Mapletree Pan Asia Commercial Trust Disappointing Fall in DPU again for Q4 FY2025/26. Time to Say Goodbye to MPACT?

Mapletree Pan Asia Commercial Trust ("MPACT") posted a 2.6% decline in distribution per unit to S$0.019 for 4th quarter ended March 2026 on the back of a sharp drop of revenue by 5.5% (from S$222.9Mil to S$210.7Mil). As usual, the overseas properties of MPACT such as Festival Walk shopping mall continued to be affected by the loss of consumers to the new shopping haven in Shenzhen which is just less than 30mins of travelling  time via the Express Rail Link. Interestingly, recently, while my Hong Kong Boss (he's a business tycoon with wide business networking in China, HK & Australia) was on a business trip to Singapore, he remarked to me that everyone in Hong Kong now goes to Shenzhen frequently as it is extremely convenient. There are cheap SPA, foot massages, value for money food and grocery available in Shenzhen hence these adversely affect Hong Kong which is facing many empty retail shops with no tenants. Gone are the good old days of ever rising rental by Hong Kong landlords. My Hong Kong Boss next made another comment that once the Malaysia Johor Bharu & Singapore RTS is completed and fully functional, Singapore retail scene is going the way of Hong Kong, that is, it will also be severely affected by the surge in Singaporeans going for cheaper food and services across the causeway. 

Extracted Results Summary Q4 FY25/26

1. MPACT Q4 Results Ending March 2026.

Ok, back to MPACT most recent results announcement. The declining rental income from its overseas properties seem to have no bottom. I was initially optimistic that we have seen the trough of the decline in rental income given the many consecutive quarters and previously sky high negative rental reversion. 

If one refers to the screenshot below of all the main properties of MPACT, we can see that the revenue of Festival Walk HK continued to drop from S$49.9Mil to S$42.5Mil. Consequently, its NPI declined from S$37.7Mil to S$31.7Mil. The official reason stated for this decline is due to the sales of the Festival Walk office component.  

Without stripping off the effect of the disposal of its office component, we cannot really tell the current performance since we are comparing apple to orange. Hence Festival Walk HK is not exactly out of the woods yet until we have more clarity. 

Properties Breakdown Comparatives Q4 Current FY vs Q4 last FY

Key Financial Highlights For MPACT

2. Change in Investment Thesis on MPACT.

My thoughts are that my investment thesis on MPACT may need to change. I mean I have no doubt that its Singapore properties of Vivocity and Mapletree Business Park are still performing well. Nevertheless, the overseas properties continued to be a drag on its overall results and distributions to unit-holders. I am having some serious doubts on whether MPACT has further room to appreciate to catch up to its NAV per unit of around S$1.73 as at 31 March 2026. 

To elaborate further, the elephant in the room is whether its NAV is S$1.73 per unit or already close to its market price of S$1.40 per unit given the expected decline in NAV attributed to the poor performance of its overseas properties. The decline in NAV is not just in theory. If you look at 31 December 2025, its NAV per unit was S$1.78 per unit and now it has further eroded to S$1.73 per unit as at 31 March 2026. 

MPACT Vivocity

3. Parting Thoughts

I have put MPACT on my watchlist and to see whether its management will continue spinning off its non-performing overseas properties. While there seems to be improvement in Festival Walk tenant sales by 6% as reported, I am unsure whether the rental rates decline have stopped. I will probably wait for further clarity in the next quarter reporting before making a call on whether to just sell off all my MPACT units and recycle the funds to other investments. Are you folks still holding on to MPACT?

Mapletree Pan Asia Commercial Trust Mixed Q3 Results For 2025/2026.

Mapletree Pan Asia Commercial Trust ("MPACT") reported a higher Q3 distribution relatively to prior year. Nonetheless, its Revenue and net property income actually decrease. The issue with MPACT is still the same, that is, its crown jewel Singapore asset- Vivocity- continues to shine brightly while its overseas investment properties are still facing headwinds. Its occupancy rate as a consolidated group is only 88.1%.  So if Singapore Vivocity is currently 100% occupied, one can easily see that its overseas assets performance has been nothing short of a disaster- Japan and China properties are at occupancy rate of only 73.1% and 83.6% respectively as seen per below screenshot:

Occupancy Rates Breakdown

1. Other Key Overseas Property-Festival Walk (Hong Kong)

While Festival Walk continued to show resilience in its occupancy rate at a high 98% for past 2 years, its rental reversion continued to reflect a negative trend of <-10%> for Q3.  

