Mapletree North Asia Commercial Trust warns of DPU hit from Festival Walk damage

Hong Kong currency notesHong Kong currency notes

Mapletree North Asia Commercial Trust (MNACT) warned Wednesday its distribution per unit (DPU) for the six-month period ending 31 March was expected to be “significantly lower” both on-year and on-half due to loss of income from the Festival Walk property in Hong Kong.

To mitigate the impact, the REIT’s manager will top-up the distributable income for the quarter ending 31 December, or the fiscal third quarter, as well as the fiscal fourth and first quarters, the REIT said in a filing to SGX.

“The distribution top-up is to enable a certain level of distributable income to be made until such time the loss of revenue is recovered through the insurance claims. The distribution top-up amount, based on approximately 40 percent of the Festival Walk retail revenue, will be included in the capital component of the distributable income payable,” the REIT said.

“Once the insurance claims proceeds are received, the same will be used to repay the external borrowings incurred to fund the distribution top-up,” it added.

While insurance coverage includes property damage and loss of revenue from business interruptions, the amounts are still being assessed and the timing of receiving claims isn’t yet determined, the REIT said.

The REIT noted the Festival Walk mall has been closed since 13 November due to extensive damage. The damage was related to the ongoing protests in Hong Kong.

“There are major recovery and repair works to be carried out on multiple levels and locations within the mall. These include repairs and/or replacements to the glass entrances, glass curtain walls, portion of the skylight, escalators, lifts, and glass balustrades along the common areas,” the REIT said.

MNACT said it was working to reopen the mall, either partially or fully, in the first three months of 2020, subject to approval from authorities.

Rents from retail tenants will not be collected while the mall is closed, the REIT said.

The Festival Walk office tower was closed from 13 to 15 November due to damage at the office lobby, with no rents collected from tenants during that period, the REIT said, adding it reopened on 26 November and rental collection from office tenants has resumed.

MNACT’s portfolio has nine properties across China, Japan and Hong Kong, and on Wednesday, it said it entered a deal to acquire two office properties in Greater Tokyo.