Manager says current asset recycling efforts remain focused on Australia assets and Suntec office strata units
[SINGAPORE] One Raffles Quay could be a candidate for divestment, the manager of Suntec Real Estate Investment Trust (Reit), which owns one-third of the building, said at an earnings briefing on Friday (Jul 24).
The comment was in response to analysts’ questions on whether the prime Grade A office asset in the Central Business District could be put on the market if the Reit were to sell a Singapore asset.
Suntec Reit owns a commercial property portfolio valued at S$11.8 billion, diversified across Singapore, Australia and the UK.
Its Singapore assets comprise Suntec City, a 66.3 per cent stake in Suntec Singapore Convention & Exhibition Centre, and one-third interests in One Raffles Quay and Marina Bay Financial Centre (MBFC).
Asked whether One Raffles Quay would be the more likely divestment candidate than MBFC, Chong Kee Hiong, the manager’s chief executive officer, replied: “Yes, purely based on yield.”
He explained that One Raffles Quay is the “lowest-yielding asset” because it is held in a private limited entity rather than a limited liability partnership, meaning the trust has to pay income tax on its earnings.
“So if there’s an opportunity for me to sell and buy Singapore assets, that is something worth considering,” said Chong.
Suntec Reit holds a one-third stake in both MBFC and One Raffles Quay. The remaining one-third stakes in One Raffles Quay are held by Hongkong Land and Keppel Reit.
Hongkong Land has injected its interests in both properties into its S$8.2 billion Singapore Central Private Real Estate Fund.
Earlier this year, analysts floated the idea that Suntec Reit could sell its one-third stake in One Raffles Quay to Hongkong Land’s private fund at a premium, after the property giant acquired a 10.8 per cent stake in the trust.
The proceeds, some analysts reckoned, could be used to acquire 9 Penang Road, a Grade A commercial building tenanted by UBS, from Suntec Reit’s sponsor.
Chong stressed that the trust has not begun discussions on divesting its Singapore assets. Instead, it remains focused on selling its mature assets in Australia and strata units in Suntec City Office Towers.
Suntec Reit has sold about S$30 million in strata offices so far this year.
Proceeds from the planned divestments – and potentially from the sale of One Raffles Quay – could fund accretive acquisitions while the strategic review is ongoing, he added.
In March, Suntec Reit’s new sponsor Tang Organization – controlled by Gordon Tang and his wife Celine – announced that it is undertaking a review to “strengthen portfolio performance and enhance capital efficiency”.
It will also explore “disciplined approaches to asset optimisation and recycling”.
The initiatives could “support higher distributions” in the coming years, while balancing Suntec Reit’s capital management needs and long-term sustainability. The strategic review is expected to be completed by the end of the year.
On a potential injection of 9 Penang Road, Chong said the Reit was in no hurry as the Grade A office building is a sponsor asset.
However, his preference would be to acquire the property in full, rather than a partial stake, as that would give the Reit greater control while reducing issues related to interested-party transactions.
For the first half ended June, Suntec Reit’s distribution per unit (DPU) rose 24.8 per cent to S$0.03936, from S$0.03155 in the previous corresponding period. Distributable income rose 25.5 per cent to S$116.5 million from S$92.8 million.
The improved DPU came amid stronger operational performance of the Reit’s Singapore office and retail portfolio.
A distribution of S$0.01936 per unit was paid out on May 29. The remaining H1 distribution of S$0.02 per unit will be paid on Aug 28.
Revenue was up 1.9 per cent at S$238.9 million for the half-year period, from S$234.5 million in H1 FY2025. Net property income fell 0.3 per cent to S$159 million from S$159.5 million.
Units of Suntec Reit ended Friday 0.7 per cent or S$0.01 higher at S$1.52.
