Suntec Reit eyes convention centre

But ARA has to first reposition centre for more stable income

There are plans for Suntec Real Estate Investment Trust (Suntec Reit) to purchase the entire Suntec International Convention & Exhibition Centre. But this is unlikely to happen until the latter has been repositioned to produce a more stable income stream.

John Lim, chief executive of ARA Asset Management, which has a unit that manages Suntec Reit, told BT: ‘Eventually, we hope for Suntec Reit to acquire the asset.’

But ‘we have to spend some time and money to reposition the convention centre, and that may take about two to three years’.

ARA is yet to approach the Urban Redevelopment Authority, though its plans are subject to approval. ‘We will have to work with the authorities closely on how to reposition the asset,’ Mr Lim said.

Last year, ARA bought Suntec convention centre for $235 million and placed it under a newly created private real estate fund called the ARA Harmony Fund. Suntec Reit has a 20 per cent stake in this fund.

The convention centre did not go to Suntec Reit entirely because its earnings fluctuate, depending on the size and frequency of events held.

Reits tend to prefer properties with steady income, so they, in turn, can make steady payouts to unit-holders.

According to Ngee Ann Polytechnic real estate lecturer Nicholas Mak, ‘putting up tenants that pay regular rents’ would be one way to inject more stability into the convention centre’s income. But the amount of space that can be converted for other uses could be limited, he said.

Mr Lim raised the possibility of more food and beverage outlets at Suntec convention centre. ‘There are quite a number of activities you can look at,’ he said.

In the meantime, Suntec Reit has been busy with other asset enhancement works. It said in January that it would build a glass facade and covered walkway to link Suntec City Mall to the upcoming Promenade MRT station. It is also creating new retail units.

Suntec Reit units gained one cent on Friday to close at $1.30.

Source: Business Times, 2 Mar 2010