Listed as Mapletree Commercial Trust back in 27 April 2011, where it invests in retail and office properties in Singapore, it was merged with another Mapletree REIT in Mapletree North Asia Commercial Trust (where it invests in retail and office properties in Hong Kong, China, Japan, and South Korea) and renamed to Mapletree Pan Asia Commercial Trust (SGX:N2IU), or MPACT for short, on 03 August 2022.

Currently, MPACT’s portfolio comprises a total of 18 retail and office properties in 5 key gateway cities in Asia – 5 in Singapore, 1 in Hong Kong, 2 in China, 9 in Japan, and 1 in South Korea, valued at S$16.6 billion.

Yesterday evening (26 October), the commercial REIT released its results for the 2nd quarter, and also for the 1st half of FY2023/24 ended 30 September – the other 2 Mapletree REITs have released their results earlier and you can check them out via the respective links:

In this post, you will find my review of Mapletree Pan Asia Commercial Trust’s latest financial results, portfolio occupancy and debt profile, and also its distribution payout to unitholders.

Let’s begin…

Financial Results (Q2 FY2022/23 vs. Q2 FY2023/24, and 1H FY2022/23 vs. 1H FY2023/24)

In this section, you will find MPACT’s financial results for the 2nd quarter (i.e. Q2 FY2022/23 vs. Q2 FY2023/24), and also for the 1st half of the financial year (i.e., 1H FY2022/23 vs. 1H FY2023/24):

Q2 FY2022/23 vs. Q2 FY2023/24:

Q2 FY2022/23Q2 FY2023/24% Variance
Gross Revenue
(S$’mil)		$218.2m$240.2m+10.1%
Property Operating
Expenses (S$’mil)		$49.7m$57.0m+14.8%
Net Property
Income (S$’mil)		$168.5m$183.2m+8.7%
Distributable Income
to Unitholders (S$’mil)		$117.7m$118.0m+0.3%

My Observations: MPACT’s positive results (well-within my expectations) was largely due to the results of the merger (with Mapletree North Asia Commercial Trust last August).

Gross revenue increased by 10.1% largely due to the full quarter contribution from the overseas properties acquired through the merger, along with higher contribution from its Singapore properties. Excluding the contribution from the overseas properties, its gross revenue would have went up by just 5.3%.

The 14.8% jump in property operating expenses was due to property operating expenses incurred by the overseas properties for the full quarter in Q2 FY2023/24. Excluding that, its property operating expenses would have been up by 8.6%, mainly due to higher utility expenses as a result of higher contracted rates, partially offset by refund of prior year’s property tax.

1H FY2022/23 vs. 1H FY2023/24:

1H FY2022/231H FY2023/24% Variance
Gross Revenue
(S$’mil)		$353.2m$477.3m+35.1%
Property Operating
Expenses (S$’mil)		$78.0m$114.9m+47.4%
Net Property
Income (S$’mil)		$275.2m$362.4m+31.7%
Distributable Income
to Unitholders (S$’mil)		$201.0m$232.8m+15.8%

My Observations: Similar to its 2nd quarter results, the big improvements in Mapletree Pan Asia Commercial Trust’s results for the 1st half of FY2023/24 was largely contributed by revenue contribution from the properties post-merger (with Mapletree North Asia Commercial Trust last year).

Gross revenue soared by 35.1%, largely due to the full period contribution from the overseas properties acquired through the merger, along with higher contribution from the Singapore properties. Stripping out the contribution from the overseas properties, the REIT’s gross revenue would have been up by just 4.7% – contributed by positive contributions across all major revenue categories including fixed rent, car park income, along with advertising and promotion income, partially offset by lower compensation sum received from the pre-termination of leases in 1H FY2023/24 compared to 1H FY2022/23.

The huge 47.4% increase in property operating expenses was due to property operating expenses incurred by the overseas properties for the full period in 1H FY2023/24. If this is excluded, the REIT’s property operating expenses would have been up by 13.4%, mainly due to higher utilities expenses as a result of higher contracted rates, partially offset by refund of prior year’s property tax.

Finally, its net property income went up by 31.7%. Excluding the contribution from the overseas properties, it would have been up by just 2.4%.

Portfolio Occupancy Profile (Q1 FY2023/24 vs. Q2 FY2023/24)

Next, let us have a look at the commercial REIT’s portfolio occupancy profile – where I will be comparing the statistics reported for the current quarter under review (i.e., Q2 FY2023/24 ended 30 September 2023) against that reported in the previous quarter 3 months ago (i.e. Q1 FY2023/24 ended 30 June 2023) to find out if it has continued to remain resilient:

Q1 FY2023/24Q2 FY2023/24
Portfolio Occupancy
(%)		95.7%96.3%
Portfolio WALE
(years)		2.6 years2.5 years

My Observations: Portfolio occupancy saw a 0.6 percentage point (pp) improvement to 96.3%, which can be attributed to improvement in occupancy rates in all of its properties, except for The Pinnacle Gangnam in South Korea (which fell from 99.1% in Q1 FY2023/24 to 97.5% in Q2 FY2023/24).

Also, looking at the occupancy rates of its properties, except for its China properties (where its occupancy rate was at 88.9%), the other properties have an occupancy rate of at least 96%, which is very strong. Particularly, VivoCity and Festival Walk (in Hong Kong) have attained an occupancy rate of 100.0%.

In terms of rental reversion, at portfolio level, it was at +3.2%. Positive rental reversions were recorded for all of its properties, except for Festival Walk (at -9.5%), China Properties (at -3.5%), and Japan Properties (at -0.8%).

Finally, on its lease expiry, in the 2nd half of FY2023/24, 4.8% of retail leases and 5.8% of office/business park leases will be due for renewal. In the next few years, on average, about 10% of retail leases, and about 11% of office/business park leases will be due for renewal each year.

