Image source: Straits Times
Mapletree North Asia Commercial Trust (MNACT)'s manager announced that the REIT is looking to re-open the Festival Walk in Q1 2020. Two months ago, the riot in HongKong had caused the retail mall to suffer extensive damage, which caused the mall to close since then. In Q3 2019, Festival Mall has contributed 62% of the REIT's total income. The loss of rental revenue from the damage will last for about six months which will then have a significant impact on the distribution per unit (DPU).
The management has reiterated that the loss of revenue due to the damage is covered under its insurance scheme. However, the amount recoverable by insurance claims are still being determined. In the meantime, the REIT's manager proposed a DPU top-up of up to 40% of Festival Walk's contribution in the next two quarters to maintain its DPU payout. The top-up amount will be funded through debt financing. Once the insurance claim is credited, the proceeds will be used to repay the debt, and the remaining will be paid out to the unitholders.
Acquisitions of two new properties
On 4th December, the REIT manager also announced the acquisition of two freehold office properties in Tokyo, with a combined worth of S482.5 million from Mapletree Investments.
Background of the properties
The two assets are located in the office hubs with good connectivity to the public transport and the two international airports. The properties have combined net lettable area of 91,583 square meters, with an occupancy rate of 85.9%. The two assets are expected to be 1.8% accretive to its DPU.
Financing of the assets
The acquisitions will be financed through a $337m of cash and debt, and the issue of $145.5m worth of new units. The new units will be issued to its sponsor, Mapletree Investments.
Growth prospect of the assets
The management has been putting effort to diversify its portfolio income away from Hong Kong to reduce the concentration risks of Festival Walk. Besides, the REIT also wants to tap on the Tokyo commercial property market, which is expected to be favorable with stable occupancy and rental rates.
The DPU of the REIT will be negatively impacted in the next two quarters due to the loss of income from Festival Walk. We don't like the top-up income, as it will incur more interest cost. Overall, we are negative on the REIT for short to mid-term.