Letter to the Editor: Proposed Mapletree merger is ‘highly detrimental’ to MCT unitholders

Mapletree Commercial Trust's VivoCity mall. Photo taken November 2021Mapletree Commercial Trust's VivoCity mall. Photo taken November 2021

Disclaimer: This is an opinion piece submitted to Shenton Wire’s editor. The opinions expressed in this item are the writer’s own and do not purport to reflect Shenton Wire’s views.

The proposed merger between Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) is being presented as a win-win deal. The reality though is that MCT holders are being asked to approve the acquisition of an underperforming REIT at a hefty premium.

While MCT has delivered steady growth over the years, MNACT’s performance has been choppy and lackluster as seen from data on MNACT’s own website and in the appendix to the PowerPoint presentation shared by both REITs.

For instance, while MCT’s distribution per unit has grown by an average of 4.8 percent per annum since IPO, MNACT’s has increased by just 1.9 percent.

MCT’s unit price has increased by an average of 8 percent a year since IPO compared to MNACT’s 2 percent, while MCT’s gearing is much lower at 33.7 percent versus MNACT’s 42.2 percent.

The future does not look promising either as Festival Walk, MNACT’s key asset, is sitting on land with just 26 years remaining on the lease, according to its fiscal 2021 annual report. MNACT’s latest financial results indicate that rents at Festival Walk are likely to continue falling in the near future.

Despite MNACT’s poor track record and outlook, MCT unit holders are being asked to value their sister REIT at a premium of 7.6 percent to 17.8 percent over the market price depending on how it is calculated.

As such, I strongly urge fellow minority shareholders of MCT to reject this value-destroying proposed merger.

I used to regard Mapletree Investments as one of the better sponsors in terms of how it treats minority shareholders. I no longer hold this view.

Yours sincerely

Kevin Lim Fung Ming

Note: This item cites the trusts’ joint investor presentation on the merger, pages 39 and 40.