Chairman's Message
Dear Unitholders,
On behalf of the Board of ESR Trust Management (Suntec) Limited (“Board”), it is my pleasure to present to you the annual report of Suntec REIT for the financial year ended 31 December 2024 (“FY 2024”).
2024 was another challenging year as geo-political tensions continue to rise while interest rates remained at elevated levels. Despite the strong headwinds, our portfolio of quality assets in strategic locations across Singapore, Australia and the United Kingdom enabled Suntec REIT to deliver a set of resilient performance in 2024.
RESILIENT PERFORMANCE ANCHORED BY SINGAPORE PROPERTIES
Gross revenue increased marginally by 0.2% to $463.6 million whilst net property income declined 0.8% to $310.8 million. Income contributions from joint ventures increased 6.4% to $100.0 million. These were mainly driven by improvements in the performance of our Singapore Office and Retail portfolios, as well as the Sydney properties, partially offset by vacancies in 55 Currie Street, Adelaide and The Minster Building, London.
Suntec REIT’s total distributable income for FY 2024 was $180.9 million, 12.5% lower year-on-year, as a result of the completion of the capital distribution in 2023 and higher financing cost.
Our Singapore office portfolio continued to deliver robust sets of results, achieving 26 consecutive quarters of positive rent reversion with strong reversion of 10.3% recorded for 2024.
The office towers at Suntec City Office, One Raffles Quay and Marina Bay Financial Centre achieved strong committed occupancies of above 98.0% as at 31 December 2024, above the market occupancy of 94.7% for Core CBD offices.
Our Australian portfolio remained stable with positive rent reversions for the year. Committed occupancies for our Australian portfolio remained healthy at 90.9%, higher than the nationwide CBD office occupancy of 84.8%. 177 Pacific Highway, Sydney, 21 Harris Street, Sydney and Olderfleet, 477 Collins Street, Melbourne had committed occupancy of 100% while the committed occupancy for Southgate Complex, Melbourne was 90.1%. At 55 Currie Street in Adelaide, while the committed occupancy improved 5.2 percentage points to 61.4%, backfilling challenges remained due to the weak market demand.
In the United Kingdom, committed occupancy at Nova Properties remained stable at 99.6% while the committed occupancy at The Minster Building stood at 90.8%.
On the retail front, Suntec City Mall recorded another year of outstanding performance in FY 2024 with improvements across key operating indicators. The mall achieved a strong full-year rent reversion of 23.2% while committed occupancy improved to 98.4%. Through continuous efforts to curate a diverse tenant mix and collaboration with strategic partners, Suntec City remains the mall of choice amongst shoppers. Mall traffic grew 6.2% while tenant sales remained stable.
Suntec Convention continued its growth momentum with income recording an increase of 16.9% driven by improvement in operations and an increase in smaller but high yielding events.
ASSETS UNDER MANAGEMENT
As at end 2024, Suntec REIT’s assets under management (“AUM”) was $12.1 billion, a slight decline of 0.8%. This was mainly due to lower property values in Australia and the United Kingdom due to expansion of capitalisation rates, partly mitigated by the uplift in the valuation of the Singapore properties as a result of better operating performance. Suntec REIT continues to be Singapore-centric with 77.9% of its AUM in Singapore, with the remaining 12.4% and 9.7% in Australia and the United Kingdom respectively.
OUR BALANCE SHEET
Suntec REIT remains focused on proactive capital management. In 2024, loans amounting to $950.0 million were refinanced, enabling the REIT to achieve interest savings of $3.1 million per annum.
As at 31 December 2024, the aggregate leverage ratio (“ALR”) was 42.4% while the average financing cost for FY 2024 was 4.06% per annum with approximately 58.0% of the debt fixed or hedged. There is adequate headroom to the ALR limit of 50.0%.
To further strengthen our balance sheet, we divested $58.3 million of strata units at Suntec City Office Towers at an average price of 24.5% above book value. The proceeds were used to pare down debts. The transactions were accretive to Suntec REIT’s earnings as the achieved divestment yields were lower than the current borrowing costs.
SUSTAINABILITY — A CORNERSTONE OF OUR BUSINESS
Suntec REIT is fully committed to sustainable operations and sound practices in areas of Environment, Social and Governance (“ESG”). Since embarking on the REIT’s sustainability reporting journey in FY 2017, Suntec REIT had consistently achieved and maintained strong accreditation and accolades.
We are pleased to report that Suntec REIT attained the highest GRESB 5 Star rating for the fifth consecutive year since our inaugural participation in 2020. Suntec REIT also maintained ‘A’ for its public disclosure. GRESB is one of the leading ESG benchmarks for real estate and infrastructure investments globally.
In line with our net carbon zero roadmap and commitment towards sustainable growth, 21 Harris Street, achieved carbon neutral status in 2024, one year ahead of schedule. We have also managed to secure approximately 70% of our debts in green or sustainability-linked loans as at end December 2024.
More information can be found in our Sustainability Report, which will be available in electronic form on SGXNet and our website by end-May 2025.
OUTLOOK
Geopolitical tensions, uncertainty over US trade policies and a potential slowdown in global growth are likely to weigh on office demand. Positive rent reversion for our Singapore office portfolio is expected to continue within a modest range of 1% to 5%, with revenue strengthening on the back of past quarters of positive rent reversion and healthy occupancies.
Revenue performance from Suntec City Mall is expected to improve, underpinned by positive rent reversion which is expected to be in the range of 10% to 15% with high committed occupancy of more than 95.0%. Suntec City Mall is well poised for future growth, supported by higher occupancy, rent and marcoms activities.
The Singapore MICE market is expected to continue its growth momentum, boosted by the growth in MICE activities. The performance of Suntec Convention is expected to be stable with the composition of event types likely to remain largely unchanged.
Our Australian portfolio is expected to remain stable supported by healthy occupancies of the Sydney and Melbourne properties with vacancy at 55 Currie Street likely to increase due to the weak market demand in Adelaide.
In the United Kingdom, the portfolio is underpinned by high occupancy and long weighted average lease expiry. However, leasing downtime at The Minster Building from vacancies is expected to impact the portfolio performance.
On the capital management front, while interest rates are expected to ease gradually, Suntec REIT’s all-in financing cost is likely to increase by 10 to 20 basis points as interest rate hedges that are expiring in the year were secured at significantly lower rates.
Suntec REIT is one of the pioneer real estate investment trusts in Singapore. Over the last 20 years, we have navigated through different challenges and have emerged stronger and affirmed our position as one of the leading real estate investment trusts in Singapore.
As Suntec REIT continues its remarkable journey, we can look ahead with confidence. Suntec REIT’s sound fundamentals and unwavering focus to create value for unitholders, underpinned by our diversified portfolio of high-quality assets and resilient income streams will put us in a good momentum for our next phase.
IN APPRECIATION
On behalf of the Board and the Manager, I would like to thank Mr Lim Hwee Chiang, John who has stepped down as Non-Executive Director of the Manager. Mr Lim has served with distinction, providing insightful guidance and strategic counsel that has been instrumental to the growth and success of Suntec REIT.
We are pleased to welcome Mr Matthew James Lawson, who joined the Board as Non-Executive Director of the Manager. His extensive experience will certainly help to complement and strengthen the Board.
I would also like to thank my fellow Board members for their continued counsel and the management team for their hard work and dedication. Last but not least, I would like to extend my sincere appreciation to our unitholders, tenants, business partners and stakeholders for their continued trust and steadfast support.
CHEW GEK KHIM
PJG
Chairman and Non-Executive Director
21 March 2025
