Mapletree North Asia Commercial Trust (SGX:RW0U) is the only Mapletree REIT that’s not a constituent in Singapore’s benchmark Straits Times Index at the moment, and it is also the only REIT where its portfolio does not have any properties located in Singapore.

At the time of writing, its portfolio includes Festival Walk in Hong Kong (where the property consist of a retail mall, along with an office component; this property currently contributes a lion share towards the REIT’s gross revenue), Gateway Plaza and Sandhill Plaza in China (with the former being a Grade A office building, and the latter being a premium quality business park development), 9 office properties in Japan (ABAS Shin-Yokohama Building, Fujitsu Makuhari Building, Hewlett-Packard Japan Headquarters, Higashi-nihonbashi 1-chrome Building, IXINAL Monzen-nakacho Building, mBAY POINT Makuhari, Omori Prime Building, SII Makuhari Building, as well as TS Ikebukuro Building), The Pinnacle Gangnam in South Korea (a 20-storey freehold office building with 6 underground floors.)

After market hours last Thursday (28 October 2021), the REIT released its results for the first half of the financial year 2021/22 ended 30 September 2021, and in this post, you’ll read about a summary of its financial performance, portfolio occupancy as well as debt profile, and also the distribution payout declared for period under review (apologies for the late update as I was not at my desk the past couple of days due to an urgent family situation):

Financial Performance (1H FY2020/21 vs. 1H FY2021/22, and Q2 FY2020/21 vs. Q2 FY2021/22)

In this section, let us first take a look at the REIT’s financial performance on a year-on-year, or y-o-y basis (i.e. 1H FY2020/21 vs. 1H FY2021/22), followed by a comparison on a quarter-on-quarter, or q-o-q performance (i.e. Q2 FY2020/21 vs. Q2 FY2021/22):

1H FY2020/21 vs. 1H FY2021/22:

1H FY2020/211H FY2021/22% Variance
Gross Revenue
(S$’mil)		$190.1m$215.4m+13.3%
Property Operating
Expenses (S$’mil)		$50.4m$53.6m+6.4%
Net Property
Income (S$’mil)		$139.7m$161.9m+15.8%
Distributable Income
to Unitholders
(S$’mil)		$96.8m$119.5m+23.4%

On one look, the REIT’s latest set of y-o-y results is an improved one – the 13.3% growth in its gross revenue can be attributed to lower rent reliefs granted to tenants at Festival Walk, contribution from Hewlett-Packard Japan Headquarters, which was acquired on 18 June 2021, along with lower average rates of Hong Kong Dollar and Japanese Yen against the Singapore Dollar. In terms of gross revenue contribution by individual properties, Festival Walk still contributed to a majority of its total gross revenue (at 49.5%) – compared to the same time period last year (which was at 46.2%), it is a 3.3 percentage point (pp) increase.

Another thing to note is its property operating expenses, which went up by 6.4% y-o-y due to property operating expenses from the newly acquired Hewlett-Packard Japan Headquarters, higher promotional expenses for Festival Walk, along with the absence of a property tax refund received in 1H FY2020/21 for SII Makuhari Building, due to the revision in the annual value of the property.

Q2 FY2020/21 vs. Q2 FY2021/22:

While the REIT did not explicitly provide its q-o-q financial performance, I managed to compute it based on the figures it provided for the first quarter, as well as for the first half of the financial year, and they are as follows:

Q2 FY2020/21Q2 FY2021/22% Variance
Gross Revenue
(S$’mil)		$96.4m$112.4m+16.6%
Property Operating
Expenses (S$’mil)		$25.2m$28.9m+14.7%
Net Property
Income (S$’mil)		$71.2m$83.6m+17.3%

My Observations: On a q-o-q basis, the REIT’s results is also an improved one – with the growth in its top- and bottom-line contributed by the newly acquired Hewlett-Packard Japan Headquarters, along with a lower rental relief granted to tenants of Festival Walk. Also, the 14.7% rise in terms of its property operating expenses can be attributed to expenses related to Hewlett-Packard Japan Headquarters.

