This morning (29 July), Mapletree Commercial Trust (SGX:N2IU) conducted its 11th AGM for the financial year 2021/22 ended 31 March 2022.

Unitholders have the option to attend the meeting either in-person, or virtually – due to the resurgence in the number of community cases, I have elected to attend the meeting online.

In this post, you’ll find a summary of the presentation by the REIT’s CEO Ms Sharon Lim and CFO Ms Janica Tan, responses to questions raised by meeting attendees (both in-person as well as virtually), along with results of the 3 resolutions put to vote during the meeting.

Let’s begin:

Presentation by CEO Ms Sharon Lim & CFO Ms Janica Tan

Financial Results:

• Despite of disruptions caused by Covid-19 for the current financial year under review (i.e. FY2021/22), the REIT still managed to grow its gross revenue and net property income (by 4.3% to S$499.5m, and 3.1% to S$388.7m respectively), led by higher contributions from all of its properties except Mapletree Anson due to transitional vacancy.
• Property operating expenses climbed 8.6% to S$110.8m primarily due to the absence of property tax grants in the previous financial year, along with property tax for the current year.
• Income available for distribution went up by 5.1% to S$301.2m, with distribution per unit inching up by 0.4% to 9.53 cents/unit (the amount includes the release of the remaining S$15.7m retained in Q4 FY2019/20 for prudence due to the pandemic situation in Singapore.)

Capital Structure (as at 31 March 2022):

• Gearing ratio remains healthy at 33.5%, and a debt headroom of S$2.9bn to the regulatory limit of 50.0%.
• Interest coverage ratio (on a 12 month trailing basis) is at 4.8x.
• Weighted average all-in cost of debt (per annum) is at 2.40%, with an average term to maturity of debt at 3.3 years.
• 80.3% of the REIT’s total debt outstanding (at S$3,014.0m) are hedged at fixed rates, giving the REIT a reasonable amount of financial certainty in interest expenses.
• Also, there remains approximately S$500m of cash and undrawn facilities available, providing the REIT with ample liquidity to meet its financial needs and debt obligations.
• Moving forward, in light of the economic headwinds, the management will continue to safeguard the REIT’s balance sheet prudently.

Portfolio Highlights & Performance:

• Vivocity:
  • Reconfigured approximately 3,000 square feet of Basement 2 prime space (completed in August 2021), and at the same time secured expansion of existing tenant (including adidas, Gram-Cafe & Pancakes, Puma, Marks & Spencer, and Timezone) and introduced new retailers (including lululemon, Foot Locker, DJI, Dyson, Una, Go Noodle House, Tai Cheong Bakery, and Love & Co.)
  • Revamped VivoRewards (which previously only catered to vehicle owners to redeem carpark dollars) to VivoRewards+ (in partnership with DBS), to provide a comprehensive range of benefits (such as redemption of discount vouchers) to reward every shopper.
  • Full year tenant sales increased by 15.6% compared to last year, with Q4 FY2021/22 tenant sales recovering to pre-Covid levels.
  • Moving forward, the management will continue to look into ways to reconfigure and refresh the mall.
• Office & Business Park Assets:
  • Gross revenue from office & business park assets improved by 1.9% on a year-on-year (y-o-y) basis, with a positive rental reversion of +1.7% achieved for FY2021/22.
  • The management also managed to secure early renewals for the tenants.

Sustainability Efforts:

• All 5 properties maintained their BCA Green Mark certifications, with 3 properties (Vivo City, along with MBC 1 & 2) being certified Platinum, the highest accolade for a building’s environmental performance.
• Established Green Finance Framework to fund initiatives that contribute positively to sustainability.
• Achieved Three Star Rating for its inaugural participation in GRESB Real Estate Assessment.
• Generated more than 1.7m kWh of solar energy across all of the REIT’s properties, an increase of more than 4% from FY2020/21.
• Installed Electric Vehicle charging points at VivoCity and at MBC, as well as smart water meters and sensors across all of its properties.

Merger with Mapletree North Asia Commercial Trust:

• Rationale for the merger is that, Mapletree Commercial Trust, currently centred in Singapore, has limited opportunities for expansion. Hence, in order to grow the REIT, it will need to expand overseas, and Mapletree North Asia Commercial Trust offers a “ready platform” for the REIT to gain instant access to key gateway cities (in Hong Kong, China, Japan, and South Korea.)
• The enlarged REIT (which will be renamed to Mapletree Pan Asia Commercial Trust) will comprise 18 commercial properties across 5 key gateway markets of Asia (Singapore, Hong Kong, China, Japan, and South Korea) with a total Assets Under Management of over S$17bn.
• Post-merger, the management will adopt a “4R” (Recharge, Refocus, Reconstitute, and Resilience) strategy to drive growth.
• Singapore will continue to remain a core market for the REIT (with more than 50.0% concentration for stability); For Hong Kong, the management will focus on the stabilisation and improvement of Festival Walk (the management acknowledged that while the road is bumpy at the moment, but they is confident of its potential for recovery, especially after the borders reopen once again); For China, their focus is on maintaining high occupancy levels and seek opportunistic acquisitions in office, and office-like business park assets (similar to MBC); For South Korea, it has favourable market dynamics which makes it primed for target expansion; For Japan, currently, 9 assets contribute just 10.0% of the portfolio, and the management will look at rebalancing its portfolio in the location.

