Suntec REIT (SGX: T82U) is one of the pioneer composite REITs in Singapore, with income-producing real estate primarily used for office and retail purposes. During the pandemic, Suntec REIT was badly impacted, as were most commercial and retail REITs, and similarly to most of its peers, it has not seen a full recovery. Investors are now wondering if a recovery is on the horizon or if Suntec REIT is a lost cause that will only trend lower over time. With pre-pandemic highs of nearly $2/share to its last close of $1.20/share, that is a potential upside of almost 70%. Let’s take a deep dive into Suntec REIT’s track record, portfolio performance, and long-term growth catalysts, as well as risks that investors should know about before investing.
Portfolio Overview
Suntec REIT’s portfolio comprises office and retail properties across Singapore, the UK, and Australia. In Singapore, its portfolio consists of Suntec City, Suntec Singapore Convention & Exhibition Centre, One Raffles Quay, and Marina Bay Financial Centre Towers 1 and 2. Located in Singapore’s Central Business District, these places are often densely populated with working professionals who generate most of the induced income, vital to the performance of Suntec REIT. Suntec REIT’s overseas portfolio is mainly focused on Grade A office buildings.
1H2025 Results
Gross Revenue and NPI
| Year on Year Difference | 1H 2025 | 1H 2024 |
|---|---|---|
| Gross Revenue | S$234.459 million (+3.3%) | S$226.882 million |
| Net Property Income (NPI) | S$159.48 million (+5.6%) | S$150.993 million |
Suntec REIT has started off FY2025 on a good note, seeing net growth in both its Gross Revenue and NPI by 3.3% and 5.6% respectively. This is a good improvement as compared to the past 2 years, where it has seen its 1H NPI perform poorly with near 0 growth or a net decrease. The higher gross revenue was driven by a one-off compensation received from 177 Pacific Highway (Sydney) and a stronger operating performance across its Singapore assets. This was partially offset by lower occupancy at 55 Currie Street (Adelaide) and lower contribution from The Minister Building (London).
Distributable Income and DPU
| Year on Year Difference | 1H 2025 | 1H 2024 |
|---|---|---|
| Distributable Income | S$92.801 million (+4.6%) | S$88.692 million |
| Distribution Per Unit (DPU) | 3.155 cents (+3.7%) | 3.042 cents |
Similarly, we see respectable growth in its Distributable Income and DPU by 4.6% and 3.7% respectively. This is a stark improvement from the past 3 years, where it has been on a downward trend. This growth is mainly driven by stronger operating performance from its Singapore assets as well as lower financing costs ($6m). This is partially offset by higher AU withholding tax provision due to loss of Managed Investment Trust (MIT) status ($4m). The loss of MIT status occurred on 10 February 2025, as two of Suntec REIT’s substantial shareholders, Mr. Gordon Tang and Mrs. Celine Tang, had increased their interest in Suntec REIT beyond 10%. One of the qualifying conditions for MIT is that no foreign individual can directly or indirectly hold, control, or have the right to acquire an effective interest of 10% or more in Suntec REIT. As a result, the withholding tax rate for FY2025 will increase from the existing 10%-15% to 30%-45%. Since the announcement made on 3 April 2025, the effective holdings of both individuals had been reduced to less than 10%. Hence, the impact of the tax increase due to the loss of the MIT status will only apply for FY2025.
Improving Balance Sheet Health
| As at 30 June 2025 | As at 31 December 2024 | |
|---|---|---|
| Aggregate Leverage | 41.1% | 42.4% |
| Interest Coverage | 2.0x | 1.9x |
| Average Cost of Debt | 3.82% | 4.06% |
| % of Fixed-Rate Debt | 65% | 58% |
On top of the strong operating performance, Suntec REIT has also seen an improvement in its balance sheet, paring down its aggregate leverage from 42.2% to 41.1%. Its ICR has also improved slightly from 1.9x to 2.0x. The management has also lowered the average cost of debt from 4.06% to 3.82% which is fantastic. The % of fixed-rate debt has also increased, which means moving forward, Suntec REIT is less sensitive to rate changes. Based on its current debt profile, every 10bps change to the cost of debt will see a net 0.18 cents impact on its DPU.
