subdued Q2 for its mall portfolio.

Suntec Real Estate Investment Trust’s (Suntec REIT) started the year slow, with its net property income (NPI) sliding 7.2% YoY to $54m in Q1 compared to $58.2m in Q1 2019, an SGX filing revealed. Gross revenue also contracted by 3.1% YoY to $86.9m from $89.7m last year.

Meanwhile, distributable income dropped to $55.1m during the quarter, a 6.5% YoY decrease compared to the $58.9m in Q1 2019. Distribution per unit (DPU) plummeted 27.7% YoY to $0.0176 per unit from $0.02434 a year earlier, which will be distributed on 28 May.

The declines were attributed to mandatory measures that were put into place to attest the coronavirus spread, which led to postponements and cancellations of events at Suntec Convention. This led to the absence of dividend contribution from Suntec Singapore, the REIT said.

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A steep drop in advertising and promotion at Suntec City Mall and a weakened Australian dollar added to a decline in distributable income, the REIT added. The absence of capital distribution, which amounted to $6.5m last year, as well as the retention of 10% of distribution (around $5.5m), also led to a lower DPU in Q1 2020.

“As the crisis deepens in the second quarter with continued weakness in the convention and retail business, [Suntec REIT] has retained 10% of the distributable income from operations and held back its capital distribution in 1Q 2020. This resulted in a DPU of 1.760 cents to unitholders. This is necessary as we need to achieve a balance between providing a reasonable return to unitholders, building cash reserves as well as assisting our tenants to weather this period,” CEO Chong Kee Hiong said in the REIT’s results announcement.

On the other hand, declines were partially offset by the better performance of Suntec City Office, Suntec City Mall, Southgate Complex and contribution from 55 Currie Street.

Suntec City Mall will be waiving the rents of all its retail tenants in April 2020, including tenants that provide essential services such as supermarkets, pharmacies, food court, and restaurants, said Chong. The mall is passing through the full savings of the property tax rebates to these mall tenants in May 2020 ahead of the REIT receiving them from the Inland Revenue Authority of Singapore.

Looking forward, Suntec REIT expects the office market to remain resilient, but Suntec City Mall is expected to register a subdued Q2 given the ongoing circuit breaker measures.

“Suntec City Mall is expected to register a substantial decline in shopper traffic in the second quarter of 2020 due to safe distancing and circuit breaker measures. A gradual recovery from the third quarter is expected if the situation improves. Rent reversion for remaining quarters is likely to be in the negative range due to weaker market demand from retailers,” the REIT stated.