Greater Southern Waterfront to spur massive gains for MCT

Majority of MCT’s portfolio is within the HarbourFront Area, including its crown jewel VivoCity.

Mapletree Commercial Trust (MCT) stands to be the primary beneficiary of the development of Greater Southern Waterfront (GSW), according to a report by UOB Kay Hian.

Ninety-one percent (91%) of MCT’s portfolio valuation is located within the HarbourFront Area in GSW. Chief amongst these properties is shopping centre VivoCity, whose revenue contribution grew 5.1% YoY to $55.6m in Q2 FY2020. MCT’s 5% rental reversion on a portfolio basis was also driven mainly by VivoCity (+6.8%).

VivoCity’s actual occupancy improved 5.1 ppt YoY to 99.8% with a committed occupancy of 100%, which UOB Kay Hian noted as an impressive feat given the huge size of the property. Retention rate for VivoCity was also reportedly healthy at 89.7%.

Office/business park properties located in the HarbourArea Front—PSA building, America Merrill Lynch HarbourFront (MLHF), and Mapletree Business City Phase I (MBC)—also pushed up high occupancies in Q2. The PSA building’s occupancy was 2.9 ppt QoQ higher with a 93.5% occupancy. America Merrill Lynch HarbourFront (MLHF) retained its 100% occupancy.

Gross revenue and NPI from office/business park properties were up 0.4% and 0.2% YoY respectively in H1, driven by higher rental income from renewed leases at PSA Building, higher rental income from new leases at MBC I, and step-up rents in existing leases at both MBC I and MLHF, the report added.

MCT has also secured four replacement tenants for office space vacated by Sumitomo Corporation, which will start contributing from Nov 2019 to Jan 2020.

MCT’s assets would also expand by 21% to $8.9b should the proposed acquisition of Mapletree Business City Phase 2 (MBC II) push through.The property is expected to be acquired at an NPI yield of 5%, which is higher than MCT’s existing portfolio’s NPI yield of 4.7%. Shareholders approved the proposal on on 15 October.

Also read: MBCII buy to boost Mapletree Commercial Trust's DPU by up to 6%: analyst

As for occupancy, Google currently occupies 680,000 sqft of MBC II and contributed 58.1% of its gross rental income. Other key tenants include Cisco Systems, Covidien and Credit Agricole.

Post acquisition, VivoCity, MBC I and MBC II will make up approximately 80% of the enlarged portfolio’s valuation and NPI.

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