Initially named as Mapletree Commercial Trust when it was listed on the Singapore Exchange in April 2011, where it invests in properties used for retail and office purposes in Singapore, it was renamed to Mapletree Pan Asia Commercial Trust (SGX: N2IU), or MPACT for short, following its merger with another Mapletree REIT (in Mapletree North Asia Commercial Trust, where it invests in retail and office properties overseas) in August 2022.

As at 31 March 2024 (end of financial year FY2023/24), its portfolio comprises 18 commercial properties across 5 key gateway markets in Asia – 5 in Singapore, 1 in Hong Kong, 2 in China, 9 in Japan, and 1 in South Korea, valued at S$16.5 billion.

Last Friday (28 June 2024), MPACT published its annual report, together with information about its upcoming annual general meeting (AGM), both of which you’ll find more details about in this post:

Key Highlights in Mapletree Pan Asia Commercial Trust’s Annual Report

Profile of MPACT’s Property Portfolio:

Asset Concentration by Geographical Location:

• Singapore (55% – with core assets in VivoCity and Mapletree Business City constituting 43% of portfolio)
• Hong Kong (26%)
• China (10%)
• Japan Properties (8%)
• South Korea (2%)

Asset Class Concentration by Assets Under Management:

• Retail (46%)
• Office (28%)
• Business Parks (26%)

Financial Results Highlights:

• Gross revenue and net property income rose 16.0% and 15.2% year-on-year respectively, to S$958.1 million and S$727.9 million, driven by the strong showing of its Singapore assets, and the full-year contribution from the merger with Mapletree North Asia Commercial Trust completed on 21 July 2022, partially offset by the a weaker Hong Kong Dollar (HKD), Chinese Renminbi (RMB), and Japanese Yen (JPY).
• On a constant currency basis, MPACT’s gross revenue would have increased by 17.5%, while net property income would have risen by 16.6%.
• Excluding the contributions from overseas properties, gross revenue and net property income would have been up by just 5.4% and 4.4% respectively.
• In terms of each geographical location’s contribution to its gross revenue, it is as follows: Singapore (59%), Hong Kong (21%), China (9%), Japan (9%), South Korea (1%).
• Amount available for distribution to unitholders increased at a slower rate (compared to its net property income) at 5.2%, to S$468.6 million, due to higher finance costs (which jumped 39.2% due to full-year interest expenses incurred by the overseas properties and the acquisition debt, as well as higher interest rates on the existing SGD and HKD borrowings). This led to a 7.3% decline in its distribution per unit (DPU) to 8.91 Singapore cents.

Portfolio Occupancy Profile:

• Committed occupancy rate of 96.1%.
• In terms of weighted average lease expiry (WALE), it is as follows: Portfolio (2.4 years), Retail (2.1 years), Office/Business Park (2.7 years).
• Top 10 tenants (excluding an undisclosed tenant) accounted for 21.6% of the portfolio gross rental income (GRI), with no single tenant accounting for more than 6.0% towards the REIT’s GRI.
• Total portfolio valuation was marginally lower by 0.5% than a year ago due to the decrease in valuation of the overseas properties as a result of the strengthening of the Singapore Dollar against HKD, RMB, and JPY, mitigated by the increase in valuation of the Singapore properties (largely driven by VivoCity’s improved operational performance).

Highlights of Individual Assets:

• VivoCity: Tenant sales reached new heights, surpassing last year’s record at close to S$1.1 billion, with occupancy hitting 100%, and a rental reversion of +14.0%.
• Mapletree Business City: Despite evolving workspace requirements, the REIT’s top tenant (by GRI), Google, has renewed a majority of its lease space over the past 2 financial years, with only one-fifth up for renewal in FY2024/25; the tech giant is MPACT’s top tenant, contributing 6.0% towards the REIT’s portfolio gross rental income; The business park concluded the financial year with an occupancy rate of 96.0%, and a rental reversion of +6.7%.
• Other Singapore Properties: mTower’s committed occupancy climbed from 88.0% 2 years ago to 96.6% by the close of FY2023/24; Bank of America Harbourfront and Mapletree Anson both have an occupancy rate of 100%; collectively, these 3 Singapore assets have a rental reversion of +7.1%.
• Festival Walk (Hong Kong): Achieved stable year-on-year shopper traffic and tenant sales, with a close-to-full committed occupancy at 99.7%, and rental reversion continues to improve compared to the previous years, though its still at -8.7% as at end FY2023/24.
• Sandhill Plaza & Gateway Plaza (China): Impacted by a weaker Chinese Renminbi, and slower than anticipated economic recovery despite the vast lifting of Covid-19 restrictions in early-2023; collectively, they have a committed occupancy rate at 87.5% (higher than the occupancy rate of 86.5% a year ago), with rental reversion at -2.7%.
• Japan Portfolio: Committed occupancy of 97.9%, and a rental reversion of -1.9% as at 31 March 2024.
• The Pinnacle Gangnam (South Korea): Achieved an occupancy rate of 99.1%, and a very impressive +39.0% rental uplift, due to tailwinds from a favourable market dynamics marked by limited supply.

