Previously known as Mapletree Commercial Trust, the REIT was formed as a result of a merger with Mapletree North Asia Commercial Trust, and subsequently renamed to Mapletree Pan Asia Commercial Trust following its completion in August 2022.

The enlarged Mapletree REIT has a total of 18 office and retail properties in 5 key gateway cities of Asia, as follows:

  • Singapore: VivoCity, Mapletree Business City, mTower, Mapletree Anson, and Bank of America Harbourfront
  • Hong Kong: Festival Walk
  • China: Sandhill Plaza and Gateway Plaza
  • Japan: IXINAL Monzen-nakacho Building, Higashi-nihonbashi 1-chome Building, TS Ikebukuro Building, Omori Prime Building and Hewlett-Packard Japan Headquarters Building in Tokyo, ABAS Shin-Yokohama Building in Yokohama, and SII Makuhari Building, Fujitsu Makuhari Building and mBAY POINT Makuhari in Chiba
  • South Korea: The Pinnacle Gangnam

After market hours yesterday (27 October 2022), the Mapletree REIT released its results for the first half of the financial year 2022/23 ended 30 September 2022 (this is also the first time the enlarged REIT is reporting its financial results following the completion of the merger), and today’s post, you’ll find my review of its financial performance, portfolio occupancy and debt profile, as well as its distribution payout to unitholders.

Financial Performance (Q2 FY2021/22 vs. Q2 FY2022/23 and 1H FY2021/22 vs. 1H FY2022/23)

The following table is Mapletree Pan Asia Commercial Trust’s financial performance, first on a year-on-year basis (i.e. 1H FY2021/22 ended 30 September 2021 vs. 1H FY2022/23 ended 30 September 2022), and then on a quarter-on-quarter (i.e. Q2 FY2021/22 vs. Q2 FY2022/23):

1H FY2021/22 vs. 1H FY2022/23:

1H FY2021/221H FY2022/23% Variance
Gross Revenue
(S$’mil)
$243.7m$353.2m+44.9%
Property Operating
Expenses (S$’mil)
$53.9m$78.0m+44.8%
Net Property
Income (S$’mil)
$189.9m$275.2m+44.9%
Distributable Income
to Unitholders
(S$’mil)
$146.5m$201.0m+37.2%

My Observations: No surprise here that the REIT’s financial results (particularly its gross revenue as well as its net property income) is a much improved one compared to the same time period last year, due to contributions from properties in Mapletree North Asia Commercial Trust’s portfolio following the completion of merger, along with higher contribution from VivoCity and Mapletree Business City. However, these improvements were offset by lower contribution from the REIT’s other Singapore properties.

At the same time, the 44.8% jump in its property operating expenses was mainly due to property operating expenses incurred by the properties added from Mapletree North Asia Commercial Trust’s portfolio, along with higher expenses incurred in all of its Singapore properties (which moved in tandem with the increase in activities this year, following Singapore’s recovery from the Covid-19 pandemic.)

Q2 FY2021/22 vs. Q2 FY2022/23:

The REIT did not provide a quarter-on-quarter (q-o-q) review of its financial results. As such, I have computed the figures based on its financial results for the first half, as well as for the first quarter of the respective financial years, and you can find them in the table below:

Q2 FY2021/22Q2 FY2022/23% Variance
Gross Revenue
(S$’mil)
$119.6m$218.2m+82.4%
Property Operating
Expenses (S$’mil)
$26.7m$49.7m+86.3%
Net Property
Income (S$’mil)
$93.0m$168.5m+81.2%

My Observations: The big jump in the REIT’s gross revenue and net property income was due to income contributions from properties in Mapletree North Asia Commercial Trust’s portfolio following the merger, along with improved contributions from VivoCity and Mapletree Business City.

Also, due to expenses incurred by the newly added properties, the REIT’s property operating expenses also saw a spike compared to last year.

