Mapletree GCC Tr Financial Results Ending 31 Mar 2017

“Our proactive portfolio management and prudent capital management have yielded stable DPU returns in FY16/17 despite the challenging business environment. The three properties continued to demonstrate resilience, achieving positive rental reversions and high occupancies.

For FY17/18, we remain committed to driving organic growth and extracting operational efficiencies, as well as to carry out asset enhancement works to maintain the prime positioning of our assets. In addition to a disciplined capital management approach to mitigate the impact of interest rate and foreign exchange volatilities, we will also continue to seek out opportunities to enhance and add to the value of our portfolio.”

Ms. Cindy Chow, Chief Executive Officer

1.959 cents SGD (4Q 2017)

MGCCT Delivers Stable DPU of 7.320 cents for FY16/17

  • FY16/17 Available DPU at 7.320 cents, 1.0% higher compared to 7.248 cents for FY15/16
  • Underpinned by resilience of the three assets in MGCCT’s portfolio

 

Mapletree Greater China Commercial Trust Management Ltd. (“MGCCTM” or the “Manager”), the Manager of Mapletree Greater China Commercial Trust (“MGCCT”), announced today an Available Distribution per Unit (“DPU”) of 7.320 cents for the period from 1 April 2016 to 31 March 2017 (“FY16/17”), 1% higher than FY15/16.

The Available DPU for the quarter from 1 January 2017 to 31 March 2017 (“4Q FY16/17”) was 1.959 cents, an increase of 1.9% over the DPU of 1.923 cents for the same quarter last year. The increase is mainly due to the reversal of Value Added Tax (“VAT”) payable previously assumed at a higher rate, following the clarification obtained from the local tax authorities on the applicable VAT rate and implementation process at Gateway Plaza in March 2017, offset by additional property tax for Gateway Plaza arising from the change in computation basis effective July 2016.

MGCCT’s distribution policy is to distribute on a semi-annual basis. Its distribution for the period from 1 October 2016 to 31 March 2017 (“2H FY16/17”) is 3.731 cents1. Unitholders can expect to receive the distribution on Monday, 29 May 2017. The closure of MGCCT’s Transfer Books and Register of Unitholders is on Friday, 5 May 2017 at 5.00pm.

Ms. Cindy Chow, Chief Executive Officer of the Manager, said, “Our proactive portfolio management and prudent capital management have yielded stable DPU returns in FY16/17 despite the challenging business environment. The three properties continued to demonstrate resilience, achieving positive rental reversions and high occupancies.

For FY17/18, we remain committed to driving organic growth and extracting operational efficiencies, as well as to carry out asset enhancement works to maintain the prime positioning of our assets. In addition to a disciplined capital management approach to mitigate the impact of interest rate and foreign exchange volatilities, we will also continue to seek out opportunities to enhance and add to the value of our portfolio.”

 

Portfolio Update

Notwithstanding a soft retail market in Hong Kong3, Festival Walk’s performance remained healthy in FY16/17. Gross Revenue and NPI rose 4.5% and 5.7% respectively compared to the preceding year. All retail leases that expired during the year were renewed or re-let with a rental reversion4 averaging 12%. While FY16/17 retail sales decreased 8.8% compared to a year ago, the mall remained fully occupied and attracted a steady stream of shoppers with annual footfall maintained at about 40.4 million. During the quarter, Festival Walk welcomed new brands and continued to organise innovative events including the “Festival Walk – PlayStation® Sports Arena”, which featured sports apparel and gear from tenants, virtual reality games, a treasure hunt and an indoor six–metre rock climbing wall.

At Gateway Plaza, occupancy level was maintained at 96.9% as of 31 March 2017. While leasing demand from foreign companies was further weakened amidst global economic uncertainty, demand from domestic companies remained firm. About 92% of the leases with expiries in FY16/17 have been renewed or re-let at an average rental reversion of 10%. However, the lower average rate of RMB against SGD and the change in property tax basis effective July 2016, resulted in a 11.8% year- on-year decline in NPI for FY16/17. In addition to active leasing efforts, the Manager will carry out asset enhancement works to maintain and further improve the marketability of the building.

Sandhill Plaza, which was acquired on 17 June 2015, continued to add to the growth and diversification of our portfolio. Enjoying full occupancy, the property made a full-year contribution of S$24.3 million and S$22.6 million to the portfolio’s FY16/17 Gross Revenue and NPI respectively, as compared to Gross Revenue of S$17.8 million and NPI of S$16.5 million in FY15/16. All leases with expiries in FY16/17 have been renewed or re-let at an average rental reversion of 16%.

