MPACT struggles with leasing demand, cost of debt as Q4 DPU tumbles 14.8%

[SINGAPORE] The manager of Mapletree Pan Asia Commercial Trust (MPACT) on Friday (Apr 25) warned of ongoing challenges – including slow leasing demand and higher-for-longer cost of debt – as distribution per unit (DPU) for the fourth quarter ended March slid 14.8 per cent year on year to S$0.0195, from S$0.0229.

“Decision-making has slowed down quite a lot, and tenants tend to be more cost conscious,” said Koh Wee Leong, head of investments and asset management at MPACT’s manager, at a briefing accompanying the real estate investment trust’s (Reit) results announcement.

MPACT’s committed portfolio occupancy rate fell to 89.6 per cent as at end March, from 96.1 per cent in the year-ago period.

The decline was led by occupancy at its Japan properties, which dropped to 79.8 per cent, from 97.9 per cent.

Meanwhile, the manager says China remains one of its “more challenging markets”.

“Leasing demand still remains fairly weak in both Shanghai and Beijing,” Koh said. “In particular, for Shanghai, we will likely see a little bit of headwinds going forward… due to the trade tensions.”

In Singapore, committed occupancy at Mapletree Business City (MBC) has also fallen – to 91.2 per cent, from 96 per cent previously.

“There have been a number of non-renewals (at MBC)… and most of those spaces are still in the process of being leased out,” Koh said. “Our experience in the past three to six months has been that tenants have been taking a far longer time to make decisions.”

For example, he said the manager is still currently marketing the two floors of space at MBC that tech giant Google gave up during the previous lease renewal.

“There are a number of (prospective) tenants who are looking at it, but the reality is spaces which are large have very few tenants looking at it currently,” Koh said. “We’ve been engaging the one or two potential tenants for at least three to six months already and we’re still working with them.”

For the latest quarter, MPACT’s distributable income stood fell 14 per cent to S$103.6 million. Unitholders can expect to receive the distribution payout on Jun 6 after books closure on May 5.

Q4 revenue fell 6.8 per cent to S$222.9 million from S$239.2 million in the year-ago period; net property income (NPI) for the quarter dropped 7.4 per cent to S$169.5 million from S$183.1 million.

The manager attributed the lower revenue to reduced contribution from the Reit’s Singapore properties following the divestment of Mapletree Anson on Jul 31, 2024.

Contribution from overseas properties was also lower, mainly due to weaker performance as a result of lower occupancy and negative rental reversion.

Rental reversions for MPACT’s Hong Kong, Japan and China properties came in at -6.9 per cent, -7.2 per cent and -9.3 per cent, respectively, for FY24/25.

In the Q4 business update, Sharon Lim, chief executive officer of the Reit manager, noted that VivoCity provided some stability, recording 3.5 per cent and 2.1 per cent year-on-year growth in its full-year revenue and NPI, respectively.

The Reit’s DPU for the full year stood at S$0.0802, down 10 per cent from S$0.0891 in the same period in the year prior.

Overall portfolio tenant retention rate was 89.6 per cent, with a weighted average lease expiry of 2.2 years as at Mar 31.

“We are intensifying efforts to safeguard occupancy and cash flow while exploring suitable opportunities to optimise the portfolio,” said Lim.

On the capital management front, MPACT’s aggregate leverage ratio fell to 37.7 per cent as at Mar 31, 2025, from 40.5 per cent the year before, largely due to the divestment of Mapletree Anson.

The average term to maturity of debt was extended to 3.3 years as at Mar 31, from three years previously.

However, the Reit’s weighted average all-in cost of debt per annum rose to 3.51 per cent, from 3.35 per cent in the year-ago period.

This was a slight decline from 3.52 per cent as at Dec 31, 2024. However, Janica Tan, chief financial officer of the Reit manager, was careful to dismiss suggestions by analysts at the briefing that MPACT’s cost of debt might have peaked.

“We do have interest rate swaps at high rates at the moment and it’s only going to drop off in the next two years up to March 2027,” Tan said. “At the moment, not yet.”

Units of MPACT closed flat at S$1.22 on Friday, following the results announcement.