Outlook Ahead:

• The Singapore government’s decision to relax Covid-19 measures and “live with Covid” is a positive for Mapletree Commercial Trust’s businesses.
• The management is of the opinion that the assets (in its portfolio) are poised to benefit further with the resumption of more economic activities, and international travel returning to normalcy.
• However, they are also mindful of the fragile global economy, where full recovery (not just for Mapletree Commercial Trust, but also the entire S-REIT industry) could be impeded by inflationary pressures, rising energy prices, and interest rates.

Responses to Questions Raised by AGM Attendees

• With the surge in the number of e-commerce transactions since the pandemic, a unitholder wanted to know if the REIT’s retail tenants are affected by this trend, and steps taken by the REIT to provide assistance to them. In response, Ms Lim shared that VivoCity has done well even during the pandemic, of the opinion that e-commerce is here to stay, and retail tenants will have to adopt an omni-channel approach in their businesses. Looking ahead, she added that brick and mortar malls are here to stay, as things like F&B and the experience of watching a movie in the cinema cannot be replaced virtually. Pertaining to monetary assistance provided by the REIT, Ms Lim said it can only help to a certain extent (one instance is in the issuance of rental rebates during the Covid period.) However, in instances where the tenants’ businesses are in sunset industries, the management can only provide advise to them to relook into their product offering.
• The same unitholder wanted to know of the impact of “Working from Home” to the REIT’s office properties, considering the fact that post-merger (with Mapletree North Asia Commercial Trust), the enlarged REIT will have a number of office properties. Ms Lim responded that many have since returned to their workplaces upon the relaxation of safe management measures. Also, despite the current hybrid working mode, with lesser people at the office at any one point, office tenants have not downsized their office spaces due to the re-configuration to include more social distancing between desks. She is also of the opinion that commercial properties will continue to remain relevant due to the importance of social element between co-workers, which can aid productivity.
• On a question pertaining to risks arising from interest rate hikes, Ms Lim said the management has hedging policies in place, which will provide some certainty to its distributable income. Ms Tan also shared that over the years, the REIT have a policy to hedge at least 70% of its borrowings on fixed rates to mitigate any possible risks relating to interest rate hikes.
• A unitholder was concerned by the short remaining land lease of Festival Walk (at just 25 years) and was worried about the REIT’s income being negatively impacted (as it will be the REIT’s second largest income contributor) if the land lease was not renewed. To this, Ms Lim shared that the precedence is that land leases in Hong Kong will automatically be renewed upon their expiry, and is of the expectation that it will be as such for the land occupied by Festival Walk upon its lease expiry.
• Responding to a question on a list of opportunities and challenges for Mapletree Pan Asia Commercial Trust, Ms Lim said in terms of opportunities, it will be a bigger balance sheet, allowing the REIT to recycle properties easily without worrying that the DPU will be significantly affected. In terms of challenges, Ms Lim said 2 key challenges as far as its properties in Singapore is concerned are interest rate and utility – that said, she added that all S-REITs are also faced with the same challenges as well. As for properties out of Singapore, Ms Lim said all the other properties are relatively stable (and the REIT will continue to maintain their high occupancy rates) except for Festival Walk (which the REIT will work on bringing its performance back to that recorded before the social unrest and pandemic.)
• Finally, another unitholder wanted to know if the REIT is looking at other countries to diversify in (apart from Singapore and Hong Kong.) Ms Lim said the management is open to all possible acquisition opportunities, but prior to embarking any moves, they will need to conduct a thorough assessment to make sure it provides sustainable returns for unitholders.

Results of the 3 Resolutions Put to Vote during the AGM

• Resolution 1, which is to receive and adopt the Trustee’s Report, the Manager’s Statement, the Audited Financial Statements of MCT for the financial year ended 31 March 2022 and the Auditor’s Report thereon, was passed with 99.85% of the votes for, and 0.15% against.
• Resolution 2, which is to re-appoint PricewaterhouseCoopers LLP as the Auditor of MCT and to authorise the Manager to fix the Auditor’s remuneration, was passed with 95.92% of the votes for, and 4.08% against.
• Resolution 3, which is to authorise the Manager to issue Units and to make or grant instruments convertible into Units, was passed with 92.00% of the votes for, and 8.00% of the votes against.

Announcement of New Chairman of the REIT

• Chairman Mr Tsang Yam Pui will be stepping down as the Chairman of the REIT, with Mr Samuel Tsien succeeding him in the position.

Related Documents

• CEO & CFO’s Presentation Slides
• Responses to Questions Raised by Unitholders

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