Portfolio Occupancy Profile (Q1 FY2021/22 vs. Q2 FY2021/22)

Next, let us take a look at the REIT’s portfolio occupancy profile, where I’ll be comparing the portfolio occupancy stats of the REIT’s properties as at the end of 30 September 2021 (i.e. Q2 FY2021/22) against that recorded as at the end of 30 June 2021 (i.e. Q1 FY2021/22) to find out whether or not it has strengthened, weakened, or stayed more or less the same:

Q1 FY2021/22Q2 FY2021/22
Portfolio Occupancy
(%)		97.4%97.0%
Portfolio WALE (by Gross
Rental Income – years)		2.5 years2.5 years
Rental Reversion –
Festival Walk (Retail) (%)		-34.0%-30.0%
Rental Reversion –
Festival Walk (Office) (%)		N.A.N.A.
Rental Reversion –
Gateway Plaza (%)		-27.0%-24.0%
Rental Reversion –
Sandhill Plaza (%)		-4.0%+5.0%
Rental Reversion –
Japan Properties (%)		+0.2%+1.0%
Rental Reversion –
The Pinnacle Gangnam (%)		N.A.+58.0%

My Observations: Personally, I felt there were more positives than negatives as far as the REIT’s latest portfolio occupancy statistics are concerned (when compared against the previous quarter 3 months ago) – particularly, positive rental reversions are being recorded for new/renewed leases in Sandhill Plaza, in its Japan Properties, and in The Pinnacle Gangnam (where the huge positive rental reversion was contributed by 1 office lease.) Another positive to note is that its portfolio WALE have remained unchanged – and in the second half of the financial year 2021/22, only 7.3% of the leases are up for renewal – which is pretty minimal in my opinion.

On the other hand, the negatives include the slight 0.4 percentage point (pp) drop in its portfolio occupancy (as a result of a dip in occupancy rates in its Japan Properties from 98.2% in Q1 FY2021/22 to 97.8% in Q2 FY2021/22), along with negative rental reversions recorded on new/renewed leases in Festival Walk (Retail), as well as in Gateway Plaza – However, the percentage of drop have declined for both of them (when compared against the previous quarter.)

Debt Profile (Q1 FY2021/22 vs. Q2 FY2021/22)

As a unitholder of the REIT, one of the concerns I have is with its aggregate leverage – which have been rising over the past couple of years (from 36.2% in FY2017/28 to a high of 41.5% in FY2020/21 – with increases recorded every single financial year.) So, whenever the REIT releases its quarterly updates, this statistic is one of the very first I take a look at.

In this section, you’ll learn about the REIT’s debt profile recorded for Q2 FY2021/22, compared against its debt profile recorded for the previous quarter (i.e. Q1 FY2021/22) to find out whether or not it has improved:

Q1 FY2021/22Q2 FY2021/22
Aggregate Leverage
(%)		41.8%41.4%
Interest Coverage
Ratio (times)		4.0x4.1x
Average Term to
Debt Maturity (years)		3.0 years3.0 years
Average Cost of
Debt (%)		1.9%1.8%

My Observations: By and large, the REIT’s most recent debt profile (recorded for the second quarter of the financial year 2021/22) compared against the previous quarter, have improved marginally. Also, from now till the end of the current financial year 2021/22 on 31 March 2022, only 3% (or S$100m) of its borrowings will be maturing – again, this is minimal in my personal opinion.

Distribution Per Unit

Since the start of the previous financial year 2020/21, the REIT have been paying its unitholders a distribution on a half-yearly basis once again (once when it announces its second quarter results, and once when it announces its fourth quarter results.)

For the current period under review (with is for the second quarter, and for the first half of the financial year), the REIT’s management have declared a payout of 3.426 cents/unit, an 19.1% improvement from the 2.876 cents/unit declared for the same time period last year (i.e. 1H FY2020/21.)

Investors of the REIT who would like to receive their payouts in units of the REIT (instead of cash), for those of you who have units of the REIT in your CDP account, you may either wait for the physical copy of the “Notice of Election” to be mailed to your residence (where you’ll need to fill up and mail back), or you can submit your preference online (via the CDP Internet here.) If you like to receive your distribution in cash, you need not do anything (as receiving the distribution payout in cash is the default option.)

The ex-dividend, record, and payout dates are as follows:

Ex-Date: 05 November 2021
Record Date: 08 November 2021
Payout Date: 24 December 2021

Closing Thoughts

On the whole, its an improved set of results reported by the Mapletree REIT – where improvements can be seen in its financial performance, as well as in its debt profile (no doubt its aggregate leverage is still a bit on the high side, but personally, I’m happy to note the slight improvements recorded, and I will continue to keep a close watch on this particular statistic in the coming quarters ahead.)

No doubt the rental reversion for new/renewed leases for Festival Walk (Retail), and Gateway Plaza continues to be negative, but compared to the previous quarter, there were some improvements – which again is good to note.

With that, all four Mapletree REITs have reported its financial results for the second quarter, as well as for the first half of the financial year 2021/22. As I have investments in all four of them, I have written my review about its results when they were released earlier this week, and you can find them via the respective links below:

I do hope you have found the contents presented above useful, and finally, please take note that this post does not represent any buy or sell recommendation for units of Mapletree North Asia Commercial Trust. You’re strongly advised to 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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