Singapore's Largest Mixed REIT

Mapletree Commercial Trust (MCT) is Singapore's largest mixed REIT with a market capitalization of $6.5 billion at its current share price of $1.95. MCT has a diversified portfolio of properties in Singapore that are used for both retail and commercial purposes. MCT is sponsored by Mapletree which is a leading real estate development, investment, capital, and property management company in Singapore. MCT's popularity has increased among investors over the recent years with its share price soaring from around $1.40 in 2016 to a high of $2.45 in Jan 2020. Its share price has since decreased by 20% to $1.95 due to the COVID-19 pandemic. MCT's excellent track record over the years has propelled it to become one of Singapore's hot retail/commercial REITs among dividend investors. What exactly makes MCT such a popular REIT?

Consistently Increasing Dividends

MCT has a 10-year consistent dividend history and has been paying out dividends to shareholders without fail since 2011. Dividend investors can be more or less assured that they will continue to receive their dividends in the future due to MCT's proven dividend track record. Their 5-year average dividend yield is only 4.5% which is average among Singapore REITs (4-5%0. However, their distribution per unit and distributable income to shareholders has been steadily increasing since they started paying out dividends in 2011. Their distribution per unit in 2011 was 5.274 cents while their distribution per unit in 2019 was an impressive 9.140 cents. This reflects the high-quality dividends that MCT is paying out to its shareholders. Moreover, this attracts dividend investors as it shows that MCT's portfolio performance has been increasing steadily over the years and the management of MCT is doing an excellent job in managing MCT. However, MCT's distribution per unit for FY 19/20 decreased to 8 cents due to the COVID-19 pandemic affecting their portfolio. MCT's gross revenue decreased by 10.5% from $112.1 million to $100.3 million in 1Q FY 20/21 and its net property income also decreased by 10.7% from $88.3 million to $78.9 million in 1Q FY 20/21. Nevertheless, investors are confident that MCT's portfolio and distributable dividends will able to rebound quickly once the COVID-19 pandemic tides over. MCT's consistently increasing dividend payouts over the past decade are one of the reasons it became Singapore's largest mixed REIT. 

Diversified Tenant Portfolio and High Tenant Occupancy Rate

MCT's portfolio consists of 5 high-quality properties in Singapore - 4 located in Harbourfront and Alexandra Precincts and 1 in the Central Business District with a total valuation of $8.9 billion as of 30 March 2020. MCT has actively acquired new properties over the years to diversify and expand its portfolio such as the acquisition of Mapletree Business City 1 in 2016 and Mapletree Business City 2 in 2019. MCT is not overly reliant on any one of its properties for a significant portion of its net property income and its tenants come from a wide range of retail and commercial industries. Additionally, MCT has high-quality tenants such as Bank of America Merill Lynch and its properties are all state-of-the-art retail/commercial properties strategically located near MRTs in Singapore. This diversification of properties and tenants helps to protect MCT's portfolio performance in tough economic times such as the current COVID-19 pandemic. Additionally, MCT has a high tenant occupancy rate of 97.1% as of 30 June 2020. This is an extremely high tenant occupancy rate for a mixed REIT and reflects the quality and popularity of MCT's properties among tenants in Singapore. MCT's weighted average lease expiry (WALE) has a committed basis of 2.6 years (Retail 2.3 years and Commerical 2.9 years). MCT is maximizing its properties to generate as much income as possible which would mean a higher dividend payout for shareholders. MCT's diversified tenant portfolio and high tenant occupancy rate increase its attractiveness and resilience to dividend investors in Singapore.

Well-Managed Debt

MCT has a debt gearing ratio of 33.7% as of 30 June 2020 which is well within my appropriate debt gearing ratio of 40%. It is also well within the Monetary Authority of Singapore's allowed ratio of 50% in the COVID-19 pandemic. REITs often use debt as leverage to acquire more properties and investments to expand their portfolio at a faster rate. It is paramount for a REIT to manage its debt well and ensure that it does not over-leverage to prevent cash flow problems in the future. MCT's management has staggered MCT's debt payments such that no significant amount of debt is due in any one of the coming years. For reference, MCT's well-distributed debt profile has no more than 15% of the debt due in any financial year. Moreover, MCT has enhanced financial flexibility from more than $1 billion of cash and undrawn facilities. The average term to maturity of debt for MCT is 3.9 years. It is highly unlikely that MCT would ever face cash flow problems in the future due to its well-managed debt portfolio. This increases dividend investors' confidence in MCT's performance in the future as investors are assured that MCT will not have any significant cash flow problems affecting their portfolio in the future. MCT's prudent capital management and well-managed debt have helped drive it to become one of Singapore's most popular REITs. 

Verdict

In my opinion, MCT is a high-quality REIT that will definitely perform in the long run for your dividend portfolio. MCT's mixed portfolio of both retail and commercial properties, combined with its high-quality tenants makes it an extremely resilient REIT to own. Also, their consistently increasing distribution per unit over the past decade reflects their outstanding performance and management. However, MCT's dividends and performance would definitely be affected in the short-term by the COVID-19 pandemic. If you are looking for long-term gains on your portfolio, you can definitely consider adding this high-quality mixed REIT to your portfolio. 

Source: Mapletree Commercial Trust 1Q FY 20/21 Business Update

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