6-Year Performance
Gross Revenue and NPI Growth
As we can see, there is an overall upward trend for Suntec REIT over the past 6 years. This is due to the fantastic management that has been aggressively growing the portfolio through meaningful acquisitions and investments over the years across other countries. However, there was a huge dip in FY2020 due to the COVID-19 pandemic, which heavily impacted the overall economy and retail sector. Taking aside the one-off black swan event, we can see that Suntec REIT has been doing well over the past few years and is set to continue that trend. We also see a dip in the FY2023 and FY2024 NPI, which was due to a higher maintenance fund contribution and commencement of sinking fund contribution in FY2023, as well as the absence of a one-off property tax refund at Suntec City Mall in FY2024.
Distributable Income and DPU Growth
However, Suntec REIT does not have a very strong track record of consistently rewarding shareholders with an increasing amount of DPU over the past 6 years. Not to mention, there was a huge decrease in DPU due to the pandemic, which it has not recovered from. Since FY2019, both the Distributable Income and DPU have been on a downtrend due to various factors, such as higher financing costs in FY2023 and FY2024, as well as vacancies in certain assets. This is a worrying note for shareholders, and it will have a dragging effect on its share price.
NAV Growth
The 6-year trend shows that Suntec REIT did not manage to grow its NAV/share year on year consistently, other than from 2H2020 to 1H2022. NAV/share is a very useful indicator when analyzing a REIT’s performance. Investors can use the NAV/share as well as DPU/share as indicators to determine if a REIT is truly bringing shareholders increased value with acquisitions and divestments, or they are only doing that “on paper” and are really diluting shareholders. A downward trend in a REIT’s NAV/share can also indicate that the REIT is paying shareholders DPU out of its NAV instead of the value it has created during the Financial Year, representing an overall net negative growth.
Balance Sheet
Looking at Suntec REIT’s balance over the past 6 years, we can see from a quick view that it does not look good at all. Starting with the aggregate leverage, which has failed to go below 40% since 1H2020, as well as the weakening ICR. This will heavily impact the REIT’s growth potential as this limits their ability for acquisitions. The cost of debt has risen steadily over the years due to higher interest rates, which is understandable due to the pandemic. Oddly enough, the % of fixed-rate debt has lowered since the pandemic, which could indicate one of two possibilities. Either the management is taking a bet on rates staying high for a short period of time (which did not happen), or bad timing when refinancing debt. Regardless, this has impacted the REIT’s DPU heavily as seen from the graph above.
Potential Growth Catalysts
Moving forward, investors should definitely consider whether Suntec REIT has any potential growth catalysts. If not, this would mean that the REIT will start to stagnate and might not be as great an investment as you think. Let’s cover a few potential growth catalysts that Suntec REIT might see in the near future, as well as long-term ones that can help grow the REIT.
Improved Portfolio Performance
Looking at Suntec REIT’s 1H 2025 operating performance, we can see that the Singapore portfolio is holding strong with a high occupancy on both the office and retail segment. On top of that, the rental reversion is very healthy with both standing at double digits. The UK portfolio saw a slight dip in its occupancy but it is still holding fine as well.
The larger issue at hand is the Australia portfolio, which has been seeing weak occupancy numbers. Despite a high rental reversion rate of 22.9%, the portfolio is still burdened by 55 Currie Street which has a very subpar comitted occupancy rate of only 52.4%, much lower than what it was 6 months ago at 61.4%. Due to the lack in occupancy, 55 Currie Street saw a 17.6% decrease in Gross Revenue year on year, which amounts of approximately ~S$768,000. The NPI fell sharply by 51.7% year on year, which amounts to approximately ~S$855,000.
