Mapletree Pan Asia Commercial Trust (SGX:N2IU), formed as a result of a merger between Mapletree Commercial Trust (a pure-play Singapore retail, office, and business park REIT) and Mapletree North Asia Commercial Trust (with retail and office properties in key gateway cities such as Hong Kong, China, Japan, and South Korea) in August 2022, released its third quarter and first 9 months of the financial year 2022/23 ended 31 December 2022 yesterday evening (31 January 2023.)

For those who are unfamiliar with the REIT, here’s a brief introduction – just like the other 2 Mapletree REITs (in Mapletree Industrial Trust and Mapletree Logistics Trust), Mapletree Pan Asia Commercial Trust is also a constituent of Singapore’s benchmark Straits Times Index (STI.) At the time of writing, its portfolio comprises of 18 commercial properties as follows:

• Singapore (5 properties): VivoCity, Mapletree Business City, mTower, Mapletree Anson, and Bank of America Harbourfront;
• Hong Kong (1 property): Festival Walk;
• China (2 properties): Gateway Plaza (Beijing), and Sandhill Plaza (Shanghai);
• Japan (9 properties): 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), along with SII Makuhari Building, Fujitsu Makuhari Building and mBAY POINT Makuhari (in Chiba);
• South Korea (1 property): The Pinnacle Gangnam (Seoul)

As a retail investor of the blue-chip REIT, I have studied its latest set of results and in this post, you’ll find my review of its financial performance, portfolio occupancy and debt profile, along with its distribution payout to unitholders for the period under review (the REIT have announced when they released its previous quarter results that they will revert back to paying out distributions to unitholders on a quarterly basis from this quarter onwards – in-line with the other 2 Mapletree REITs; you can read the announcement about this in full here.)

Let’s begin:

Financial Performance (Q3 FY021/22 vs. Q3 FY2022/23, and 9M FY2021/22 vs. 9M FY2022/23)

In this section, you’ll find a comparison of the REIT’s results on a quarter-on-quarter (q-o-q) basis (i.e. Q3 FY2021/22 vs. Q3 FY2022/23), and also on a year-on-year (y-o-y) basis (i.e. 9M FY2021/22 vs. 9M FY2022/23):

Q3 FY021/22 vs. Q3 FY2022/23:

My Observations: The blue-chip REIT’s latest set of results was within my expectations – with the strong jump in its gross revenue and net property income (by 84.0% and 76.8% respectively) contributed from properties in Mapletree North Asia Commercial Trust’s portfolio following the merger, on top of higher contribution from all of the REIT’s properties in Singapore. However, if you were to exclude the properties included in the REIT’s portfolio as a result of the merger, its gross revenue would be up by just 5.9%.

The huge increase in the REIT’s property operating expenses was due to expenses incurred by the properties included into Mapletree Pan Asia Commercial Trust’s portfolio post-merger, along with higher expenses incurred by its Singapore properties, which moved in tandem following the increase in activities in the quarter under review (as almost all of the safe management measures have been removed.)

9M FY2021/22 vs. 9M FY2022/23:

My Observations: The REIT’s gross revenue and net property income skyrocketed due to contributions from Mapletree North Asia Commercial Trust’s properties following the merger, along with higher contribution from VivoCity and Mapletree Business City, offset by lower contribution from other Singapore properties. However, excluding the revenue contributions from properties as a result of the merger, the REIT’s gross revenue for the first 9 months of FY2022/23 would have been up by 9.2% compared to the same time period last year (i.e. 9M FY2021/22)

Additionally, the 67.3% increase in the REIT’s property operating expenses was due to expenses incurred by Mapletree North Asia Commercial Trust’s properties following the merger, as well as higher expenses across all of the REIT’s Singapore properties – which moved in tandem with the increase of activities in the current financial year under review.

Portfolio Occupancy Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

Moving on, let us take a look at the REIT’s portfolio occupancy profile, where I will be comparing the statistics recorded for the current quarter under review (i.e. Q3 FY2022/23 ended 31 December 2022) against that recorded in the previous quarter 3 months ago (i.e. Q2 FY2022/23 ended 30 September 2022) to find out if it has continued to remain strong:

My Observations: Mapletree Pan Asia Commercial Trust’s portfolio occupancy saw a slight 1.4 percentage point (pp) decline due to a dip in occupancy rates in Mapletree Business City (from 98.4% in Q2 FY2022/23 to 95.0% in Q3 FY2022/23), VivoCity (from 98.9% in Q2 FY2022/23 to 98.3% in Q3 FY2022/23), as well as in its China Properties (from 92.5% in Q2 FY2022/23 to 88.6% in Q3 FY2022/23.)

