Early this morning (07 July 2022), Mapletree Commercial Trust (SGX:N2IU) published its annual report following the conclusion of its financial year ended 31 March 2022 (i.e. FY2021/22).

In case you’re not already aware, this will be the final annual report which the REIT will be publishing under the name “Mapletree Commercial Trust”, as unitholders of the REIT, along with Mapletree North Asia Commercial Trust (SGX:RW0U), have unanimously voted in favour of the merger of the 2 REITs, which will be renamed to “Mapletree Pan Asia Commercial Trust” when the merger is completed.

As a unitholder of the Mapletree REIT, I have attended the relevant meetings when they were conducted, and you can find my summaries here (for those who are interested to read about them):

• My Summary of SIAS' Virtual Dialogue Session with the CEO of Mapletree Commercial Trust
• My Summary of Mapletree Commercial Trust's EGM

In this post, you will read about my summary of the most important points to take note of from Mapletree Commercial Trust’s latest annual report, details about its upcoming annual general meeting (AGM), along with my thoughts as a unitholder of the REIT.

Let’s begin:

Summary of Mapletree Commercial Trust’s Annual Report

Support for its Tenants:

• Much of FY2021/22 (period between 01 April 2021 and 31 March 2022) was marred by Covid-19 as emergence of new virus variants resulted in policy shifts and re-imposition of stringent health measures to contain further transmissions.
• Apart from various support schemes implemented by the Singapore Government, Mapletree Commercial Trust also worked closely with its tenants and provided meaningful support where warranted – particularly, since the start of the pandemic, the REIT have helped eligible tenants offset on average approximately 5.8 months of their fixed rents (this included the passing on of property tax of rebates, cash grants from the Singapore Government, as well as other mandated grants to qualifying tenants.)
• However, with Singapore’s gradual return to normalcy, rental rebates for retail tenants have also tapered progressively.

FY2021/22 Financial Performance:

• Gross revenue and net property income improved by 4.3% (to S$499.5m) and 3.1% (to S$388.7) respectively, contributed by higher revenue from all of its properties except Mapletree Anson (due to its transitional vacancy), lower rental rebates for its tenants (as businesses gradually resumed their business operations following the easing of safe management measures), improved contributions in carpark income, compensation received from the negotiated lease pre-termination at mTower, and effects of step-up rents in existing leases.
• Distribution to unitholders edged up 0.7% (to S$317.0m), with the amount inclusive of the release of the remaining S$15.7m retained in Q4 FY2019/20 (the decision to do so was for prudence due to the headwinds posed by the Covid-19 pandemic; the other tranche of S$28.0m have been released as distribution to unitholders in FY2020/21.) Accordingly, distribution per unit to unitholders also inched up slightly to 9.53 cents/unit from 9.49 cents/unit in FY2019/20.)

Portfolio Performance:

• VivoCity’s tenant sales improved by 15.6% year-on-year (y-o-y) to S$804.0m, while shopper traffic improved by 4.5% to 26.9m. The retail mall also achieved a positive rental uplift of 2.5%. Committed occupancy as at the end of FY2021/22 is at 99.2%.
• Mapletree Business City’s committed occupancy ended the financial year at 97.3%, and the property continues to provide a steady source of revenue and remains an integral component of the REIT’s resilience.
• mTower’s active occupancy rate climbed from 75.5% in March 2021 (end of previous financial year) to 84.7% (end of current financial year under review), as the REIT made a good progress to backfill vacancies due to lease pre-termination (with compensation received in Q1 FY2021/22, and the amount provided more than a year’s cover for backfilling.)
• Mapletree Anson closed its transitional vacancy as it achieved full commitment as at 31 March 2022, while Bank of America Harbourfront (previously known Bank of America Merrill Lynch Harbourfront) continued to be fully occupied.
• Collectively, the REIT’s office and business park properties saw a positive rental uplift of 1.7% for FY20211/22, and the management expects the positive leasing momentum to continue through to the new financial year.
• On a portfolio level, its committed occupancy rate is at 97.0%, with a portfolio weighted average lease expiry at 2.3 years. Top 10 tenants (excluding an undisclosed tenant) contributed 27.7% towards the REIT’s gross rental income, with no single trade segment accounting for more than 19.7% of the REIT’s gross rental income.

