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Better portfolio contribution boosts MCT's Q2 DPU to 2.32 S cents

HIGHER contribution from its assets - VivoCity, Mapletree Business City (MBC) I, PSA Building and Bank of America Merrill Lynch HarbourFront Mapletree Commercial Trust - boosted Mapletree Commercial Trust's (MCT) second-quarter performance, all except for Mapletree Anson.

For the three months ended Sept 30, the commercial landlord posted a distribution per unit of 2.32 Singapore cents, up from 2.27 cents a year ago.

Gross revenue rose 1.9 per cent to S$112 million, while net property income added 1.7 per cent to S$87.7 million. Income available for distribution was also consequently 1.9 per cent higher year-on-year at S$66.8 million.

MCT's portfolio occupancy fell to 96.1 per cent from 97.3 per cent as at end-June 2019. Occupancy at Mapletree Anson was hit especially hard, falling to 75.1 per cent as at end-September, although including commitments, it would have been 99 per cent.

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The trust's biggest asset, VivoCity, posted 5.1 per cent and 4.9 per cent growth in gross revenue and net property income respectively, driven by higher rental income from new and renewed leases, following mall refurbishments and step-up rents in existing leases.

As at Sept 30, VivoCity was fully committed. Momentum of shopper traffic and tenant sales also picked up with the progressive opening of new stores on Basement 2 and Level 1 in Q2, the trust said.

The Reit manager also announced that it had on Tuesday obtained unitholders' approval for the proposed acquisition of Mapletree Business City (Phase 2) for S$1.55 billion, enlarging MCT's asset size from S$7.4 billion to S$8.9 billion.

CEO of the Reit manager Sharon Lim said: "It reinforces MCT's foothold in the Alexandra precinct, giving us greater economies of scale and flexibility in meeting tenant requirements. Post-acquisition, MCT's portfolio will be further elevated, with best-in-class assets, namely VivoCity, MBC I and MBC II, making up approximately 80 per cent of the enlarged portfolio's valuation and net property income."

MCT's office and business park assets generated slight uptick in gross revenue and net property income in the first half of the year, but the trust flagged a slowdown in the overall leasing volumes in the broader market, due to tight vacancies in higher-quality buildings, as well as a lack of new supply on the horizon.

"The two-tier market continued to diverge as highlighted by the lower vacancy in the city fringe submarket where Mapletree Business City is located. Average rents maintained at the same level of S$5.80 per square foot per month and S$3.80 per square foot per month for the city fringe and the rest of island submarkets respectively. CBRE expects rents and vacancy to be relatively unchanged and maintain at current levels over the moderate term," the Reit said.

Units of the trust closed one cent lower at S$2.34 on Tuesday.