Mapletree North Asia Commercial Trust's H1 DPU up 19.1%

MALL and office landlord Mapletree North Asia Commercial Trust (MNACT) has increased its half-year distribution per unit (DPU) to 3.426 Singapore cents from 2.876 cents a year ago.

The trust's results were lifted by lower rental reliefs that were given out amid higher footfall and retail sales at Hong Kong's Festival Walk mall, as well as by contributions from the acquisition of the Hewlett-Packard Japan Headquarters Building in Japan and The Pinnacle Gangnam in Korea.

Net property income rose 15.8 per cent to S$161.9 million as gross revenue increased 13.3 per cent to S$215.4 million for the first-half ended Sep 30.

Distributable income climbed 23.4 per cent to S$119.5 million.

Festival Walk mall and Gateway Plaza office building in Beijing, however, recorded lower average rental rates, which dragged down gross revenue. Rental reversions at Festival Walk's retail segment were negative 30 per cent, while those at Gateway Plaza were negative 24 per cent.

Portfolio occupancy edged up to 97.9 per cent as at the end of September. Aggregate leverage ratio decreased to 41.4 per cent as at Sep 30, from 41.8 per cent as at Jun 30.

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The manager said the trust's outlook is expected to be uneven across different markets, given the spread of the Covid-19 Delta variant, supply chain disruptions, higher inflation and rising interest rates.

It pointed out that in Hong Kong, improved retail sales performance has yet to transform into leasing demand on a meaningful scale. Most retailers have been cautious about committing to long-term leases, hence demand in major shopping districts remains predominantly driven by short-term leases and pop-up stores.

For Festival Walk, the average renewal or re-let rental rate for FY2022 is expected to be lower than the year before.

A bigger supply of properties in Beijing in the second half is likely to further push up vacancy rates and place pressure on rents and landlords, the manager said. But new supply is expected to drop in 2022 and 2023, which should suppress vacancy rates.

One of the major tenants in Gateway Plaza has extended its lease in advance by another year, but there is a risk that the lease might not be extended beyond December 2023, the manager cautioned.

MNACT's properties in Shanghai are expected to achieve a stable performance.

In Tokyo, cost-cutting tenants are driving demand for office buildings in decentralised areas, leading to the growing popularity of satellite offices amid the pandemic. "Japan properties, which comprise mainly decentralised offices, are expected to continue to attract such demand and maintain a high level of occupancy," the manager said.

Books close on Nov 8 and distributions to unitholders will be made on Dec 24.

The counter closed flat at S$1 on Thursday (Oct 28).