Capital Management:

• As at 31 March 2022, there were approximately S$500m of cash and undrawn committed facilities available to support financial stability.
• Debt maturity profile remained well-distributed with no more than 24% of debt due for refinancing in any financial year.
• Approximately 80.3% of the total gross debt of S$3,014.0m of debt are on fixed rates, or interest swaps – this provides a reasonable amount of certainty over interest expenses.
• Aggregate leverage as at the end of FY2021/22 was at 33.5%, with interest coverage remaining healthy at 4.8x, average term to debt maturity at 3.3 years, and weighted all-in cost of debt at 2.40% per annum.
• In navigating today’s rising interest rates, the management will continue to safeguard the balance sheet prudently, and stay proactive in seizing suitable opportunities to achieve an optimal balance of risks and costs.

Environmental, Social and Governance (ESG) Updates:

• The REIT’s approach towards sustainability is aligned with its Sponsor, where it is anchored by the belief to incorporate the “triple bottom line” in running their businesses: financial, social, and environmental.
• Good progress have also been made in their ESG efforts, including the integration of reporting of environmental risk assessment findings into Mapletree Commercial Trust’s Enterprise Risk Management Framework – allowing better identification and management of climate-related risks and opportunities, along with the adoption of recommendation of the Task Force on Climate-related Financial Disclosures – where the REIT have made its inaugural disclosure within the Sustainability Report.
• Since 2020, the REIT have been graded “A” for GRESB Public Disclosure, and this year, they were conferred a GRESB Three Star rating for its inaugural participation in the GRESB Real Estate Assessment (a global ESG performance benchmark for real estate companies and funds, where the REIT will use the assessment to help them better gauge their performance against global peers, and at the same time fine-tune their sustainability practices.)

Outlook Ahead:

• With the significant relaxation of Covid-19 measures towards the end of the REIT’s financial year, the management expects the REIT’s assets to benefit further as more economic activities resume, along with international travels returning to normalcy.
• However, global geopolitical environment remains fragile. This, together with rising energy prices and interest rates, could impede full recovery.
• Finally, with the completion of the merger with Mapletree North Asia Commercial Trust in the financial year ahead, the merged REIT will have a diversified and high quality portfolio across Singapore, Hong Kong, China, Japan, and South Korea, of which best-in-class assets constitute approximately 67% of its portfolio. The management is confident of delivering on their commitment to drive long-term growth and sustainable return.

Summary of Mapletree Commercial Trust’s Upcoming AGM

Mapletree Commercial Trust will be holding its 11th AGM on Friday, 29 July 2022, at 11.00am.

Unitholders have the option to attend the meeting either in-person (at 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439), or virtually, and you can indicate your choice when you sign up below (do note that the deadline to sign up is on Tuesday, 26 July 2022, at 11.00am):

https://go.lumiengage.com/mctagm2022

As much as I would like to attend the meeting physically, but taking into consideration yet another wave of Covid-19 cases recently, I have decided to attend the meeting virtually – and as always, I will be publishing a summary of it in due course.

Closing Thoughts

The blue-chip REIT is one of the most stable among all the REITs listed in Singapore – in terms of its financial performance, portfolio occupancy, capital management, and also its distribution to unitholders.

I understand some of the concerns unitholders may have on the merger with Mapletree North Asia Commercial Trust, particularly the fact that Festival Walk in Hong Kong will become the 2nd biggest contributor towards the REIT’s gross revenue – while there are headwinds due to Hong Kong still pretty much closed due to its stringent Covid management policies, together with China – where the REIT will have 2 properties in the country, but in the long run, I’m confident of the properties in these 2 countries contributing positively towards the REIT’s gross revenue (reason being China is currently the world’s second largest economy, and Hong Kong being a major financial hub in Asia.)

With that, I have come to the end of my summary of Mapletree Commercial Trust’s latest annual report. Please note that all the comments above are solely my own for sharing purposes only. They do not represent any buy or sell calls for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.

Related Documents

• Annual Report
• Notice of AGM
• AGM Announcement
• Proxy Form

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