Suntec Reit to divest three Australian assets, focus more on Singapore
The divestments signal a preference for Singapore’s limited commercial supply and tight vacancies, potentially increasing acquisition flexibility while reducing Australian interest-rate and earnings pressures.
Suntec Reit will market three Australian commercial assets for sale, aiming to reduce its aggregate leverage ratio to below 40% and refocus on Singapore.
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Suntec Reit will be launching formal sales campaigns for three freehold commercial properties in Australia, comprising 177 Pacific Highway and 21 Harris Street in Sydney, and 477 Collins Street in Melbourne.
Located within North Sydney’s CBD, 177 Pacific Highway is a 31-storey Grade A commercial development. The recently completed 21 Harris Street is a nine-storey, Grade A office building in Pyrmont, west of Sydney’s CBD. Both are fully owned by the Reit.
Meanwhile, Suntec Reit holds a 50% stake in 477 Collins Street, a 39-storey, premium-grade office development known as Olderfleet, in Melbourne’s CBD.
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According to a Sept 21 bourse filing, the divestment plan follows a strategic review undertaken by the Reit after a change in its sponsor.
This is part of a portfolio reconstitution to reduce overseas exposure, starting with Australia, sharpen its focus on the growing Singapore portfolio and improve its capital structure.
Under the divestment plan, the manager says the Reit will focus more on Singapore, given the country’s macroeconomic and political stability and the relative strength of the Singapore dollar, particularly amid economic uncertainty and high inflation.
The manager added that Singapore’s commercial property market “remains favourable”, supported by limited new supply and tight vacancy rates. It will continue to explore opportunities to strengthen Suntec REIT’s presence in the city-state.
The divestments of the Australian assets are supported by “improving conditions in Australia’s capital markets and continued investors’ interests in high-quality, well-leased assets with stable income streams”, the bourse filing noted.
Chong Kee Hong, CEO of Suntec Reit’s manager, said the successful divestment of the assets will reduce the Reit’s aggregate leverage ratio to below 40%, providing greater flexibility for future acquisitions, unit buy-backs and/or capital distributions.
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“This would also reduce the earnings drag arising from the high-interest rate environment in Australia and improve the Reit’s interest coverage ratio.”