Negative Reversion Again for Q3

Additionally, MPACT also will be completing its divestment of the office component of Festival Walk by February 2026. I think that this is the right step for MPACT which is struggling in its financial performance due to its overseas investment properties.

2. Key Financial Highlights

Key Highlights

Q3 Financials

As per earlier discussed, MPACT Q3 results are a tad disappointing in terms of operations. The good news here is that its Finance Expenses has lowered significantly by +10.2%. This is a +S$6Mil savings in terms of finance expenses for a quarter. Saying that, MPACT is not yet out of the woods. Its overseas properties are dragging down its overall financial performance. It maybe time to just divest its China and Japan properties. As for Hong Kong retail, I think that Festival Walk should see a gradual slow down in its negative rental reversion given that its economy is finally seeing the lights at the end of the tunnel. 

Parting Thoughts

Overall, I thought that it is a decent quarter for MPACT especially with higher distributions to unit-holders despite the not so good overseas performance. Given its Net Asset Value of S$1.75 per unit vs the market price of S$1.46 per unit, there is a still a 16.5% discount to NAV. MPACT should continue to diversify its overseas assets in order to realise more intrinsic value for unit-holders.

How to Invest Into Singapore Real Estate Investment Trusts? My Personal Approaches to REITS.

How to Invest Into Singapore Real Estate Investment Trusts? My Personal Approaches to REITS- Please refer to below video:

Living on the Knife’s Edge These Days- Investment Portfolios Heavy Losses and Personal Wealth Maybe Already Destined at Birth

Just when everyone thought that the China-US trade war has simmered down, the King of Mayhem, Donald Trump, unleashed another round of turmoil to the global stock markets by threatening a 50% tariff on the European Union (“EU”) and a 25% import tariff on Apple iPhones not made in US. This is hundred of billions in trade with EU. Retaliatory actions-which we are sure of-by the EU will basically mean the end of trade between US and the EU. It does not matter whether this is another brilliant negotiation tactic out of the “Art of the Deal” book by Trump as he has succeed in damaging trade and bilateral ties with EU even if he were to change his mind later on. 

1. Local bread and butter- potential loss of jobs in upcoming market slowdown.

There has been a slow down in business in retail definitely. I have been living on the knife’s edge (刀口上舔血) for the past 2 years. Despite my company making record profits in 2024, the senior management at HQ has not approved any salary increment again. I guess the uncertain economic outlook contributes to the current predicament. Maybe should have applied to be a civil servant in government for stability instead of taking a private commercial career path. Now too old to change with a short runway once you hit middle age.

2. REIT heavy portfolio going lower.

Wow, the recent see-saw up down up down for REITs is never ending. With bond price crashing due to higher yield demand for the supposingly risk free US Treasuries, this mean that REITs must also produce a higher income yield which puts tremendous downward pressure on REITs. We can see the Mapletree family of REITs crashing to near recent low again. Will it go down further? Yup, this is definitely possible given the antics of the King of Mayhem.  

3. Transferring CPF Ordinary Account to CPF Special Account for higher 1.5% more interest income.

When we talk about the strategy of transferring CPF OA to CPF special to get the higher 1.5% more interest income, the property guru and YouTuber Eric Chiew always come to my mind. This is because Eric will mock folks who do this as it means not much money left in the CPF OA to upgrade to bigger private condominium to make tons of money. 

Sometimes, one has to accept one’s wealth destiny. My ex-colleague (68 years old) who has retired told me that in everyone’s life, how much money one can made in this lifetime is more or less already decided at birth. Haha….so not everyone can expect to be like Eric who keep flipping properties to get wealthy and then get to live in landed property. If your destined life is like salted vegetable, chances are when you try to buy a second property to Huat big big, you may end up like in 2008 or 1990s where the property market crash over 20% and get very stressed up for 4-5 years trying to pay off the mortgage like a slave to the bank and your work place boss.

