Why I Sold Mapletree North Asia Commercial Trust (MNACT) Shares at $1.10

MCT/MNACT merger is big news for Singapore REITs. But here's why I sold my MNACT shares when they announced the deal.

“Willie, what do you think of the MCT/MNACT merger?”

Both Mapletree Commercial Trust (SGX:N2IU), MCT and Mapletree North Asia Commercial Trust (SGX: RW0U), MNACT combined will propel the newly merged entity, Mapletree Pan Asia Commercial Trust (MPACT) to be… 

One of the biggest Singapore REITs in the region

This allows MPACT to compete buying quality properties. And borrow cheaper loans from the bank.

This also helps to diversify their tenants. After the acquisition, each tenant will contribute less than 6% of total revenues. These are high quality tenants — Google, BMW, Seiko, HP Japan, HSBC and so on.

Now, MNACT is the kind of stock I would buy for a dividend portfolio — conservative, not too expensive — since it owns a solid, well-established portfolio of properties.

But that’s not the reason why I sold MNACT. 

I’ll explain.

Festival Walk is MNACT’s biggest retail mall, which contributes to a big portion of MNACT’s total revenues. Festival Walk is a high-end retail mall located in one of Hong Kong’s suburban areas. This mall is highly popular — producing high foot traffic and often attract big events within its mall. In fact, Festival Walk has turned itself into a “lifestyle hub” — bringing in more F&B and services-related tenants. So far, Festival Walk is almost fully occupied.

In its latest half-yearly results, MNACT’s foot traffic was up 30%, retail sales was up 22% as compared to a year ago.

MNACT’s CEO was pleased: “…achieved a DPU growth of 19% as compared to the year ago. This is largely due to lower quantum of rental reliefs granted to our retail tenants at Festival Walk from the improvement of foot traffic and retail sales.”

But here’s the thing. 

While many other retail malls from Link REIT and Fortune REIT recovered despite the COVID pandemic, MNACT is still struggling.

In the same set of financial results, Festival Walk’s rental reversion was down a whopping 30%.

Source: MNACT’s 30 Sep 2021 Financial Results

Rental reversion is the adjustments when leases are renewed. 

This means, going forward, Festival Walk’s rent will be much lower. Lesser dividends for unitholders.

The bad news: when MNACT merges with MCT to form MPACT by later this year, Festival Walk will contribute 22% of MPACT’s total revenues (see red circle below). That’s a chunky contribution. 

Source: MNACT’s 30 Sep 2021 Presentation Slides

In my opinion, if Festival Walk doesn’t recover over the next few years, it’s going to drag down the performance of the new MPACT REIT.

That’s why, I also expect dividend yield to fall.

Here’s the other thing.

You see, when the merger was announced, MNACT’s shares jumped to S$1.10.

Once the merger is done, MNACT shares will be converted into a combination of new shares plus cash — this will value existing MNACT shares at S$1.19 per unit. 

Source: MNACT’s 30 Sep 2021 Presentation Slides

Today, MNACT trades at S$1.10. Sounds like a good deal, right? Well, the upside is only about 9% from here. Not much.. And what’s more, even if you’d exchange MNACT for the new MPACT shares, you’ll still be stuck with Festival Walk. 

Not worth it.

Buying and selling properties are all about the price. At a certain level, it’s worth buying these REITs. But not at this point.


If you ask, I’ve sold my MNACT shares. 

Sometimes investing can be simple.

Willie Keng, CFA

Founder, Dividend Titan

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