Capital Management:

• Aggregate leverage was at 40.5% (at this level, the REIT has a debt headroom of $3.2 billion), alongside an adjusted interest coverage ratio of 2.9x on a 2-month trailing basis, and a weighted average all-in cost of debt at 3.35% per annum.
• However, following the completion of divestment of Mapletree Anson in July 2024, with net divestment proceeds of S$762m allocated towards debt reduction, aggregate leverage is expected to be down to 37.6%, and interest coverage ratio improved to 3.3 times on a pro forma basis.
• 77.1% of total gross debt is in fixed rate debt, or fixed through interest rate swaps.
• 93% of MPACT’s distributable income (based on rolling 4 quarters) was derived from or hedged into SGD as at 31 March 2024.
• Debt maturity profile in the financial years ahead is as follows: FY24/25 (15%), FY25/26 (21%), FY26/27 (21%), FY27/28 (12%), FY28/29 (17%), FY29/30 or later (14%).

Progress on Sustainability Front:

• Attained 5-Star rating in 2023 GRESB Real Estate Assessment
• Maintained “A” rating for GRESB Public Disclosure
• Expanded solar capacity by over 50% to 3,729 kWp with new installations at Mapletree Business City, as well as at VivoCity
• Obtained LEED certifications for its China properties (Gateway Plaza, Sandhill Plaza), and its South Korean property (The Pinnacle Gangnam)
• Achieved 100% green-certified portfolio

Outlook Ahead:

• Singapore: Remarkably resilient despite challenges, and the REIT’s management will reinforce it as the cornerstone of MPACT’s stability.
• Hong Kong: REIT will evolve with the market and ride on clearer recovery when the trend of cross-border travelling stabilises.
• China: While there are near-term headwinds, but its 2 assets have outperformed the market (as a result of proactive and ceaseless leasing efforts), and the management remains confident of the country’s long-term potential as a key economic force in Asia.
• Japan Properties: Particularly, its Makuhari assets (mBAY POINT Makuhari, and SII Makuhari Building) are being affected by market softness, which the management step up leasing efforts and implement targeted strategies to mitigate occupancy impact, and minimise downtime arising from lease expirations.

Details of Mapletree Pan Asia Commercial Trust’s 13th Annual General Meeting

When? Monday, 29 July 2024
Where? 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439
Time? 2.30pm

Unitholders whose units are in the CDP account need not pre-register to attend the meeting (as verification will be done on the spot when you register at the meeting venue). However, for those whose units are in a custodian account, then you will need to contact your broker to appoint you to attend the meeting as a proxy.

The meeting will be held in a wholly physical format, with no options for unitholders to attend virtually.

Closing Thoughts

One of the concerns many investors have is the REIT’s investments in Hong Kong (in Festival Walk), as well as in China (in Sandhill Plaza and Gateway Plaza).

While Festival Walk contributed slightly more than 20% towards the REIT’s total gross revenue in FY2023/24, but the property has a very high committed occupancy rate (at 99.7%). In terms of shopper traffic, for the current financial year under review, it is up by 0.6%, with tenant sales up by 0.1%. While rental reversion for new/renewed leases still negative (at -8.7%), but in my opinion, it is an improvement from the last few years (at -12.7%, -27%, and -21% in FY2022/23, FY2021/22, and FY2020/21 respectively), and I foresee further improvements on this front in the coming quarters ahead. I will continue to keep a close watch on the numbers.

As for the 2 office properties in China, they only contribute slightly under 10% towards the REIT’s gross revenue in FY2023/24, which in my opinion is a very small percentage. While the country may be faced with a number of headwinds currently (from a crisis in the property sector, rising unemployment rate, and jittery investor confidence), but let’s not forget the country is still the world’s 2nd largest economy. Also, the Chinese government is expected to implement even more initiatives to support the economy and stabilise the property market. No doubt some time may be needed before we can see positive results, but I’m confident of its eventual recovery.

Apart from that, I personally felt that on the whole, MPACT’s financial performance is a stable one (helped by the properties in Singapore, as well as full-year contribution from the merged properties), overall portfolio occupancy (of 96.1%) being very strong, and debt profile in a healthy position (following the completion of the divestment of Mapletree Anson, MPACT’s aggregate leverage will be down to 37.6%, which is a healthy level in my opinion).

Last but not least, in terms of the outlook of the REIT’s distribution payout in the financial year ahead, I’m of the opinion it will be weaker compared to last year (by a low- to mid-single digit percentage), considering the “still high” interest rates, along with weaker HKD, RMB, and JPY against the Singapore dollar.

With that, I have come to the end of my sharing on Mapletree Pan Asia Commercial Trust’s latest annual report. As always, I hope you have found the key highlights useful (in keeping you updated), and please note that all the opinions in this post are purely mine which I am sharing for educational purposes only. They do not constitute any buy or sell calls for the REIT’s units. You should always do your own due diligence before you make any investment decisions.

Due to time constraints, I will not be attending the meeting.

Related Documents

• Annual Report
• Sustainability Report
• Circular to Unitholders in Relation to the Proposed Unit Buy-Back Supplement to the Trust Deed, and the Proposed Adoption of the Unit Buy Back Mandate
• Notice of AGM
• Proxy Form

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

The post Mapletree Pan Asia Commercial Trust's Annual Report for FY2023/24 - Key Highlights to Take Note of first appeared on The Singaporean Investor.