Or to share another tragic story, I had another colleague who suddenly got into a car accident (you can’t control other drivers from recklessly driving into you) with multiple fractures and also pain medication withdrawal side effects that effectively diminish your ability permanently to function effectively as an employee and business owner. Then how to pay for huge monthly mortgages?

Parting thoughts

The only light at the end of the tunnel is that Donald Trump only has 4 years tenure as president of the United States. Making America Great Again (“MAGA”) seems to be destroying everyone including US itself with the high prices for daily necessities and other imported products.

Upcoming US Recession and SREIT Rally From Lower Interest Rate Fallacy.

Wow, this is really bad news! Early US economic data for the first quarter of 2025 is pointing towards negative growth, according to the Federal Reserve Bank of Atlanta. If we have 2 consecutive quarters of negative growth, then techincally, the US would be in an economic recession. What this means is that the probability of two or even more Federal Reserve rate cuts has just increased drastically. 

1. The Call to Buy REITs as Interest Rate Cuts Will Mean Huge Savings in Financing Cost is a Fallacy.

Interestingly, a number of folks on social media have mentioned that now maybe the best time to buy into REITs which have been performing badly and in the doldrums. Nevertheless, it is important to note that a financing cut may not lead to a rally in SREIT market price because the main factor is still whether the REIT can continue to generate sustainable rental income. Many businesses will be severely impacted and there will be increased in bankruptcy from firms and consumers. There will also be widespread retrenchment of staff (which we are already seeing for a number of years).   

Not suprisingly, during past recessions, most of the REITs will have substantial drop in their market price (along with the broad market sentiment) despite a lower interest rate environment. So far, I have not seen REITs price rally in past recessions. Do remember that REITs are still equities afterall and underlying business fundamentals are still the essential determinant of its market price. This is unlike bonds instrument whereby their market price soar when interest rate is being cut- this is the basic 101 inverse relationship of bond price vs the market financing rate.  

2. REITS I Will Try Avoiding During Recession

Personally, I will be avoiding the following REITs sector:

(1) Hospitality REITs- if everyone is struggling with bread and butter, no one will be in the mood for travelling; demand will thus plunge. 

(2) Office Commercial REITs- Too cyclical and unpredictable.

Instead, I think that shopping mall REITs (Frasers Centrepoint Trust and Lendlease REIT) as well as Industrial REITs (backed by Temasek Holdings) will be a safer buy while waiting for the market to recover.  Special theme REIT like strip malls with grocery focused business (United Hampshire US REIT) should also be a safer place to ride out the recession. 

Parting Thoughts

With a narrowing net interest margin spread, bank stocks like DBS, UOB & OCBC will find their earnings dipping soon as they have peaked. SREITs will also be in the doldrum for at least another year or two. So will you folks be making any adjustment to your current portfolios?

Investment Portfolios Updates (30 December 2024) - Net Investment of S$709K and Projected Annualised Passive Income of S$47K.

It has been 3 months since my last update of investment portfolios on 27 September 2024. The rally in S-REITs and China stocks fizzled out quickly in a short span and it seems that we are back to square one. Overall, real estate related investment assets still make up about 60% of my combined portfolios. I have continued to work on diversifying away from real estate related businesses and have continued investing into mostly bond related unit trusts via Endowus as well as buying into F&B retail business of Kimly Group. 

1. Portfolio 1- Stocks held in SGX Central Depository 
(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

Main changes here as aforesaid mentioned is the addition of Kimly F&B retail group here. I have also took part in the preferential rights issue for Keppel DC REIT. I retained the additional units of KDC in my SGX account while selling off the additional units in my Margin Trustee account- see below.

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

Took part in the preferential rights issue for Keppel DC REIT and then sold off all the 4,000 additional units in my Margin Trustee account and bought 5,000 units of Mapletree Pan Asia Commercial Trust. 

In addition, I also invested into the Bank of China as well as ICBC Bank here. 

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

(Venture into higher risk as well as capital growth stocks here)

Bought into additional units of Oceanus here as well as ICBC (Bank). 

