MPACT’s Greater China lag takes shine away from strong Singapore showing

EVEN as China announced the scrapping of its strict zero-Covid policy towards the end of 2022, a lag in recovery for Mapletree Pan Asia Commercial Trust’s (MPACT) assets in Greater China is weighing on its overall growth.

The Festival Walk mall in Hong Kong – MPACT’s biggest property by asset value – experienced rental reversion of minus 12.7 per cent for the full year ended March 2023.

Meanwhile, rental reversion at its Gateway Plaza office asset in Beijing and Sandhill Plaza business park in Shanghai came in at minus 3.7 per cent for the financial year from 2022 to 2023.

All its other properties in Singapore, Japan and South Korea recorded positive rental reversions of between 1.6 per cent and 14.2 per cent.

“If you look at Hong Kong, of course it’s slower. It used to be about four million (tourist arrivals) a month from China… (but) in the last two months it was about two million (in total). So there’s still some room (for improvement),” said Sharon Lim, chief executive of the trust’s manager, at a briefing on Friday (Apr 28).

Shopper traffic was recorded at 29.8 million in FY2022/23, up 16 per cent year on year. However, this remained significantly lower than the 41.3 million shoppers captured in FY2018/19. Even before curbs due to the Covid-19 pandemic, the mall had been shut for repairs after suffering damage by anti-government protestors in late 2019.

Tenant sales were up 9.3 per cent year on year to HK$3.9 billion (S$664.3 million) in FY2022/23, but remained 26 per cent lower than in FY2018/19.

The way Lim sees it, rental reversion is “en route” to recovery. The real estate investment trust (Reit) manager noted that the Festival Walk mall recorded rental reversions of minus 27 per cent and minus 21 per cent in FY2021/22 and FY2020/21 respectively.

But first, she says, there must be signs of a consistent recovery.

“It has to be consistent, because the tenants have suffered for three to four years. They are not going to buy in with one quarter of good sales and say: ‘Hey, I’ll give you the rent’,” Lim said. “They need to see some sustained higher sales.”

The performance at MPACT’s assets in Hong Kong and China stands in stark contrast to that of its assets in Singapore.

For example, at VivoCity – Singapore’s largest shopping mall – full-year tenant sales surpassed S$1 billion for the first time, as shopper traffic rose 48.4 per cent and tenant sales climbed 30.6 per cent. The mall recorded reversion rates of 7.7 per cent for FY2022/23.

Citi analyst Brandon Lee believes that the outlook could be brighter for Festival Walk in future.

“Festival Walk continued to witness negative reversion of minus 12.7 per cent in FY2023, but improving sales and traffic as a result of the opening of borders with China and the lifting of all remaining measures do provide optimism going into the next fiscal year,” he said.

However, he cautioned that MPACT’s China assets could continue to experience weakness in view of a significant supply expected to come online in both the Shanghai and Beijing markets.

MPACT’s gross revenue grew 65.4 per cent to S$826.2 million for FY2022/23, while net property income rose 62.6 per cent to S$631.9 million.

This was mainly due to contributions from properties acquired through the merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust to form MPACT, which was completed on Jul 21, 2022.

Full-year distribution per unit (DPU) was 0.8 per cent higher at S$0.0961. Excluding the release of retained cash in the year-ago period, DPU for FY2022/23 would have been 6.1 per cent higher.