MNACT posts 13.3% fall in Q3 DPU to 1.671 S cents

North Asia Commercial Trust ( MNACT) reported on Friday that its distribution per unit (DPU) for the third quarter fell 13.3 per cent to 1.671 Singapore cents, down from 1.927 cents a year ago.

The Q3 DPU included a distribution top-up to mitigate the impact of Festival Walk's closure on distributable income. The mall in Hong Kong was damaged in recent protests and was closed from Nov 13 to Jan 15, during which time MNACT was unable to collect rental from the retail tenants. The office tower was closed for a shorter period, from Nov 13 to 25, and rental collection resumed on Nov 26.

Revenue for the three months ended Dec 31 was down 36.3 per cent to S$67.28 million, on the back of lower revenue from Festival Walk mall, lower revenue from a Japan property that was converted to multi-tenancies from single tenancy, and lower revenue from Gateway Plaza due to lower average occupancy.

Net property income (NPI) fell 40 per cent to S$50.8 million, and distributable income shrank 12.5 per cent to S$53.4 million. For the nine months ended Dec 31, DPU was 5.558 cents, down from 5.734 cents a year ago.

Revenue shrank 8.9 per cent to S$277.7 million and NPI dipped 10 per cent to S$220.6 million, mainly due to lower revenue from Festival Walk. This was partially offset by full nine-month contribution from the Japan properties, whose acquisition was completed on May 25, 2018.

Distributable income edged down 0.8 per cent to S$177.2 million.

Aside from the Festival Walk mall in Hong Kong and its portfolio of properties in Japan, MNACT also has office properties in Beijing and Shanghai. The Reit manager said that slower economic growth and trade tensions continued to drag on leasing activities in those properties, with revenue falling on lower average occupancy rates and the yuan's lower average rate.

The Festival Walk top-ups were to be paid out over three quarters (Q3 and Q4 FY19/20, and Q1 FY20/21), but as the mall reopened earlier than expected, MNACT will not have a distribution top-up in Q1 FY20/21. Unitholders will receive their Q3 distribution on March 10. The books closure date is Jan 28 at 5pm.

MNACT units closed up one Singapore cent or 0.81 per cent to S$1.24 on Friday before the results were announced. This was mainly due to an enlarged unit base following a placement and preferential offering to partially fund its US$198.8 million acquisition of 400 Capitol Mall.

Gross revenue rose 13.3 per cent to US$45.7 million from US$40.4 million last year, largely due to contributions from the acquisition of two office towers in Virginia for US$122 million. In May this year, the Reit ( real estate investment trust) unveiled plans to buy Centerpointe I & II in Fairfax, Virginia, about 30 kilometres west of the US capital of Washington, DC.

Net property income for the quarter also increased 11.8 per cent to US$28.1 million, on the back of its acquisitions, which included Centrepointe, 1750 Pennsylvania Avenue also in Washington DC, and the Phipps Tower in Buckhead, Atlanta. Distributable income was up 7.8 per cent to US$20.8 million, from US$19.3 million last year.

The Reit's third-quarter DPU of 1.48 US cents comprises an advanced distribution of 1.47 US cents to be paid on Nov 29, while the remaining DPU of 0.01 US cent will be paid with its Q4 DPU in the first quarter next year, it said.

On Sept 30 2019, Manulife US Reit issued about 91.3 million new units in connection with the Capitol private placement. The manager declared an advanced distribution for the period from July 1 to Sept 29, being the day prior to the day when the new units were issued.

This was to ensure that the total amount available for distribution, accrued by Manulife US Reit up to the day prior to the date on which the new units were issued, was only distributed to the existing unitholders, it said.

Jill Smith, chief executive of the manager, said: "Backed by its strong sponsor, Manulife, the Reit now owns nine premier Trophy and Class A buildings. Including the recent acquisition of Capitol, Manulife US Reit's AUM (asset under management) has increased 20.4 per cent year on year to US$2.1 billion. At every step, we have aimed to fortify the portfolio through diversification of income. We have maintained a long WALE (weighted average lease expiry) of six years and a high occupancy of 97.3 per cent by consciously increasing the trade sectors without compromising on the quality of the tenants.

"Our properties have been carefully selected for their location in capital cities and top MSAs ( Metropolitan Statistical Areas) that are expected to remain resilient through property cycles over the long term. Since its IPO ( initial public offering), the Reit has steadily attracted a significant institutional investor base that will put it in good stead to remain the US Reit of choice - especially with the FTSE EPRA NaReit Index inclusion in sight."