4. Portfolio 4 (Endowus Unit Trusts & Other Investments)

The public and government objection to the Allianz acquistion of Income Ltd means that the 300% capital gain deal fell into the drain. Worst still, the suspension of public trading of Income Ltd shares on Alta platform as at 17 Octobet 2024 is a double whammy due to the fallout from the Allianz deal. Income Ltd management team screwed up big time on this one.

I have also decided to start drawing down the dividends and distribution from Portfolio 4 going forward.

Summary

I sincerely hope that 2025 will be a better year and that the run-away inflation has been tamed and that interest rate will remain as it is else any increase in rates will once again batter REITs and bonds asset prices to death. 

Would also like to take this opportunity to wish all a Happy New Year and may we all prosper together in 2025! :)😎

Selling Excess Rights Keppel DC REIT For Mapletree Pan Asia Commercial Trust.

Surprisingly, I managed to get all my rights and excess units subscription for Keppel DC REIT ("KDC") preferential rights offering, that is, 5,000 units @ S$2.03 per unit. As per my previous post, I think that KDC is overvalued, so I decided to keep only 1,000 units of the allocated KDC units while selling 4,000 units from the rights allotment to lock in a tiny profit to the market price of S$2.10 per unit and prepare for redeployment in view of the sharp correction in the prices of many blue-chip REITs.

1. Reassessment of Mapletree Pan Asia Commercial Trust ("MPACT")

On the crown jewel front, Vivocity shopping mall continued to shine brightly in terms of its financial performance for the 1st half of FY2024/25. Its other local jewel of Mapletree Business City seems to have lost some of its luster with commited occupancy dropping from 96.8% on 30 September 2023 to 92.5% as at 30 September 2024- nonetheless, its quarter on quarter occupancy has held on well. 

MPACT's Hong Kong segment also seems to have finally some signs of optimism sprouting. I think that the fear of all Hong Kong folks going over to Shenzhen to shop and dine via the high speed train and thus marking the end of Hong Kong shopping malls, may have been over-exaggerated. Festival Walk is a major shopping mall in Kowloon and not strictly just catering for tourist. It remains a popular hangout place for the Hong Kong local folks as per my chit chatting with Hong Kong colleagues.

1.1 Hong Kong star property- Festival Walk finally seeing lights at the end of the tunnel with rental stabilising.

The negative rental reversion has slowed down for Festival Walk albeit my Hong Kong colleagues still feeling gloomy with their economic outlook. 6 mths ago, the reported rental reversion is a miserable -8.7% while the recent announcement is a tad lower -6.1%.

 There are also ongoing efforts to curate the right retail mix to cater to local's demand for experiential and lifestyle concepts.

1.2 The Accretive Divestment of Non-Core Asset Mapletree Anson on 31 July 2024

The successful divestment of Mapletree Anson at a fair value gain while MPACT is trading at 29% off its NTA thus managed to lower its aggregate leverage to 38.4% (below 40% level) and boost unit-holders return.

1.3 Sharp Drop in market price back to S$1.20 per unit as at 20 December 2024 range from S$1.53 per unit on 3rd October 2024.

MPACT has corrected by approximately 20% in less than 3 months. This is despite the continued interest rate reduction by the US Federal Reserve that was just announced. It is also giving out an attractive distribution yield of 6.5% per annum based on the recent distribution.

Parting thoughts

After selling off my KDC excess stocks, I have snapped up 5,000 units of MPACT last week @ S$1.21 per unit in view of the significant price correction. Come to year end, I intend to invest another S$10K to either MPACT or Link REIT as I think that Hong Kong will eventually rise and shine brightly again given the latest developments- Hong Kong's economy is set on a recovery path with five consecutive quarters of positive GDP growth.

SREITS Crashed Again- REITS Or SG Banks More Attractive?

SREIT tumbled down again over the past 2 weeks. Interestingly, I see a number of folks like Josh Tan buying into Mapletree Industrial Trust (“MIT”) or Master Leong strong preference for Mapletree PanAsia Commercial Trust (“MPACT”) to take advantage of the recent “crash” while others like the famous AK71 preferred the local trio of DBS, OCBC and UOB banking stocks as better buy than REITs. For the latter, the local banks are only paying out 50%-60% of their earnings as dividends to shareholders while ploughing back 40%-50% of their earnings into the business which should theoretically keep building up their Net Assets Value and eventually their market price should gradually increase. So it gets kinda of confusing on whether one should buy more REITs during the current downturn for the REITS sector or accumulate more local SG bank stocks given the different opinions of their preferences. 

