Sharon Lim, CEO of Mapletree Commercial Trust’s manager, said Friday that for her Singapore-based trust to venture overseas, it either needed to go big or stay home.
“Because we are only in Singapore, and one of the last of the Mohicans left with only Singapore-centric assets, for me to move overseas, my maiden move has to be significant,” she said in a press conference to announce a big overseas acquisition.
Buying a small property overseas wouldn’t showcase the ability to do deals, and would be “very stretched on the management,” she said. To venture overseas, “we have to have the operating platform. And that is very valuable if they’re capable people and operating on the ground. Without that platform, it’s very hard for us to execute in terms of driving the asset after acquisition.”
Mapletree Commercial Trust went big, announcing Friday it would acquire Mapletree North Asia Commercial Trust (MNACT) in a S$4.22 billion deal which will create one of Asia’s top-10 largest REITs, with assets across Singapore, South Korea, China, Hong Kong and Japan. The combined entity will be called Mapletree Pan Asia Commercial Trust.
Lim said that prior to announcing to the deal, investor feedback had indicated concerns over where the Singapore-based portfolio would find long-term growth.
“Singapore has always been a very stable and giving us very good returns over the years,” Lim said. “But if we look at really meaningful, long-term expansion, we have to grow inorganically. That’s where we are proposing this merger, that can set ourselves up to be better placed to take on new opportunities overseas.”
Mapletree Commercial Trust’s portfolio has five properties in Singapore, including VivoCity, which is among Singapore’s largest malls, as well as Mapletree Business City, mTower, Mapletree Anson, and Bank of America Merrill Lynch HarbourFront.
MNACT’s portfolio includes property mainly used for commercial purposes, including retail and office space, with assets located in Japan, South Korea, China and Hong Kong.
The combined portfolio will hold 18 commercial properties, with assets under management of around S$17.1 billion, the trusts said in a filing to SGX Friday.
In one sign of the size of the deal, units of both trusts were halted for four full trading days — Tuesday through Friday. Lim said the halt was due to “prudence” as the trusts were “in the thick of the heavy negotiations.”
Going forward, Lim said the combined trust would mainly focus on office and business park assets, while remaining selective on retail assets, noting some structural pressures in the retail segment.
Even before the Covid-19 pandemic struck, retail properties in general were facing declining interest for in-person shopping. The pandemic, and the resulting lockdowns and movement restrictions, boosted acceptance of e-commerce and further dampened interest in physical retail.
Cindy Chow, CEO of MNACT’s manager, said the merged entity was “definitely envisaged” to go beyond the existing markets of Singapore, Japan, South Korea, China and Hong Kong.
“But I think the platform is definitely well placed to continue to grow within the existing North Asia markets that MNACT already has,” Chow said at the press conference.
“In terms of immediate targets, definitely, there are quite a number of opportunities that we can already immediately look into, within the for North Asian markets that we are currently in,” Chow said, adding the larger, combined platform will be able to do much larger deals.
The deal is expected to be completed around mid-2022.