Mapletree North Asia Commercial Trust is the third Mapletree REIT (out of a total of 4) to make available its business update for the first quarter of the financial year 2021/22 ended 30 June 2021 after market hours yesterday (26 July 2021.)

As the REIT have switched to reporting its detailed financial results on a half-yearly basis, for the quarter under review, they only provided a snippet of it, along with performances about each property in its portfolio, and its debt profile.

Let us take a look at them in detail in this post, along with my personal opinion about the REIT’s latest ‘report card’:

Financial Performance (Q1 FY2020/21 vs. Q1 FY2021/22)

Q1 FY2020/21Q1 FY2021/22% Variance
Gross Revenue
(S$’mil)
$93.7m$103.0m+9.9%
Property Operating
Expenses (S$’mil)
$25.2m$24.7m-2.0%
Net Property
Income (S$’mil)
$68.5m$78.3m+14.3%

Compared to the same time period last year, the REIT’s financial performance have improved, and this can be attributed to lower rental reliefs of S$4.0m granted to retail tenants at Festival Walk retail mall in the quarter under review compared to the same time period last year (which was S$17.9m), higher occupancy from IXINAL Monzen-nakacho Building, along with a maiden contribution from its newly acquired Hewlett Packard Japan Headquarters on 18 June 2021.

In terms of gross revenue contribution by individual properties for the quarter under review, Festival Walk contributed 49%, Gateway Plaza contributed 19%, Sandhill Plaza contributed 6%, the Japan Properties contributed 23%, and The Pinnacle Gangnam contributed 3%.

Also, in case you’re wondering why there aren’t any ‘distributable income to unitholders’ this quarter, it is because the REIT have already switched to paying out a distribution on a half-yearly basis – hence there aren’t any distributions declared this time round.

Portfolio Occupancy Profile (Q4 FY2020/21 vs. Q1 FY2021/22)

Moving on, let us take at the portfolio occupancy rate, along with rental reversion for each of the properties under the REIT’s portfolio (for the first quarter of FY2021/22 as at 30 June 2021) compared against that recorded in the previous quarter 3 months ago (i.e. Q4 FY2020/21 ended 31 March 2021) to find out whether it has improved, deteriorated, or stayed more or less the same:

Q4 FY2020/21Q1 FY2021/22
Festival Walk (Retail)
– Occupancy Rate
– Rental Reversion

99.9%
-21%

99.8%
-34%
Gateway Plaza:
– Occupancy Rate
– Rental Reversion

92.9%
-7%

92.9%
-27%
Sandhill Plaza:
– Occupancy Rate
– Rental Reversion

97.9%
+5%

99.7%
-4%
Japan Plaza:
– Occupancy Rate
– Rental Reversion

97.8%
+2%

98.2%
+0.2%
The Pinnacle Gangnam:
– Occupancy Rate
– Rental Reversion

96.5%
N.A.

95.7%
N.A.

My Observations: While the occupancy rates more or less remained remained high and stable, but in terms of rental reversions of new leases as well as lease renewals, on the whole it has weakened rather significantly – even for the Japan Properties, while it continues to be positive, but it has weakened compared to 3 months ago. That said, in the quarters to come, we could potentially see the REIT’s revenue being adversely impacted as a result of lower rentals.

In case you’re wondering why there aren’t any columns on the offices in Festival Walk, that’s because its occupancy rate remains at 100.0% in Q4 FY2020/21 as well as in Q1 FY2021/22, and also there aren’t any lease renewals for both quarters.

Debt Profile (Q4 FY2020/21 vs. Q1 FY2021/22)

Finally, let us take a look at the REIT’s debt profile.

Similar to how I have studied its portfolio occupancy profile in the previous section, I too will be comparing its debt profile recorded for the current quarter under review (i.e. Q1 FY2021/22 ended 30 June 2021) against that recorded in the previous quarter 3 months ago (i.e. Q4 FY2020/21 ended 31 March 2021) to find out whether or not it has improved, or deteriorated further (for those of you who have been following my company reviews will know that I have concerns about the REIT’s high aggregate leverage, as well as its low interest coverage ratio, and its something I’ve been keeping a close watch on over the past couple of quarters):

Q4 FY2020/21Q1 FY2021/22
Aggregate Leverage
(%)
41.5%41.8%
Interest Coverage
Ratio (times)
3.7x4.0x
Average Term to
Debt Maturity (years)
3.1 years3.0 years

My Observations: Compared to the previous quarter, the REIT’s debt profile is a mixed bag.

On the upside, its interest coverage ratio and average cost of debt saw some improvements – particularly, the improvements in its interest coverage ratio was due to higher net property income, along with lower net finance costs. Also, just 5% (or S$186m) of the REIT’s total debt are maturing by the end of the current financial year 2021/22.

However, its aggregate leverage and average term to debt maturity have weakened slightly – the former due to the REIT using bank borrowings to fund its acquisition of Hewlett Packard Japan Headquarters.

Closing Thoughts

As a unitholder, I am of the opinion that the REIT’s latest ‘report card’ is a mixed one – while it is good to note that its key financial results have improved as a result of a lower rebate given to tenants of Festival Walk retail mall, along with contributions from its newly acquired properties, but I’m concerned about the significant drop in its rental reversion (for new and/or renewed leases), which could negatively impact its financial performance ahead.

On the other hand, at the time of writing of this post, Hong Kong have reported no new local infection for 49 days in a row (you can read the news report about it here), and this bodes well for community malls like Festival Walk (which contributes a lion share towards the REIT’s gross revenue) as visitor footfall (along with tenant sales) to the mall gradually returns.

With that, I have come to the end of my review of Mapletree North Asia Commercial Trust’s latest first quarter business review for the financial year 2021/22. Just like for all other result reviews I have done, the opinions you have read in this post are purely for educational purposes only, and they are by no means any recommendation to buy or sell units of the Mapletree REIT. You should always do your own due diligence before you make any investment decisions.

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

 

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