1. Time to Chiong/Accumulate more SREITs while prices crash and interest rate being slashed gradually into 2025?

Personally, I have mentioned before my thoughts in September 2024 that most of our SREITs are now priced fairly given that we should not expect future interest rate to be near the previous decade of zero interest rate environment. Distribution yield of 5.5% to 6.0% for blue-chips SREITs should be the norm now. Anything that is lower will not compensate for the additional risk premium one undertakes relative to the local risk-free rate. 

MIT’s distribution yield of 5.96% at unit price of  S$2.27 per unit is decent. But I would not say super attractive given that its market value per unit is at a huge premium over its NTA per unit. Since MIT is my second largest holdings already, I did not add on any further.

As for MPACT, while its distribution yield is now at an attractive 6.9% (@ S$1.23 per unit) and its market value per unit is at a large discount over its NTA per unit, the stock market maybe pricing in substantial worsening in distributions from its Hong Kong, China and Japan exposure. Also, its crown jewel of Mapletree Business City seems to be losing its luster. So I guess the usual high risk high reward adage will apply here. It thus depends on which crystal ball you are gleaning into for whether the foray here will reap handsome return or just a lackluster one.

2. Local Banks With Splendid Results Expected Into 2025.

There is no doubt that DBS, UOB and OCBC trio have been having a good run since last year due to the sudden spike in interest rate on their net interest margin and also wealth management business. But if recession comes, bank stocks will also crash and risk of bad debts increase exponentially. I will be staying away from banks for now unless there is a substantial correction in their prices. 

Parting Thoughts and My Watchlist.

Given the recent developments as aforesaid mentioned, I have been focusing my monthly nibble size investments into Endowus bond funds and Keppel Ltd. I thought that overseas REIT such as Link REIT looks more attractive given its market price is almost 40% off its net book value per unit and giving a distribution yield of 7.6% with 21% leverage ratio.

 

Invest SREITs at all-time low or better to go into Bond Investment Instead?

I am having a headache recently with regard to my upcoming regular month end of additional capital injection into the investment portfolios. On one hand, SREITs have tanked again to near their 52 weeks low and now seems the best time to invest. Saying that, in particularly for the past few months, whenever I thought that the SREITs prices have bottomed and accumulated more units, their price just dropped further. On the other hand, my investment forage into bond unit trusts over the past 1 year has been stable thus far especially with global inflation under control- interest income which I had received is around 6% return per annum and capital price of the bond fund held their ground well. Moreover, there is also potential further capital appreciation once interest rate cuts by the US Federal Reserve is announced.

1. Invest SREITs at all-time low or better to go into Bond Investment Instead? 

I think that I will probably add on to the bond unit trusts for June 2024 month end as I have previously in May 2024 already invested approximately S$10K into both United Hampshire US REIT and Frasers Logistics & Commercial Trust  (unfortunately, both SREIT's unit price declined further after my respective purchases).

2. A close friend asked me whether Equities or Money Market Funds is the best investment in view of current market?

I thought that my friend asked me a very interesting question. My personal thoughts are that for risk averse folks who find equities and bonds extremely risky, then maybe buying into the Money Market Funds is well worth it. Singapore Saving Bonds or T-bills are also good options. 

The thing is that over the years, I have decided to just keep my real thoughts to myself whenever risk averse close friends asked me such question. I will at most just share my thoughts on the above financial instruments since their risk profile is extreme prudence and they generally ask for the sake of affirming their own beliefs (if you say something else, then it gets into a heated debate). However, the fact remains that returns from such investments will barely keep up with inflation. I think that some risks need to be undertaken in order to exit the rat race earlier.

Ok, that's all for today's post, have a great week ahead folks!   

Investment Portfolios Updates (7 July 23) - S$538K and Projected Annualised Passive Income of S$53K.