As such, Suntec REIT could stand to see strong organic growth in terms of its operating performance if it focused more on its existing portfolio, improving occupancy and continuing to maintain its strong rental reversion numbers. No doubt the office vacancies in Melbourne and Adelaide CDB is expected to stay weak, it is up to the management to be proactive and take action.
Increasing Effective Stake in Joint Ventures
Suntec REIT has been holding an effective stake in several Joint Ventures as seen above. Another avenue in which the REIT can grow its operating figures would be to increase its stake in these Joint Ventures, and possibly exploring a full acquisition down the line when the balance sheet allows for it. Similar REITs that did this has seen strong success and growth such as Lendlease REIT acquiring JEM. Quarter by quarter, the REIT slowly grew its stake in JEM until it was able to fully acquire the entire asset and add it into its portfolio.
If I were to choose one of the Joint Ventures to focus on, I’d pick either One Raffles Quay (ORQ) which owns One Raffles Quay, or BFC Development LLP which owns MBFC Towers 1 and 2 as well as Marina Bay Link Mall. As we can see, the share of profits from these 2 Joint Ventures have been steadily growing and will definitely be a strong addition to Suntec REIT’s portfolio.
Privatization Offer
On 5 December 2024, Aelios Pte. Ltd. formally issued a mandatory conditional cash offer for all shareholders to acquire all outstanding shares of Suntec REIT at an offer price of S$1.16/share. Given the obviously lowball offer, many investors were not happy with the offer. A month later, in January 2025, Aelios issued a revised cash offer, increasing the offer price slightly to S$1.19/share. This offer is still too low given that Suntec REIT’s NAV/share stood at $2.05/share during the same period of the cash offer. As the offer closed on 7 February 2025, Aelios received valid acceptances amounting to 57,443,931 shares, representing 1.96% of the total number of issued shares.
Witnessing this, it does open up the question of a future privatization offer that could come. As with most blogs, financial publications and even analysts, the consensus was clear: The offer was not attractive at the slightest. But what if the offer was more attractive, offered closer to Suntec REIT’s book value, perhaps at a 0.8x Price to Book ratio? Based on its recent earnings release, a 0.8x PB ratio puts the “offer price” at S$1.592 which is pretty attractive when we compare to its last closing price of S$1.20.
Valuation v. Peers
| Suntec REIT's Peers | PB Ratio | Annualized Dividend Yield |
|---|---|---|
| Suntec REIT ($1.20) | 0.603x | 5.258% |
| Keppel REIT ($0.97) | 0.802x | 5.608% |
| OUE Commercial REIT ($0.295) | 0.518x | 6.644% |
| Mapletree Pan Asia Commercial Trust ($1.31) | 0.736x | 6.122% |
Taking a first glance at Suntec REIT’s current valuation, we can see that it’s being priced way below its book value, with a price to book ratio of 0.603x. On top of that, it is also paying an annualized dividend yield of 5.258% to investors. This is pretty attractive given that it is much higher than Singapore’s risk free rate of 2.5% (CPF OA) and 4% (CPF SA) and you have substantial upside if Suntec REIT recovers back to 1x PB ratio.
When compared to its peers, we can see that Suntec REIT seems like a weak investment despite having the second lowest PB ratio, as it has the lowest yield amongst its peers. Among the 4 REITs, Mapletree Pan Asia Commercial Trust (SGX: N2IU) appears to be the best as it has the second highest PB ratio (0.736x), which means it offers an attractive upside if it recovers back to 1x PB ratio, and it has the second highest yield of 6.122%, paying investors attractively as they wait for the price to recover.
Final Thoughts
Suntec REIT’s share price has been on a downtrend since the pandemic and has finally started to see some uptick thanks to improving operating performance. Nonetheless, its weak balance sheet and obvious laggards in its portfolio will make investors think twice before taking up a position. In my opinion, the high aggregate leverage ratio and weak ICR is limiting its growth potential severely. With a PB ratio of 0.603x and a yield of 5.258%, the risk to reward ratio is not very attractive.