 

Increased Portfolio Valuation at S$6,226.3 million

MGCCT’s assets were valued by Colliers International (Hong Kong) Limited at S$6,226.3 million as of 31 March 2017, resulting in fair valuation gain of S$218.9 million compared to that as of 31 March 2016. Over the same period, the Net Asset Value (“NAV”) per Unit grew from S$1.239 to S$1.3011.

 

Awards & Accolades at Festival Walk

Affirming its position as a leading shopping, dining and lifestyle destination, Festival Walk won 15 industry awards in the quarter:

  • Ten awards at the 2017 Stevie® Awards for Sales & Customer Service comprising ‘Inbound Marketing Program of the Year (Gold)’ for the ‘Christmas Secret Garden’ event, five Silver and four Bronze Awards;
  • ‘Top 10 My Favourite Mall’ and ‘Most Trendy Shopping Mall’ at the Best Mall Awards 2016 organised by Apple Daily;
  • ‘Top 10 Favourite Shopping Mall Award 2016 – 2017’ organised by Hong Kong Economic Times;
  • ‘Best Promotion Campaign Award’ for the ‘Disney Tsum Tsum Walk N’ Roll Festival’ at both Asian Licensing Awards 2016 and Hong Kong Licensing Awards 2016, organised by the Asian Licensing Association and presented by the Hong Kong Trade Development Council.

 

Capital Management

The Manager continued to adopt a prudent and proactive approach towards capital management. Over the quarter, HK$400 million of debt maturing in March 2018 was further refinanced. MGCCT’s debt maturity profile remains well-staggered, with no refinancing requirements due by end 2017 and with HK$510 million due in March 2018. As of 31 March 2017, approximately 71% of MGCCT’s debt had been hedged into fixed rates, with average debt maturity of 3.73 years (from 3.01 years as of 31 March 2016). Interest coverage ratio remained healthy at 3.6 times. For FY16/17, the effective interest rate was 2.72% p.a. (compared to 2.43% for FY15/16). In addition, about 65% of the expected distributable income for 1H FY17/18 has been hedged into SGD, mitigating MGCCT’s exposure to the HKD and RMB volatility.

 

Outlook

China’s gross domestic product1 (GDP) expanded 6.9% in the first quarter of 2017, up from 6.7% in the same quarter last year, and higher than the 6.7% growth in 2016. For Hong Kong, GDP growth2 moderated from 2.4% in 2015 to 1.9% in 2016. Looking ahead2, China’s GDP3 is expected to maintain a steady growth of 6.6% supported by continued policy stimulus and rebalancing of the economy to services and consumption. Hong Kong’s economy2 is expected to grow by 2% to 3% given the recent rebound in visitor arrivals and regional trade flows.

Hong Kong’s total retail sales4 value decreased by 3.2% year-on-year for the first two months of 2017. This is an improvement compared to the decline in retail sales value by 13.6% year-on-year for the first two months of 2016. In the year ahead, domestic consumption2 is expected to remain resilient given a stable labour market. For Festival Walk, gross revenue is expected to remain stable. The rental reversion rate for leases expiring in FY17/18 is expected to grow at a moderate pace.

At Gateway Plaza, leasing demand continued to be dominated by domestic companies in view of the weaker business sentiments especially among multinational corporations. Average rental reversion is expected to grow modestly for leases expiring in FY17/18, with downward pressure on occupancy rate.

Sandhill Plaza is expected to benefit from healthy rental reversions due to the continued trend towards decentralisation, where tenants benefit from significant cost savings, favourable tax incentives and improved accessibility.

The Manager will stay focused on proactive asset management to enhance and add to the value of our properties, pursue accretive acquisitions as well as actively monitor and manage interest rate and foreign exchange exposure to deliver long term, sustainable returns to Unitholders.

 

IMPORTANT NOTICE

This release is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for units in MGCCT (“Units”). The value of Units and the income derived from them may fall, as well as rise. Units are not obligations of, deposits in, or guaranteed by, the Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. Investors have no right to request the Manager to redeem their Units while the Units are listed. It is intended that Unitholders of MGCCT may only deal in their Units through trading on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units. The past performance of MGCCT is not necessarily indicative of its future performance.

This release may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income, changes in operating expenses, including employee wages, benefits and training, property expenses and governmental and public policy changes and the continued availability of financing in the amounts and the terms necessary to support future business. You are cautioned not to place undue reliance on these forward looking statements, which are based on current view of management on future events.

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