The stock markets had a good recovery over the last week. However, my portfolio remains in the doldrum-all additional capital injection over the past 6 months into the SGX seems to be sucked into a bottomless blackhole. I have made some adjustments to the dividend income yield projection listed on StocksCafe for US office REITs by taking a further haircut of 25% to reflect forward dividend returns. (Note: Please also refer to my other Family Portfolio which is projected to yield +S$20K per annum).

 1. Portfolio 1- Stocks held in SGX Central Depository 

(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

The major change here was the selling off of Fu Yu Corp and switching to Keppel Corp  and OCBC over the past 1 month- please read more here: "SGX Listed Fu Yu Corporation No Longer A Cash Cow- 3 Things To Be Wary". I have been building up my position in Keppel Corp, which is similarly undergoing a business transformation, in both my Portfolio 1 and Portfolio 2.

I have also been busy building up additional stakes in Netlink Trust to ensure sufficient diversification away from REITs. 

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

(i) On 5th May 2023, I have sold off all my 16,000 units of holdings in Mapletree PanAsia Commercial Trust @S$1.72 per unit. All proceeds have been reinvested into Keppel Corp. Please read more here: " Saying Goodbye to Mapletree Pan Asia Commercial Trust".

(ii) Added 4,000 units of AIMS APAC REIT during its recent rights issue exercise to finance AEI initiatives. Please see "AIMS APAC REIT Announced Fund Raising For Asset Enhancement And Property Redevelopment- Important Timelines To Take Note".

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here

Sold off whatever remains of Fu Yu Corp and partial disposal of Alibaba and switched to DigiCore REIT. Please refer to my previous post on rationale: "US Digital Core REIT- Worst Maybe Over With Unraveling of Stalking Horse Bid by 16 July 2023".

4. Portfolio 4 (Other Investments)- Non-listed Equities+ Endowus

(a) I have added PIMCO GIS Income Fund and Allianz Global High Yield Fund to my existing Fidelity Global Dividend Fund in Endowus to create a "Balanced Fund" portfolio that targets to return distribution of 5.5% yield per annum. This is a 20% equities and 80% fixed income portfolio- the equity component will allow one to still have some upsides in terms of long term capital appreciation from global equities on top of having a high distribution payout on a monthly basis. 

(b) The Endowus Secure Cash a money market fund that is offering a target of 3.7% to 3.9% annual return on cash placed. Withdrawal can be anytime and there is no lock in period. 

(c) The Endowus Enhanced Cash seeks to pay out higher distribution of 4.2% to 4.5% per annum. Have put some funds here also to test run. So far, the return has been worst than the Endowus Secure Cash with negative returns on some days.

Summary

I am extremely disappointed with my Alibaba holdings which seems to have become a value trap and incurring lots of opportunity cost. The only consolation is that I have stopped adding on to it and Alibaba forms only a small portion of my overall portfolios. Nevertheless, I will still be holding on to the remaining Alibaba shares and hope that with the upcoming IPO of the major business divisions, it can finally unlock value for the long debilitated share price.

Saying Goodbye to Mapletree Pan Asia Commercial Trust.

 

I have just sold off all my 16,000 units in Mapletree Pan Asia Commercial Trust ("MPACT") during the 1st week of May 2023. The main reason being that Festival Walk and other China overseas office assets are becoming more of a liability to MPACT now. True enough, in the recently announced results for Q4 2023, their Hong Kong jewel property, Festival Walk, reported negative rental reversion again. It seems that VivoCity and Mapletree Business City are being left to hold the fort for MPACT. My personal thoughts are that the merger exercise last year to combine the 2 Mapletree REITs had not produced much synergy and on the contrary, it appears to be destroying value for investors due to the under performance of the newly acquired overseas properties in Hong Kong and China.  

1. Falling Overseas Properties Valuation

The staggering loss in property valuation of S$398Mil mainly due to forex translation losses is just astonishing. 

2. Low Occupancy For Overseas Assets

The office properties in China are the main culprit for the lowly 86.5% occupancy. 