Portfolio Occupancy Profile (Q1 FY2022/23 vs. Q2 FY2022/23)

Moving on, let us take a look at the REIT’s portfolio occupancy profile for the current quarter under review (i.e. Q2 FY2022/23 ended 30 September 2022), which is with the inclusion of properties from Mapletree North Asia Commercial Trust’s portfolio, compared against the previous quarter (i.e. Q1 FY2022/23 ended 30 June 2022), which is before the merger, to find out the extent to which the merger have affected its overall portfolio portfolio occupancy profile (positively and/or negatively):

Q1 FY2022/23Q2 FY2022/23
Portfolio Occupancy
(%)
97.2%96.9%
Portfolio WALE
(years)
2.8 years2.4 years

My Observations: The REIT’s portfolio occupancy saw a slight dip, as a result of a decline in occupancy rate in its China Properties (down from 95.1% in Q1 FY2022/23 to 92.5% in Q2 FY2022/23), as well as in its Japan Properties (down from 97.8% in Q1 FY2022/23 to 97.6% in Q2 FY2022/23.)

Despite of that, I note that apart from the portfolio occupancy rate of its other Singapore Properties (where occupancy rate is at 93.9%), and its China Properties (where occupancy rate is at 92.5%), all its other properties have occupancy rates at more than 95.0% – which I consider to be very resilient.

Another thing to note about its portfolio occupancy profile is that, its leases are well spread-out over the next couple of years – where only 3.7% of its retail leases and 5.4% of its office/business park leases expiring in the second half of the current financial year 2022/23, 13.5% of its retail leases and 14.4% of its office/business park leases expiring in FY2023/24, 13.1% of its retail leases and 10.1% of its office/business park leases expiring in FY2024/25, and the remaining 69.7% of its retail leases and 70.1% of its office/business park leases only expiring in FY2025/26 and beyond – and this provides some form of ‘income stability’ for the REIT.

Debt Profile (Q1 FY2022/23 vs. Q2 FY2022/23)

Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be reviewing its debt profile in a similar manner (in that I will be comparing the statistics reported for the current quarter under review [post-merger] against that reported in the previous quarter 3 months ago [pre-merger]) to find out the extent to which the merger have affected the REIT’s debt profile (positively and/or negatively):

Q1 FY2022/23Q2 FY2022/23
Aggregate Leverage
(%)
33.8%40.1%
Interest Coverage
Ratio (times)
4.9x4.4x
Average Term to
Debt Maturity (years)
3.0 years3.0 years
Average Cost
of Debt (%)
2.5%2.4%
% of Borrowings Hedged
to Fixed Rates (%)
78.6%72.5%

My Observations: Apart from its cost of debt improving slightly (down to 2.4% in Q2 FY2022/23), and average term to debt maturity remaining stable at 3.0 years, all the other metrics weakened slightly – particularly, with just 72.5% of its borrowings hedged to fixed rates, the REIT is likely to be exposed to the negative impacts of interest rate hikes (where every 50bps change in benchmark rates is estimated to impact DPU by 0.16% per annum) when it refinances its debt in the coming years (it has 8% [or S$568m] of borrowings maturing in the second half of the current financial year, and another [13% [or S$927m] of borrowings maturing in the coming financial year 2023/24.)

Another thing to note is that, even though its aggregate leverage have jumped by 6.3 percentage points (pp) to 40.1% following the merger, but there’s still some debt headroom to the regulatory limit of 50.0%.

Distribution Payout to Unitholders

The management of Mapletree Pan Asia Commercial Trust declares a distribution on a half-yearly basis – once when it releases its results for the first half of the financial year (which is this time round), and once when it releases its results for the second half of the financial year.

For the first half of the current financial year 2022/23, the management have declared a distribution payout of 4.94 cents/unit – a 12.5% increase from the payout of 4.39 cents/unit declared in the same time period last year (i.e. 1H FY2021/22), with the increase as a result of contributions from the newly added properties to the REIT following the merger. However, do take note that prior to the merger, the REIT have already made a “clean-up distribution payment” of 3.04 cents/unit for the period between 01 April and 20 July 2022. As such, you’ll receive only 1.90 cents/unit for the period between 21 July 2022 and 30 September 2022 in the upcoming distribution payout.

