VTLs may hurt shopper traffic in short term, says Mapletree Commercial Trust manager

WHILE the opening of vaccinated travel lanes (VTLs) has raised hopes that an increase in visitors will bring retail sentiment a step closer to pre-Covid levels, Sharon Lim, the chief executive officer of the manager of Mapletree Commercial Trust (MCT), believes there could be a "net negative effect" on shopper footfall in Singapore malls in the short term.

The Singapore-listed real estate investment trust (S-Reit) owns retail and office assets in Singapore, such as VivoCity, Mapletree Business Centre (MBC) and mTower.

"Singaporeans love to travel. Any time the gates open, a lot of people will try to go out," Lim said at a briefing on Thursday (Oct 28) following the release of MCT's half-year financial results after market close on Oct 27. "I think there will be a net negative effect, in my view, when it's open for a short period, because we're not going to get the reciprocal love of more tourists coming in versus Singaporeans running out for holiday."

Lim qualified that this was her "personal view" that is not backed by data. However, using a potential VTL with Hong Kong as an example, she added: "Everybody wants to go to Hong Kong, but Hong Kongers, not everybody wants to come to Singapore ... So in the short term, I think it's negative."

Overall, Lim said VivoCity has been suffering due to the border closures. But, to its credit, MCT has so far been doing fairly well on the shopper traffic front despite protracted Covid-19 restrictions in Singapore.

For the H1 FY21/22 to end September, shopper traffic at VivoCity grew 31.6 per cent year on year, while tenant sales rose 30.4 per cent to S$338.9 million - just about 25 per cent lower than pre-Covid levels.

This comes despite maximum capacity regulations on dining-in at its F&B tenants which accounted for a third of the Reit's revenue from VivoCity.

"I own up that I will not be able to outperform the suburban malls, which are actually quite resilient during this Covid period," Lim said, adding that the asset is performing "slightly better" than the Orchard Road malls.

"When the borders open and people start coming back to the office, (we will be) back to the good old days," she said.

For now, however, MCT remains resilient despite the challenges amid the pandemic.

For the 6-month period, MCT achieved positive portfolio rental reversion of 2.3 per cent, with committed occupancy at 96 per cent as at end September.

The manager said it hopes to see more improvement in leasing once the restrictions are lifted and people are able to move around more freely.

Gross revenue for the first half grew 11.5 per cent to S$243.7 million while net property income increased 10.7 per cent to S$189.9 million. Distribution per unit (DPU) was up 5.3 per cent to 4.39 Singapore cents.

However, the better performance was mainly due to lower rental rebates of S$17.7 million in H1 compared to S$40.5 million a year ago, as well as compensation received from a pre-terminated lease at mTower.

Going into the second half of its financial year, the manager said it may have to give out a similar level of rental rebates as it did in H1.

"Assuming the same status of operations, the limitation on dining, the number of lockdowns is similar to the first half (and) is replicated in the second half, that will be a general guidance," Lim said.

"(But) it's very hard to predict," she added. "At the end of the day, I'm not sure when the borders are going to open, I'm not sure whether the restrictions are going to be lifted and how they will be lifted."