Retail and office REIT, Mapletree Commercial Trust (SGX:N2IU), which is also a component of Singapore’s benchmark Straits Times Index, have released its latest annual report for the financial year 2019/20 ended 31 March 2020, along with details of its upcoming annual general meeting (AGM).
As a unitholder, I have gone through the report to learn about the REIT’s latest developments and in this post, you will find all the notes I have taken (which I feel that as a unitholder, you need to take note of), along with my personal thoughts to share…
Letter to Unitholders by Non-Executive Chairman and Director Tsang Yam Pui, and Executive Director and Chief Executive Officer Sharon Lim
Impact of Covid-19 on VivoCity:
- As a result of the Covid-19 pandemic in Singapore, VivoCity’s 4Q FY2019/20 performance has been negatively impacted (as a result of a reduced footfall and tenant sales, along with approximately 3.5 months of rental assistances over March to July 2020 which the REIT has rolled out to support the tenants)
- While there remains uncertainty as to when normalcy can resume, the REIT have decided to exercise prudence by retaining S$43.7m of distribution in the fourth quarter
Acquisition of Mapletree Business City (MBC) II:
- The REIT completed the acquisition of MBC II on 01 November 2019 at an agreed property value of S$1.55b
- The acquisition was funded through a fund raising exercise, which received a resounding support from both its existing and new investors, along with securing a S$670.0m of green loan facilities
- Together with MBC I, it forms one of the largest premium campus-style environment with Grade A building specifications in Singapore
Asset Enhancement Initiative (AEI) Works in VivoCity:
- In 2Q FY2019/20, the REIT completed its fifth AEI in VivoCity, comprising the changeover of the hypermarket (from Giant to NTUC FairPrice Xtra), and partial recovery of anchor space to accommodate new and expanding tenants
- The entire exercise delivered a positive rental uplift and approximately 40% of annual return on investment
Debt Profile (as at 31 March 2020):
- Total gross debt: S$3,003.2m
- Aggregate leverage: 33.3%
- Interest coverage ratio: 4.3x
- All-in cost of debt: 2.94% per annum
- 78.9% of the REIT’s total debt were fixed by way of fixed rate debts or interest rate swaps
- Based on a gearing limit of 50.0%, there is a debt headroom of S$2.9b
- 5% of the REIT’s debt will be maturing in FY2020/21, 15% in FY2021/22, 17% in FY2022/23, 11% in FY2023/24, and the remaining 52% of the REIT’s debt will mature in FY2024/25 and beyond
Portfolio Occupancy Profile (as at 31 March 2020)
|Mapletree Business City II||99.4%||100.0%|
|Merrill Lynch Harbourfront||100.0%||100.0%|
Weighted Average Lease Expiry by Gross Rental Income:
|No. of Leases||%|
|FY2024/25 & Beyond||35||20.9%|
The REIT’s top 10 tenants contributed 27.9% towards its gross rental income, and they are:
|Tenant||% of Gross |
|1||Google Asia Pacific Pte Ltd||10.1%|
|2||Merrill Lynch Global Services Pte Ltd||3.0%|
|3||The Hongkong & Shanghai Banking|
|5||PSA Corporation Limited||2.3%|
|6||Info-Communications Media |
|7||SAP Asia Pte Ltd||2.0%|
|8||Unilever Asia Private Limited||1.9%|
|9||Samsung Asia Pte Ltd||1.7%|
|10||NTUC Fairprice Co-operative Ltd||1.7%|
Key Financial Highlights (FY2018/19 vs. FY2019/20)
- Gross revenue: Up 8.8% to S$482.8m (FY2018/19: S$443.9m) due to first-time contribution from MBC II (S$37.5m), along with higher year-on-year (y-o-y) contribution from MBC I and Merrill Lynch Harbourfront, partially offset by lower contribution from VivoCity, PSA Building, and Mapletree Anson
- Property operating expenses: Up 9.0% to S$104.9m (FY2018/19: S$96.3m) mainly due to first-time inclusion of property operating expenses of MBC II (S$7.3m), higher staff costs, utilities expenses, property taxes, along with marketing and promotion expenses
- Net property income: Up 8.7% to S$377.9m (FY2018/19: S$347.6m)
- Amount available for distribution to unitholders: Down 7.9% to S$243.2m (FY2018/19: S$264.0m) as a result of the REIT retaining S$43.7m of distribution in 4Q FY2019/20 for extra prudence, as well as to better position the REIT ahead of uncertainties arising from Covid-19
- Distribution per unit: Down 12.5% to 8.00 Singapore cents/unit (FY2018/19: 9.14 Singapore cents/unit)
- Moving forward to FY2020/21, the REIT will be adopting a half-yearly reporting framework, and as such, distributions to unitholders will be paid out on a half-yearly basis (from quarterly basis previously)
Notice of Annual General Meeting (AGM)
- Date & Time: Wednesday, 22 July 2020, at 2.30pm
- Registration Link: Here (Deadline of registration: Sunday, 19 July 2020, at 2.30pm, with confirmation email to be received by Tuesday, 21 July, at 2.30pm)
- Questions?: You can either raise them when you register to attend the AGM, or you can send in your questions via email to email@example.com by Friday, 17 July 2020, at 2.30pm (remember to include your full name, address, and the manner you hold your units in Mapletree Commercial Trust – either via CDP, Scrip, CPF or SRS; along with your questions)
My Personal Thoughts
After studying the REIT’s latest annual report, my personal take is that the REIT’s latest set of financial results, portfolio occupancy and debt profile continues to remain sound.
With regard to the REIT retaining some of the distributions for 4Q FY2019/20, as I have mentioned when I reviewed the REIT’s financial results when it was released back in April 2020 (you can check out my post about it here), it is largely within my expectations.
As I am writing this pose, Phase 2 of Singapore’s re-opening has already been effected (since 19 June 2020), with retail shops resuming their operations after a temporary shutdown during the 2-month circuit breaker period imposed by the Singapore government to contain the further community spread of Covid-19. As such, barring unforeseen circumstances, we can hope for the REIT resuming its distribution payout to unitholders (with no withholding) as VivoCity gradually see its footfall and tenant sales resuming.
Finally, I have also signed up to attend the REIT’s upcoming virtual AGM on Wednesday, 22 July 2020, at 2.30pm, along with my questions (which I hope they can be addressed):
- I understand that PSA Corporation Limited will be shifting out of the PSA Building into a new premise (in FY2019/20, it comprised of 2.3% towards the REIT’s overall gross rental income.) I’d like to find out whether there will be a new tenant taking over and also whether or not the building will continue to remain as “PSA Building” or will it be renamed.
- Are there any plans for the REIT to divest geographically, considering that at present, all its properties are in Singapore. If so, are there any countries that the REIT has shortlisted? If not, may I know why the REIT is not looking to divest geographically?
For the benefit of unitholders who are not able to attend the virtual AGM, I will be providing a summary of it in due course, so if you are interested, do keep a lookout for it. 🙂
Disclaimer: At the time of writing, I am a unitholder of Mapletree Commercial Trust.
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