Mapletree Commercial Trust (SGX:N2IU), a blue-chip REIT with retail, office, and business park properties all located in Singapore (with most of them located around the Harbourfront area), held its 10th annual general meeting (AGM) for the financial year 2020/21 ended 31 March 2021 earlier this afternoon (22 July 2021), which I have attended as a unitholder to receive the latest updates from its management.

Due to the current safe distancing measures in place, the meeting was held online. However, despite of that, attendees were given the option to submit any questions they may have during the presentation, with the management addressing them thereafter.

Similar to the summaries for the other 3 Mapletree REITs I have published earlier (the links can be found at the end of the post), in this post, you will read about a summary of the presentation delivered by the CEO Ms Sharon Lim and CFO Ms Janica Tan, responses to questions submitted by AGM attendees, and finally, results of the 3 resolutions put to vote during the meeting.

Let’s begin…

Summary of Presentation by CEO Ms Sharon Lim and CFO Ms Janica Tan

Provision of Support to Tenants Affected by the Ongoing Covid-19 Pandemic:

  • Ms Tan highlighted that in light of businesses being severely impacted by the ongoing Covid-19 pandemic (where at one point in time non-essential businesses had to shut for almost 10 weeks), Mapletree Commercial Trust had rolled out one of the most comprehensive tenants to help their tenants cope to preserve the long-term health of the retail ecosystem.
  • Particularly, a total of 7 tenant support programmes totalling more than S$70.0m of rental rebates were provided to eligible retail tenants offset on average more than 4 months of fixed rents; this was on top of the cash grants and property tax rebates provided by the Singapore government.

Financial Performances:

  • As a result of rebates provided by the REIT to help eligible tenants affected by the pandemic (but offset by a full-year contribution from Mapletree Business City II which was acquired on 01 November 2019, compared to just 5-months worth of contributions in the previous financial year 2019/20), its gross revenue fell by 0.8% compared to last year to S$479.0m (FY2019/20: S$482.8m.)
  • However, as a result of a reduction in property operating expenses (due to lower staff costs, utilities and also marketing and promotional expenses), its net property income only saw a marginal 0.2% drop to S$377.0m in the same time period (FY2019/20: S$377.9m.)
  • The amount available for distribution, due to the REIT releasing S$28.0m out of the S$43.7m of retained cash (which Ms Tan explained is for prudence in anticipation of the highly volatile environment due to the pandemic) in Q4 FY2019/20, improved by 29.4% year-on-year (y-o-y) to S$314.7m (FY2019/20: S#243.2m.) Pertaining to when the remainder of retained cash will be returned to unitholders, Ms Tan said that the REIT will do so once the uncertainties surrounding the ongoing Covid-19 pandemic are sufficiently abated.
  • On the REIT’s distribution per unit to its unitholders, it was up by 18.6% on a y-o-y basis to 9.49 Singapore cents/unit (vs. 8.00 Singapore cents/unit in FY2019/20.) Excluding the release of distribution, Ms Tan shared that the distribution per unit for the financial year under review would be 8.65 Singapore cents/unit.

Debt Profile:

  • Ms Tan said that the REIT continues to maintain a proactive and prudent capital management, where its aggregate leverage ratio as at 31 March 2021 was at 33.9%. She added that there remains a S$2.8b of debt headroom to the regulatory limit of 50.0%.
  • She further added that 70.7% of the REIT’s borrowings are on fixed rate/interest rate swap, and that all of its borrowings are unsecured.
  • With more than S$600m of cash and undrawn committed facilities available, Ms Tan commented that there remains ample liquidity for the REIT to meet its financial obligations.
  • Finally, only S$70.0m of medium term notes are due in the coming financial year 2021/22, which had been redeemed subsequent to reporting year, hence completing the refinancing for the year way ahead of time.

Portfolio Occupancy Profile:

  • Ms Lim highlighted that the REIT’s portfolio occupancy rates for individual properties were all above the benchmark for occupancies in Singapore – particularly, VivoCity’s committed occupancy of 99.1% was above benchmark for retail properties at 90.3%; its office properties in mTower (at 91.7%), Mapletree Anson and Merrill Lynch Harbourfront (all at 100.0%) were all above the benchmark occupancy rate of 94.1% for office properties; its business park properties in Mapletree Business City I (at 94.6%) and Mapletree Business City II (at 100.0%) were also above the benchmark at 85.1%.
  • She also highlighted that while there was a negotiated pre-termination of a major tenant’s lease at mTower, the compensation provided more than 16 months of lead time for backfilling, which marketing of the space is still in progress.
  • In terms of rental reversions, as a result of a -9.6% of negative reversion from its retail properties, the portfolio rental reversion rate as at 31 March 2021 was -3.1%.

