Suntec REIT is selling three Australian office assets worth over A$1bn (€621m) following a portfolio review, driven in part by high local interest rates.
The SGX-listed property group said it was divesting two Sydney office buildings – 177 Pacific Highway in North Sydney and 21 Harris – and its 50% stake in 477 Collins Street in Melbourne’s central business district.
It was undertaking a “portfolio reconstitution” after the review, and it was decided to refocus the trust back to its home market because of the city state’s macroeconomic and political stability, together with the relative strength of the Singapore dollar, especially during times of economic uncertainty and in a high-inflation environment.
“The fundamentals of the commercial property market in Singapore remain favourable, underpinned by limited new supply and tight vacancy rates. The manager will continue to explore opportunities to strengthen Suntec REIT’s presence in Singapore,” said the Suntec board.
Suntec bought 177 Pacific Highway for A$413.9m in 2013 when it was newly completed, and it followed up with the purchase of 21 Harris Street for A$297m in 2019. In 2020, it formed equal joint ownership of 477 Collins Street for A$414m. Mirvac, which developed the building, known as Olderfleet, and sold 50% stake to Suntec REIT on completion.
Chong Kee Hiong, CEO of Suntec REIT, said: “The successful divestment of these assets is expected to reduce Suntec REIT’s aggregate leverage ratio to below 40%, providing the headroom to support Suntec REIT’s future acquisition opportunities, unit buy-back and/or capital distribution.
“This would also reduce the earnings drag arising from the high-interest rate environment in Australia and improve the REIT’s interest coverage ratio. The strategic review reinforces the manager’s commitment in enhancing long-term unitholder returns.”
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