Chairman's Message

Our Australian portfolio remained stable with positive rent reversions recorded for the year. Committed occupancies for our Australian portfolio remained healthy at 88.6%, higher than the nationwide CBD office occupancy of 85.1%. 177 Pacific Highway and Olderfleet, 477 Collins Street achieved 100% committed occupancy while the committed occupancy for 21 Harris Street and Southgate Complex was 98.8% and 85.1% respectively. Committed occupancy for 55 Currie Street declined to 56.2% due to the exit of an anchor tenant.

Asset enhancement works to revitalise and elevate the office environment at 55 Currie Street and 177 Pacific Highway were completed and were well-received by office tenants.

In the United Kingdom, committed occupancy at Nova Properties remained unchanged at 100% while committed occupancy at The Minster Building dipped to 87.3% due to the exit of a co-working tenant.

On the retail front, Suntec City Mall recorded an outstanding performance in FY 2023, as shown in the improvements across key operating indicators. The mall has attained seven consecutive quarters of positive rent reversion and achieved a strong full-year rent reversion of more than 20% in FY 2023. Continual efforts to refresh the tenant mix and the curation of strategic marketing partnerships helped strengthen Suntec City Mall’s appeal to shoppers. As a result, mall traffic grew 8% to over 40 million while tenant sales increased further by 4%, comparable to the steady state growth we enjoyed pre- COVID. Committed occupancy of the mall was 95.6% due to the exit of two anchor fitness tenants.

Suntec Singapore recovered strongly with both revenue and income surpassing pre-COVID levels. The strong performance of the convention business allowed us to resume dividend contributions from the third quarter of 2023.

ASSETS UNDER MANAGEMENT

As at end 2023, Suntec REIT’s assets under management (“AUM”) stood at $12.2 billion. Suntec REIT continues to be Singapore-centric with 76% of its AUM in Singapore, with the remaining 14% and 10% in Australia and the United Kingdom respectively.

MAINTAINING BALANCE SHEET RESILIENCE

Suntec REIT remains focused on proactive capital management. As at 31 December 2023, the aggregate leverage ratio (“ALR”) was 42.3% while the average financing cost for FY 2023 was 3.84% per annum with approximately 61% of the debt fixed or hedged. There is adequate headroom to the ALR limit of 45%.

To further strengthen our balance sheet, we divested $94.4 million of strata units at Suntec City Office Towers at an average price of 31% above book value. The proceeds will be used to pare down debt. The transactions are expected to be accretive to Suntec REIT’s earnings as the assets were divested at a yield lower than the current borrowing cost.

SUSTAINABILITY REMAINS CORE PILLAR OF OUR BUSINESS

Suntec REIT is fully committed to sustainable operations and sound practices in areas of Environment, Social and Governance (“ESG”) and we continue to make progress in these areas.

We are pleased to report that Suntec REIT attained the highest GRESB 5 Star rating for the fourth consecutive year since our inaugural participation in 2020. Suntec REIT was also awarded an ‘A’ for its public disclosure. GRESB is one of the leading ESG benchmarks for real estate and infrastructure investments globally. Our achievements were testament to Suntec REIT’s commitment towards sustainability practices, the positive impact to the community and the environment as well as our investment in people.

In line with our commitment towards sustainable growth, we secured three sustainability-linked loan facilities totalling $780 million in 2023. Since obtaining our first green loan in 2020, approximately 50% of our debts were green or sustainability-linked loans as at end December 2023.

In addition, a sustainability roadmap has been put in place to guide the REIT in achieving our target of net-zero carbon emission by 2050. A medium-term target has also been set to achieve net-zero carbon emission for fully owned assets by 2030. More information can be found in our Sustainability Report, which will be available in electronic form on SGXNet and our website by end-May 2024.

OUTLOOK

Geo-political tensions and economic headwinds continue to weigh on the Singapore office market with few discernible key demand drivers in sight. As a result, rent growth is expected to moderate though rent reversion for our Singapore office portfolio will remain positive. Revenue is expected to continue to strengthen on the back of high occupancies and past quarters of positive rent reversions.

The continued recovery of tourism in Singapore is expected to be the key driver for mall traffic and tenant sales. Suntec City Mall tenant sales is expected to remain above pre-COVID levels while rent reversion is expected to be positive. Revenue from Suntec City Mall is expected to improve, underpinned by higher occupancy, rent and marcoms revenue.

Singapore’s Meetings, Incentives, Conventions and Exhibitions (“MICE”) industry will continue to drive and benefit from the country’s tourism recovery. Higher dividend contribution from Suntec Convention is expected as our convention business continues to grow.

The majority of our Australian assets is expected to deliver stable returns. However, the portfolio is expected to be impacted by the leasing downtime of vacancies at 55 Currie Street and Southgate Complex. Higher incentives seen in Adelaide and Melbourne will also affect the revenue performance of these two assets.

In the United Kingdom, revenue for our portfolio will remain resilient. However, it will be impacted in the short term by the leasing downtime created as a result of vacancies at The Minster Building.

Looking ahead, despite the better operating performances expected from our Singapore portfolio, the elevated interest rates and the leasing downtime created as a result of vacancies at 55 Currie Street, Southgate Complex and The Minster Building will continue to weigh on our distributable income.

Suntec REIT’s sound fundamentals and unwavering focus to create value, underpinned by our diversified portfolio of high-quality assets and resilient income stream, helped us navigate different challenges over the years and will continue to do so in the current difficult environment. In 2024, we will also continue with our pro-active asset management strategy of divesting mature assets and strata units at Suntec City Office to deliver long-term value to our unitholders.

FORMATION OF NOMINATING AND RENUMERATION COMMITTEE

We are pleased to update that the Nominating and Remuneration Committee (“NRC”) was established on 20 April 2023 to assist the Board and the Manager in fulfilling the oversight responsibilities relating to nomination and remuneration matters of the Board and management to achieve Suntec REIT’s long-term objectives and strategies.

IN APPRECIATION

On behalf of the Board and the Manager, I would like to thank Mr Jeffrey Perlman, who stepped down as Non-Executive Director of the Manager, for his valuable contributions.

We are pleased to welcome Mr Shen Jinchu, Jeffrey, who joined the Board as Non-Executive Director of the Manager. His vast experience will certainly help to complement and strengthen the Board.

May I 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
25 March 2024