3. Hong Kong's Festival Walk Failed To Deliver Yet Again

Festival Walk which made up 18% of Gross Revenue contribution has a negative -12.7% rental reversion despite the gradual lifting of COVID measures in Hong Kong which have improved retail sales and shoppers traffic at the mall. This really makes one wonder when will this nightmarish downtrend end and turn positive. While I have no doubt that this will turn around eventually, it may be a longer wait then expected. 

Parting thoughts

I do hope that MPACT management starts considering the disposal of weaker overseas assets such as those China offices in order to shore up its financial performance and also to reduce its debt gearing which has exceeded over 40% (last year was 33.5% before the merger), especially in view of the current crazy high interest rate environment. 

Anyway, as aforesaid mentioned, I had decided to throw in the towel and exited with a decent overall profit last week. Will be re-investing the proceeds into another SGX blue-chip company (non-REITs) for its better growth prospects as well as decent dividend yield of over 5% (will probably blog about this another day). 

Mapletree Commercial Trust Tragic Preferential Offering Still Higher Than Market Price.

The tragic Preferential Offering exercise for Mapletree Commercial Trust ("MCT") has commenced on 12 July 2022 and will close at 5.30pm on Wednesday, 20 July 2022. The offer basis will be 306 Preferential Offering Units for every 1,000 existing MCT Units held by eligible unit-holders at the issue price of S$2.0039 per unit. It is a tragedy as the current market traded price as at 18 July 2022 is S$ 1.790 per unit hence no one in the right frame of mind will be subscribing for this particular rights issue which is at a premium of +12% to the market traded price on SGX. Mapletree Investments Pte Ltd will be taking up all the unsubscribed rights and losing as much as S$200Mil immediately in unrealised losses.  

Time table for Preferential Offering

Offered price way higher than last market trading price

While I have previously sold off my entire Mapletree North Asia Commercial Trust ("MNACT"), I am still holding on to MCT and as a matter of fact, I have been adding more units into MCT with the recent dip in pricing. With the previous January sudden outbreak of Omicron variant of COVID in Hong Kong being brought under better control, much of the restrictions previously imposed has been relaxed and this bodes well for its key asset Festival Walk acquired from MNACT. The negative rental reversion for Festival Walk should turn-around eventually.

Last but not least, I am sure that the incumbent property manager will continue to maximise the potential of all the newly acquired assets given its good track record of growing its portfolio under the management of the Mapletree branding. In addition, Mapletree Investments Pte Ltd seems to be of the view that the newly merged entity is worth at least S$2.0039 per unit and willing to undertake all the rights issue at this exorbitant price. 

(Note: Since I am being heckled as well as being trolled online these days whenever my past few posting relating to REITs is put up on a Facebook group, I need to state here that having a liberal mind on discussion of 2 sides of a coin should never be perceived to be "filmsy" or "airy". It is also perfectly ok to disagree with my views but one should not be overly confrontational, in particularly, through harassing or trying to disconcert others with challenges or gibes.)

The Merger Into Mapletree Pan Asia Commercial Trust- What Should Existing Mapletree Trusts Investors Do?

The talk of the town this week is the proposed merger between Mapletree Commercial Trust ("MCT") and Mapletree North Asia Commercial Trust ("MNACT") into a combined behemoth known as the Mapletree Pan Asia Commercial Trust with S$17.1 billion worth of assets under management. Through the proposed merger, MCT will gain ready access to footholds in key gateway cities across Asia, tapping on the established network, strong local expertise and on-the ground presence of both MNACT and their Sponsor, Mapletree Investment Group. Wider geographical exposure will also provide the combined entity a new trajectory for overseas growth. While the marketing materials make it seems everything is perfect, I will try to elaborate more on the elephant in the room for the upcoming merger: Yes- my thoughts are that this deal unfortunately does not bode well for certain group of unit-holders.

1. Existing downside risk for unit-holders of MNACT being transferred to MCT

(i) The biggest headache here is that the China and Hong Kong are still pursuing a zero COVID tolerance approach while many other countries have already started opening up and adopting a live with COVID strategy. Furthermore, Sinovac vaccines has been found in a recent Hong Kong study that it does not provide sufficient anti-bodies to neutralise the Omicron variant. It will be some time before things get back to normal before the pre-covid days. We can already see many negative rental reversion in the crown jewel Festival Walk of MNACT. Most Hong Kong retailers have remained conservative and cautious on committing to long-term leases.