As far as lease expiries are concerned, only 1.1% of retail leases and 2.2% of office/business park leases will be expiring in the final quarter of FY2022/23. Another 13.1% of retail leases and 10.1% of office/business park leases will be expiring in the next financial year 2023/24, 13.3% of retail leases and 11.3% of office/business park leases will be expiring in FY2024/25, and the remaining 16.6% of retail leases and 32.4% of office/business park leases will be expiring in FY2025/26 or later.

Debt Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

Just like how I have looked at its portfolio occupancy profile in the previous section, I will also be looking at the REIT’s debt profile by comparing the statistics reported in the current quarter under review (i.e. Q3 FY2022/23) against that reported in the previous quarter 3 months ago (i.e. Q2 FY2022/23) to find out whether or not it has continued to remain healthy – this has become all the more important now especially in the rising interest rate environment, as returns to unitholders could be impacted should the debt profile of the REIT weakens:

My Observations: Compared to the previous quarter (i.e. Q2 FY2022/23), the REIT’s debt profile have weakened slightly (with its average cost of debt ticking up by 2pp to 2.6%, and interest coverage ratio reduced to 3.8x) – no surprises there, given the high interest rate environment we are in right now.

In terms of its debt maturity ahead, 5% (or S$356m) of its borrowings will be maturing in the final quarter of FY2022/23, another 13% (or S$915m) of its borrowings will be maturing in the next financial year 2023/24, 22% (or S$1,511m) of its borrowings will be maturing in FY2024/25, and the remaining 60% (or S$4,084m) of its borrowings will be maturing in FY2025/26 or later.

Another thing to note is that, no doubt the REIT’s percentage of borrowings hedged to fixed rates have gone up considerably (from 72.5% in Q2 FY2022/23 to 78.3% in Q3 FY2022/23), but at the same time, it has about 35% of its borrowings due for refinancing from now till the end of FY2024/25 – as such, I’m of the opinion that in the coming quarters ahead, its debt profile is likely to further weaken, due to borrowings being refinanced at higher interest rates (as far as impact of higher borrowings costs to distribution payouts is concerned, every 50bps change in benchmark rates is estimated to impact distribution by 0.14 cents per annum.)

Distribution Payout to Unitholders

As mentioned in the beginning of this post, the management have decided to revert back to paying a distribution to its unitholders every quarter starting from this quarter (yay!)

For the third quarter under review, the management have declared a distribution payout of 2.42 cents/unit, and if you are a unitholder of the REIT, do take note of the following dates:

Ex-Date: 07 February 2023
Record Date: 08 February 2023
Payout Date: 15 March 2023

Comments by the REIT’s CEO, Ms Sharon Lim (from the REIT’s Press Release)

“Global economic uncertainties have heightened and have affected overall leasing activities. Notwithstanding, we closed the quarter by locking in positive rental uplifts across all markets except Greater China, and achieved a healthy portfolio committed occupancy of 95.5%.

Our Singapore portfolio demonstrated its strength by delivering higher gross revenue and NPI during the quarter. Our core asset, VivoCity, continued to ride on a positive momentum, registering 7.9% rental uplift on a year-to-date ("YTD") FY22/23 basis. Driven by strong festive spending, 3Q FY22/23 tenant sales reached S$300.1 million, well surpassing pre-COVID levels. The AEI on Level 1 is on track for progressive opening from mid-2023, and will further enhance VivoCity's long-term competitiveness.

In conclusion, delivering long-term sustainable returns to our unitholders remains our utmost priority. Looking ahead, the operating environment is likely to remain rough with weaker global economic outlook, elevated energy prices and volatile interest rates. We will continue to forge ahead with our proactive asset management approach, implement measures to protect our financial well-being, and seize the right opportunities to achieve a balance of risks and costs.”

Closing Thoughts

The REIT’s latest set of financial results were within my expectations, as income contribution from properties in Mapletree North Asia Commercial Trust’s portfolio led to a jump in its gross revenue and net property income (both on a q-o-q, as well as on a y-o-y basis.)

No doubt its portfolio occupancy have declined slightly, but looking at the occupancy rates of the REIT’s properties, apart from its China Properties (where its occupancy rate was at 88.6%), they were maintained at above 90.0% – which I consider to be very resilient.

Looking at its debt profile, with about 35% of borrowings due for refinancing from now till the end of FY2024/25, it is likely to weaken further in the quarters ahead, given the current high interest rate environment we are in, and as a result, its distribution payout could be impacted to a certain extent.

Finally, if you have missed out on my review of the other 2 Mapletree REITs’ Q3 & 9M FY2022/23 results, you can check out by clicking on the respective REIT names below:

• Mapletree Logistics Trust (results released on 19 January 2023)
• Mapletree Industrial Trust (results released on 26 January 2023)

With that, I have come to the end of my review of Mapletree Pan Asia Commercial Trust’s latest results release. As always, I hope you’ve found the contents above useful, and do take note that all the personal opinions above are for educational purposes only. They do not represent any buy or sell calls for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Related Documents

• Press Release
• Financial Statements
• Presentation Slides

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