This company doesn’t need much introduction.
Mapletree Commercial Trust (SGX: N2IU) is a major Singapore REIT with a market cap of S$6.8 billion. It owns the biggest shopping mall in Singapore — VivoCity.
Located at the heart of HarbourFront Precinct, VivoCity is the gateway to Sentosa, a famous getaway destination for tourists and locals.
What’s impressive about VivoCity is it’s jam-packed with retail outlets, with a total 352 leases — from fashion to electronics and food, all under one roof.
But the management team always brings the mall’s retail experience one step ahead.
VivoCity is turning some of its retail spaces into “concept” stores.
For example, the mall recently reported that Adidas (ETR: ADS) Original doubled its retail footprint on Basement One of the mall.
The sports apparel giant brings in some of its most extensive collections of sneakers. And this outlet is Adidas’ largest flagship store in Southeast Asia.
In 2019, FairPrice opened its largest hypermarket store — FairPrice Xtra hypermarket, in VivoCity.
Taking up 90,000 sqft, the hypermarket occupies two floors of the mall and even includes a dine-in area where customers can have staff cook their choice of seafood or meat picked from the hypermarket itself.
VivoCity is also well known for bringing some of the best foods to Singaporeans.
One of them is Shake Shack, a wildly-popular American burger joint known for their mouthwatering burgers and milkshakes. Another is Hoshino Coffee with its Japanese-western fusion cafe and many more.
Shoppers typically don’t get bored with food choices, unlike other shopping malls in Singapore.
You will agree with me the mall attracts strong foot traffic. When Phase Three finally arrived last December, tenant sales returned close to 80% of pre-COVID levels, while shopper traffic climbed back to 60% of pre-Covid levels.
As the pandemic situation improves, shopper traffic should stabilise at around current levels
But, Mapletree Commercial Trust doesn’t just own VivoCity.
You see, its trophy asset is actually Mapletree Business City, or MBC.
MBC is so big that it comprises two large-scale, integrated office and business park “Grade-A” type complexes — MBC I and MBC II — worth S$3.7 billion in property value.
During its latest fiscal 2021 nine-month earnings report, MBC contributed S$159 million and S$131 million in gross revenue and net property income respectively, up 40% and 41% respectively year-on-year.
The huge rental income growth in Mapletree Business City was mainly due to MBC II’s full contribution, plus higher occupancy and the increase in rental rates for existing leases.
Today, Mapletree Commercial Trust owns a total of five well-located properties, with mTower, Mapletree Anson and MLHF being the other three properties.
What further stabilizes Mapletree Commercial Trust’s overall revenues is its high-quality tenants. Some of the biggest tenants in MBC include Google Asia Pacific, Merrill Lynch Global Services, PSA Corporation, Info-Communications Media Development Authority and Unilever Asia.
Having strong financial capital management is the hallmark of a well-run REIT. And Mapletree Commercial Trust has a solid financial policy. As of December 2020, management has sufficient external funding to refinance all of its debt due in the coming financial year ended March 2022.
Mapletree Commercial Trust also has more than S$500 million of cash and undrawn committed facilities to meet additional working capital and debt obligations.
REITs get into trouble if they cannot refinance their debt. But fortunately, Mapletree Commercial Trust does not have that problem.
And because of its high-quality properties, Mapletree Commercial Trust pays a low borrowing cost of 2.5% per year and has healthy interest coverage of 4.2 times.
So far, Mapletree Commercial Trust’s share price has rebounded 40% to S$2.11 per share, from the low back in March 2020.
But it has yet to recover fully to its pre-Covid highs back in Feb 2020 of S$2.35 per share.
The reason for the depressed share price is probably due to continued weak retail demand caused by the ongoing pandemic, which should change as the situation improves.
Already, VivoCity’s tenant sales and foot traffic are recovering well.
In fact, Mapletree Commercial Trust’s overall occupancy is close to 100% as the REIT struggled through the tough challenges posed by the pandemic last year.
While its current dividend yield of 3.3% may not be the most exciting, Mapletree Commercial Trust still offers one of the most stable and resilient property portfolios in Singapore.
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Disclaimer: Willie Keng does not own shares in any of the companies mentioned.