There were 35 leases at Festival Walk in 1st half of 2021 that were renewed at an average -30% rental rate

Gateway Plaza at Beijing also have 13 office leases being renewed at an average negative rental reversion of -24% during the most recent results announcement.

Beijing office also performed badly with -24% rental reversion

(ii) Let me explain further here on another blip on the radar. Eventually, China and Hong Kong will have to open up their borders fully. This will lead to a stage whereby their healthcare system will be initially overloaded with many COVID cases and death rate will go up. This is similar to European countries and Singapore which have already went through this initial stage. Hence, there will be enhanced control measures in place which is obviously bad for business. I expect the opening up to be somewhere end of 2022 or even in 2023 which means that MCT will be picking up the tab for this issue while paying NAV price for MNACT. 

2. MNACT properties are not in the same league as MCT's Vivocity and Mapletree Business Parks

Compare Festival Walk, the China and Japan commercial office properties to Vivocity and Mapletree Business City- I don't think we need to discuss this further to know that existing MCT unit-holders will be getting the shorter end of the stick here. 

Vivocity

3. Should Unit-holders of MNACT sell off their units upon resumption of trading?

Well, this is the fun part which needs some form of mental acrobatics given that once the trading halt is lifted, the market price will fluctuate. Due to point 1 and point 2 as aforesaid mentioned, there is a very high probability that MCT will dip below S$2 as MCT unit-holders will most likely be frowning at being given the shorter end of the stick. As such, MNACT trading price will be below S$1.19 along with the fact that this deal is not done yet.

In short, we can expect MNACT to be trading in the range between S$1.11 per unit (the last traded price) to S$1.19 per unit. My guess is that it will hover around S$1.15 per unit for now. Of course, if the price of MCT suddenly shot up instead to more than S$2.0039 per unit (the offered consideration to MNACT), then one can consider keeping it.

To sell or not for existing MNACT unit-holders will ultimately depend on your own entry price, concentration of your own portfolio and other investment criteria.  For me personally, I maybe looking at exiting my MNACT current holdings as my entry price was around S$1.00 per unit for an immediate realization of my profits and re-deploy them to other undervalued commercial REITs. 

    

4. Should Unit-holders of MCT sell off their units upon resumption of trading?

As alluded to the above points, there are some short term downside risks being transferred over to MCT from MNACT. This has no doubt some short term repercussion. But current medical advancements against COVID is picking up pace. The long term picture still bodes well for unit-holders of MCT in terms of assets and geographical diversification. 

I plan to carry on holding my units in MCT to maintain sufficient portfolio diversification in my margin investment account portfolio. 

Mapletree Business City

Parting thoughts:

There will certainly be some unhappy unit-holders who would have preferred their own plain vanilla REIT focusing entirely on either overseas or Singapore. Another point that I want to bring up to everyone is that from long term perspective, I believe that the merged entity of Mapletree Pan Asia Commercial Trust will have economies of scale and more diversity of assets. Last but not least and most importantly, the sponsor is Mapletree and behind it is the financial might of Temasek supporting it- this is a premium factor in itself.  

P.S: I am currently an unit-holder of both MCT and MNACT units.

Trading Halt For Both Mapletree Commercial Trust and Mapletree North Asia Commercial Trust

Trading halt was called since this morning for both Mapletree Commercial Trust ("MCT") and Mapletree North Asia Commercial Trust ("MNACT"). Looks like a possible merger and acquisition involving the two REITs to build up its size for greater synergy? Yesterday, I was trying to buy additional Mapletree North Asia Trust due to its high distribution yield of around 6.5% but was very surprised to see the price keep shooting upwards and have to give up. SGX  regulators ought to do better in preventing leakage of important information from leaking out before major announcements. In the end, I decided to invest the extra cash into Capitaland Integrated Commercial Trust (this is another story that I will share on another day). Let's keep our fingers crossed that Mapletree will come up with some value adding initiative in their upcoming announcement for all investors.

(Note: I am currently vested in both MCT and MNACT).