Sustainability Efforts:

  • Ms Tan shared that all of Mapletree Commercial Trust’s properties have maintained their respective BCA Green Mark certifications – in particular, 3 of its properties (in VivoCity, Mapletree Business City and Mapletree Anson) being certified Platinum, the highest accolade for a building’s environmental performance.
  • The REIT also generated close to 1.6m kWh of solar energy from solar panels atop VivoCity and Merrill Lynch Harbourfront, along with implementing other green initiatives.
  • Apart from that, they have also secured another S$370.0m of green loans (on top of the S$620.0m secured from FY2019/20.)

Outlook Ahead:

  • Ms Lim opined that the full recovery ahead is dependent on the development of Covid-19 – both home and abroad.
  • With Singapore currently back to Phase 2 (Heightened Alert) from today till 18 August, with any relaxation of measures reliant on case count and vaccination rate, Ms Lim shared that the REIT will continue to render support to affected tenants just like when the Singapore government implemented the same phase between 16 May and 13 June 2021.
  • She added that the REIT will focus on the individual properties’ occupancy rate to maintain a steady income, and at the same time, continue to practice extra prudence in terms of capital management, and work to strengthen assets for the long-run.

Responses to Questions from Unitholders

  • On a concern which unitholders have pertaining to the REIT’s growth strategies, as well as whether there are plans to venture overseas, Ms Lim explained that the REIT have no plans to venture out of Singapore, as there are potential opportunities available within the country. She shared that the REIT has a right of first refusal (ROFR) to 6 properties from its Sponsor – Harbourfront Centre, Harbourfront Tower One, Harbourfront Tower Two, SPI Development Site (known as Proposed Mapletree Lighthouse in Mapletree Commercial Trust’s IPO Prospectus), St James Power Station, as well as 20 Harbour Drive (known as PSA Vista in Mapletree Commercial Trust’s IPO Prospectus.) She further added that before the REIT embarks on any acquisition, be it ROFR or from third-party, the property will be evaluated in terms of its value accretion, yield threshold, and asset quality (which includes its location, enhancement potentials, building specifications, tenant and occupancy profile.)
  • With Singapore currently back to Phase 2 (Heightened Alert) as a result of another outbreak in the number of cases in the community, a fellow unitholder asked about the level of support which Mapletree Commercial Trust will be granting to affected tenants. In response, Ms Lim said that the REIT is always ready to render reliefs to affected tenants so that they will not come into a cash crunch situation, with the volume of sales drop being a key parameter for consideration. She cited that back when Singapore was in Phase 2 (Heightened Alert) between 16 May and 13 June 2021, the REIT had negotiated for a pre-commitment with affected retail tenants in VivoCity and ARC where the level of support are being calibrated based on their sales volume.

Results of the 3 Resolutions Put to Vote during the AGM

  • Resolution #1, which is to receive and adopt the Trustee’s Report, the Manager’s Statement, the Audited Financial Statements of Mapletree Commercial Trust for the financial year ended 31 March 2021 and the Auditor’s Report thereon, was passed with 99.83% (or 2,187,522,513) of the votes for, and 0.17% (or 3,825,606) of the votes against.
  • Resolution #2, which is to appoint PricewaterhouseCoopers LLP as the Auditor of Mapletree Commercial Trust and to authorise the Manager to fix the Auditor’s renumeration, was passed with 99.97% (or 2,191,317,280) of the votes for, and 0.03% (or 610,984) of the votes against.
  • Resolution #3, which is to authorise the Manager to issue Units and to make or grant instruments convertible to Units, was passed with 91.88% (or 2,013,918,881) of the votes for, and 8.12% (or 178,011,152) of the votes against.

Closing Thoughts

I echo the management’s view that recovery ahead is dependent on Covid-19 both at home, as well as abroad (particularly because VivoCity also generates a part of its income from tourists – especially those visiting Sentosa island.)

While in the near-term, there may be some headwinds for the REIT, particularly now with Singapore seeing a resurgence in the community spread and the country now back in Phase 2 (Heightened Alert), where dining-in is no longer permissible once again, and number of visitors to malls reduced, tenant sales is likely to be impacted to a certain extent and the REIT may need to provide some form of financial support to help them through the tough period.

As to the level of impact current heightened measures will affect the REIT, in my personal opinion, if the measures are lifted after 18 August, then it is likely to be minimal. However, should the number of cases continue to climb with new big clusters continue to form, and the measures had be tightened further, then depending on the tightening as well as the duration of the measures, then we may see a heavier impact to the REIT (but definitely it will not be as bad as the ‘circuit breaker’ period last year.)

That said, I remain confident in the long-term growth prospects of the blue-chip REIT.

With that, I have come to the end of my post today, and hope you’ve enjoyed the read. In case you’re interested to read my AGM summaries by the other 3 Mapletree REITs conducted last week, you can find them via the respective links below:

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Mapletree Commercial Trust.

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