If you are a unitholder of the REIT, do take note of the following dates on its distribution payout:

Ex-Date: 03 November 2022
Record Date: 04 November 2022
Payout Date: 07 December 2022

The management of Mapletree Pan Asia Commercial Trust have also announced that they will be reporting its its full financial results, as well as paying out a distribution to its unitholders on a quarterly basis with effect from the next quarter (i.e. Q3 FY2022/23), and you can check out the full announcement about this here – as a unitholder, I am happy with the announcement, because my preference is always towards companies that report its full financial results on a quarterly basis (as it allows me to better keep track of whether its financial performance continues to remains sound), as well as distribution payouts in the same time period (well, who doesn’t like to receive ‘pocket money’ in your bank account on a more regular basis?)

CEO Ms Sharon Lim’s Comments on the Latest Results and Outlook (from the REIT’s Press Release)

“In spite of rising volatilities in the global economy and financial markets, positive indicators have been observed in our operating metrics. Notably, major leases at BOAHF, Gateway Plaza and Festival Walk were renewed ahead of expiry and higher commitments were recorded in most markets, driving the portfolio’s committed occupancy to 96.9%. Positive rental reversions were secured in the majority of markets. We will remain proactive in working with our tenants to address their space requirements, aiming to maintain stability of the portfolio.

Our core market, Singapore, continued to chart a new post-COVID path. In tandem with the country’s full reopening, VivoCity and MBC achieved all-rounded improvements – delivering higher revenue and NPI, as well as rental uplifts of 7.7% and 3.8% respectively. Together, approximately 63% of our gross revenue and NPI were derived from these two assets, further underscoring their status as crown jewels of MPACT.

VivoCity kept its recovery momentum with its 2Q FY22/23 tenant sales continuing to surpass pre-COVID levels5. Notwithstanding its solid performance, proactive efforts to strengthen the mall continues. We are now embarking on an 80,000 square feet AEI that includes converting part of TANGS’ Level 1 space into a 56,000 square feet new retail zone. This is the culmination of a project that has been in the works for several years, utilising the escalator node added in 2018 to activate an alternative shopper discharge channel. This is win-win for both TANGS and VivoCity as the former will be able to optimise its footprint on Level 1 and Level 2, while we seize the opportunity to introduce exciting F&B and lifestyle options. A majority of the space has been committed and the new zone is expected to progressively open by mid-2023. We expect the entire AEI to deliver more than 10%6 of return on investment on a stabilised basis.

Performance of our other retail mall, Festival Walk in Hong Kong, continued to be impacted by strict COVID protocols. However, the gradual easing of health measures and disbursement of government consumption vouchers have boosted 2Q FY22/23 footfall and tenant sales. Looking ahead, a further lifting of COVID restrictions and full re-opening of the Hong Kong-mainland China border are necessary to catalyse recovery.

The global economic environment has deteriorated due to prolonged political conflicts, rising energy prices and interest rates. In navigating the volatilities, we will press on with our proactive asset management approach. We will also focus on safeguarding the balance sheet, and seize suitable opportunities to achieve a balance of risks and costs.”

Closing Thoughts

Personally, the REIT’s latest set of financial results (both on a q-o-q as well as on a y-o-y basis) was very much expected, considering its results this time round included contributions from properties added from Mapletree North Asia Commercial Trust’s portfolio following the merger.

While its portfolio occupancy rate saw a slight decline compared to the last quarter, but in my opinion, they are still very resilient as a majority of its properties have recorded occupancy rates of more than 95.0%.

The only slight concern I may have is its debt profile – particularly with just 72.5% of its borrowings hedged to fixed rates, and with about 21% (or S$1,495m) of its borrowings maturing in between the second half of the current financial year (i.e. 2H FY2022/23) and end of next financial year (i.e. FY2023/24), coupled with rising interest rates, its distribution payout to unitholders could be negatively impacted over the next couple of quarters.

But that said, I still remain very confident of the REIT’s management riding through this tough economic environment, and emerging out of it stronger. Additionally, I’m happy to hear that the REIT’s management will once again pay out distributions on a quarterly basis starting from the next quarter (it used to be doing so since its IPO till FY2019/2020, before changing to paying out on a half-yearly basis), as well as reporting its full financial results every quarter.

With that, I have come to the end of my review of Mapletree Pan Asia Commercial Trust’s results for the first half of the financial year 2022/23. As always, I do hope you’ve found the contents above useful, and do note that all the opinions are purely mine which I’m sharing for educational purposes only. They do not represent any buy or sell calls, and you are strongly advised to do your own due diligence before making any investment decisions.

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

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