I recently attended the annual general meeting of Mapletree Pan Asia Commercial Trust (MPACT), which was formed through the merger of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) in 2022. MPACT is a real estate investment trust (REIT) that owns a diverse portfolio of 18 commercial properties across Singapore, Hong Kong, China, Japan, and South Korea. As of March 31, 2023, MPACT is among the top 10 REITs in Asia based on market capitalization, with a total property portfolio valued at S$16,576 million.

During the AGM, I learned several key things about MPACT’s post-merger performance and management outlook in the current uncertain macroeconomic environment. Here are the eight main takeaways:

1. MPACT achieved impressive growth in its financials. Gross revenue increased by 65.4% year-on-year to S$826.2 million, and net property income (NPI) grew by 62.6% to S$631.9 million in FY22/23. This growth was mainly driven by the contribution from properties acquired through the merger, as well as higher revenues from MPACT’s core assets, VivoCity and Mapletree Business City (MBC). VivoCity and MBC generated a combined S$445.8 million in gross revenue and S$345.9 million in NPI in FY22/23, representing an 11.5% and 11.3% year-on-year growth, respectively.

2. MPACT’s distributable income also saw significant growth, with a 40.6% year-on-year increase to S$445.6 million. The distribution per unit (DPU) grew by 6.1% to 9.61 cents. As of March 31, 2023, MPACT’s yield stands at 5.3%, slightly behind the FTSE Straits Times REIT index of 6.0%. However, since its listing, investors have enjoyed a capital appreciation of 104.5% and a total distribution of 112.1%, resulting in a total return of 216.7%.

3. MPACT’s overall portfolio occupancy decreased from 97.2% in 2022 to 95.4% in 2023. The decline in occupancy was mainly due to MPACT’s properties in China, which saw a decrease of 9.4 percentage points. The mediocre performance in China was attributed to COVID-19 outbreaks following the lifting of restrictions, weaker domestic demand, and a delay in leasing activities. However, MPACT expects leasing activities to be supported by China’s stimulus policies, such as interest rate cuts.

4. MPACT’s gearing ratio, which measures its debt-to-equity ratio, is currently at 40.9% as of March 31, 2023, up 7.4 percentage points from a year ago. The total debt outstanding increased by 130.3% to S$6,940.8 million. However, 75.5% of the borrowings are hedged at fixed rates. The management reassured unitholders that the gearing ratio is within a comfortable range and has a healthy margin to the regulatory limit of 50%. MPACT also remains in a highly liquid position with no issues in obtaining loans from banks.

5. MPACT recently issued S$150 million in senior green notes at 4.25% for seven years. However, unitholders can expect wider margins for borrowings from banks due to the overall increase in interest rates. The cost of debt has increased by 10 to 20 basis points since the merger, despite MPACT’s improved rating.

6. MPACT’s focus for future growth is on expanding beyond the Singapore market. While the opportunities for quality Singapore-based assets are limited, MPACT will continue to look for possible acquisitions. The management believes that China presents attractive long-term prospects, as the country is committed to rebalancing its economy and growing domestic demand through stimulus policies. MPACT expects future growth to be derived from markets outside of Singapore.

7. MPACT’s acquisition strategy is primarily focused on office or office-like assets. The management is currently refraining from acquiring retail properties due to the human-intensive nature of retail management and the need for in-depth skills and ground knowledge. However, if a retail property is part of an office development, MPACT will consider it. The geographical focus remains on the five key markets where MPACT already has a presence, as venturing into new markets carries considerable risks.

In summary, MPACT has shown strong post-merger performance with impressive growth in its financials. Despite the challenges in China, the REIT remains an attractive long-term play due to its prospects and the country’s large market influence. However, in the current high interest rate environment, investors should expect a slowdown in acquisition activities, which may serve as temporary headwinds for the REIT.

My hot take on MPACT’s AGM is that the REIT has performed well post-merger, with significant growth in its financials. The management’s focus on expanding beyond the Singapore market and its cautious approach to acquisitions demonstrate a strategic and prudent approach to long-term growth. While challenges in China persist, the country’s stimulus policies and long-term prospects make it an attractive market for MPACT. Overall, MPACT’s performance and management outlook indicate a positive outlook for the REIT.

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Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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