Debt Profile (Q1 FY2023/24 vs. Q2 FY2023/24)

Just like how I have reviewed the REIT’s portfolio occupancy in the previous section, I will also be reviewing its debt profile similarly – where I will be comparing the statistics reported in the current quarter under review (i.e., Q2 FY2023/24 ended 30 September) against that reported in the previous quarter (i.e., Q1 FY2023/24 ended 30 June) to find out if it has been maintained at healthy levels (this is all the more important in the current high interest rate environment):

Q1 FY2023/24Q2 FY2023/24
Aggregate Leverage
(%)		40.7%40.7%
Interest Coverage
Ratio (times)		3.2x3.0x
Average Term to
Debt Maturity (years)		2.9 years3.0 years
Average Cost of
Debt (%)		3.2%3.3%
% of Borrowings Hedged
to Fixed Rates (%)		74.2%80.0%

My Observations: On the whole, MPACT’s debt profile have largely remained the same as the previous quarter – its aggregate leverage, at 40.7%, is still a pretty safe distance away from the regulatory limit of 50.0%. Another thing to note is the 5.8pp increase in the percentage of borrowings hedged to fixed rates to 80.0% (which is a good percentage to have in my opinion). For the remaining 20.0% of unhedged borrowings, every 50 bps change in benchmark rates is estimated to impact DPU by 0.13 cents per annum.

As far as the REIT’s debt maturity is concerned, only 1% (or S$90m) of borrowings will be due for refinancing in the 2nd half of FY2023/24. For the years thereafter, debt maturity is well-spread out, with approximately 21% of borrowings due for refinancing in a year between FY2024/25 and FY2026/27, with the remaining 35% of borrowings due for refinancing only in FY2027/28 or later.

Finally, one of the things I’ve noticed is the declining interest coverage ratio since Q1 FY2022/23, where it has fell every quarter from 4.9x to just 3.0x in Q2 FY2023/24 – while its not a big cause for concern at this point, but its something I’d be monitoring, as its aggregate leverage limit will be reduced to 45.0% should its interest coverage falls below 2.5x.

Distribution Payout to Unitholders

Mapletree Pan Asia Commercial Trust used to be paying out a distribution on a half-yearly basis, before switching to quarterly distribution payout from this financial year 2023/24, in-line with the other 2 Mapletree REITs.

For the 2nd quarter of FY2023/24, a distribution payout of 2.24 cents/unit was declared.

Together with its payout of 2.18 cents/unit declared in the 1st quarter of FY2023/24, MPACT’s total distribution payout for the first half of FY2023/24 amounts to 4.42 cents/unit. Compared to its payout of 4.94 cents/unit in the same time period last year (i.e., 1H FY2022/23), this represented a 8.2% decline – this was due to forex headwinds from a stronger Singapore dollar and a rising interest rate environment (where borrowing costs have spiked as a result).

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

Ex-Date: 02 November 2023
Record Date: 03 November 2023
Payout Date: 08 December 2023

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

“We are proud to report like-for-like gains in gross revenue, NPI and DPU for 2Q FY23/24 over the preceding quarter, led by robust performance in Singapore and commendable stability in our overseas assets. This achievement was despite sustained pressure from higher utility expenses, adverse forex movements and elevated interest rates. It also demonstrates the effectiveness of our asset management effort, which has lifted portfolio’s committed occupancy and secured meaningful rental reversions.

While external factors like currency fluctuations and higher interest rates will persist in shaping the broader landscape, our focus remains on nimble asset and capital management. For example, VivoCity in Singapore continues to excel and we are already initiating enhancements on an F&B cluster on Level 1 to further elevate the mall’s performance. In Hong Kong, Festival Walk continues to adapt with a retail mix increasingly aligned with local preferences, and we expect its revenue stability to sustain in tandem with improving operational metrics. We have also taken steps to enhance our balance sheet and optimise our debt profile. MPACT’s resilience lies in the intrinsic strength of our core assets – VivoCity and Mapletree Business City – and the operational expertise of our team. We will continue to keep our fingers on the market’s pulse and stay agile, ensuring that we are well-positioned to navigate challenges and capitalise on opportunities as they arise.”

Closing Thoughts

On the whole, Mapletree Pan Asia Commercial Trust’s latest ‘report card’ in terms of its financial performance (both for the 2nd quarter, as well as for the 1st half of the year) was very much within expectations, where the double-digit percentage growth was attributed to contributions from properties as a result of the merger (completed in August last year).

However, I expect this kind of high double-digit percentage gain to tail-off in the 3rd and 4th quarter of the year (and it should be around a single-digit percentage growth, unless or otherwise there are new acquisitions to account for), as financial figures in the previous financial year for the same periods had contributions from the overseas properties included.

Looking at its portfolio occupancy, I’m sure you will agree with me that it is very resilient, where all but its China properties have an occupancy rate of at least 96%. Also, lease expiries are also well-spread out.

Finally, on its debt profile, its aggregate leverage of 40.7% as at 30 September 2023 is also considered to be healthy. On top of that, its good to note that the REIT have about 80.0% of borrowings hedged to fixed rates. The only slight negative is the gradual decline in its interest coverage ratio – which fell from 4.9x in Q1 FY2022/23 to a low of just 3.0x in Q2 FY2023/24. I will be keeping a close watch on this in the coming quarters ahead.

With that, I have come to the end of my review of MPACT’s results for the 2nd quarter, and for the 1st half of FY2023/24. As always, I hope you have found the contents presented in this post to be useful, and do note that all the opinions you’ve read about are all mine which I’m sharing for educational purposes only. You are strongly encouraged 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 Pan Asia Commercial Trust.

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