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Mapletree North Asia Commercial Trust to acquire 2 Tokyo office properties

MAPLETREE North Asia Commercial Trust's (MNACT) manager announced on Wednesday that it is acquiring an effective interest of 98.47 per cent in two freehold office properties in Greater Tokyo, Japan for S$482.5 million from Mapletree Investments.

The total acquisition cost comprises the aggregate consideration of approximately S$477.7 million and the estimated professional and other fees and expenses of approximately S$4.8 million.

The proposed acquisitions have a net property income yield of 4.5 per cent.

The two properties are mBay Point Makuhari Building (MBP) in Chiba and Omori Prime Building (OPB) in Tokyo. The assets have a gross floor area of 180,941 square metres (sqm) altogether and a net lettable area of 91,583 sqm. As at Sept 30 this year, the occupancy rate was 85.9 per cent with 53 tenants altogether.

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Cindy Chow, CEO of the manager, said that the proposed acquisition of the two office towers in Greater Tokyo will contribute to the diversification of MNACT and reduce the income and asset concentration of Festival Walk. Festival Walk is its retail mall in Hong Kong that has been closed since Nov 13 as it had suffered extensive damage from the protests in the city.

She pointed out that the properties in Japan are freehold and provide a "relatively higher yield spread against the local cost of funds" compared to the Greater China market.

The properties also have convenient access to public transport nodes with a "strong tenant base from a diverse trade mix", she added. They include information technology, financial and real estate sectors, with the potential opportunity to "lease up" progressively and improve portfolio occupancy.

Upon completion of the proposed acquisitions, the property value of the enlarged portfolio will stand at about S$8.2 billion, up 6.3 per cent from the existing portfolio of S$7.7 billion. Japan's contribution by net property income will go up from 11.6 per cent to 17 per cent.

The manager intends to finance the total acquisition cost with issuance of units to the sponsor's nominee (Suffolk Assets, a wholly-owned subsidiary of Mapletree Investments), debt financing, and internal cash resources. The issuance of units to Suffolk Assets is subject to the grant of a whitewash waiver.

Separately, MNACT's manager also announced that it hopes to reopen the Festival Walk mall, either partially or fully, in the first quarter of 2020. The re-opening is also subject to approvals to be obtained from the relevant authorities.

Due to the loss of retail and office revenue from damages sustained, the manager said that MNACT's distribution per unit (DPU) for the six-month period from Oct 1, 2019 to March 31, 2020 (2H FY19/20) is expected to be significantly lower compared to the same period last year.

To mitigate the impact on the distributable income payable to unitholders, the manager will implement a top-up to the distributable income for the third and fourth quarter of FY19/20, as well as the first quarter of FY20/21.

The distribution top-up is to enable a certain level of distributable income to be made until such time the loss of revenue is recovered through the insurance claims, said the manager.

The amount, based on approximately 40 per cent of the Festival Walk retail revenue, will be included in the capital component of the distributable income payable for each of the distribution periods and funded by external borrowings.

Once the insurance claims proceeds are received, the same will be used to repay the external borrowings incurred to fund the distribution top-up and the balance will be distributed as part of the distributable income payable to unitholders.