As we know, MCT and MNACT has proposed a merger. Many of you have had questions regarding this merger, and as such, I had the opportunity to speak to Mapletree Commercial Trust’s CEO, Ms Sharon Lim, questions you may have regarding the merger. This is Part 1 of a 2-part series (Read here), in Part 2 I interview MNACT CEO, Ms Cindy Chow, regarding post-results and the merger with MCT.
Resources
- Circular to MCT Unitholders dated 29 April 2022 in relation to the Proposed Merger of MCT and MNACT
- Presentation dated 29 April 2022 in relation to the Proposed Merger of MCT and MNACT
- Responses to Substantial and Relevant Questions (13 May 2022)
- Responses to Additional Substantial and Relevant Questions (17 May 2022)
Mapletree North Asia Commercial Trust
- Scheme Document dated 29 April 2022 (for MNACT Unitholders)
- Presentation Slides – Proposed Merger of MCT and MNACT
- Responses to Substantial and Relevant Questions (17 May 2022)
Is there any Plan B for MCT if the merger with MNACT does not go through?
It will be business as usual for MCT and we will continue to adhere to our existing investment mandate by focusing on quality commercial assets in Singapore that are value accretive for MCT Unitholders.
We actively explore acquisition opportunities, including third party assets, on an on-going basis. However, opportunities for growth are limited if we remain confined to Singapore. Unitholders have provided as a point of feedback over the years that growth is a priority. We have explored and tried to pursue opportunities in Singapore but good ones that are value accretive are limited. Having reviewed MCT’s growth trajectory, we believe that overseas expansion is inevitable with Asia being a natural place to expand into given our common background and familiarity in the region. MNACT presents itself as a ready platform with footholds in key gateway cities of Asia which will be a springboard for future growth.
Opportunities for growth are limited if we remain confined to Singapore. We have explored and tried to pursue opportunities in Singapore but good ones that are value accretive are limited.
This Merger provides a clear pathway for growth and provides MCT Unitholders with DPU and NAV accretion on a historical pro-forma basis and access to attractive footholds into North Asia, supported by established local operating teams with extensive experience and track record. Growth and expansion in Pan Asia is therefore much easier as opposed to buying individual assets and trying to build an operational team from scratch.
The MCT Manager and the MNACT Manager believe that the Merger will be transformative, and upon completion, will create a flagship commercial REIT in Asia with stability and scale across key Asian gateway markets. The Merged Entity combines the best qualities of both MCT and MNACT – (i) strength, driven by MCT, one of the largest Singapore-focused commercial REITs with longstanding track record in delivering stable returns to unitholders, and (ii) growth potential, driven by MNACT, the first and only North Asia focused REIT listed in Singapore with properties in key gateway markets including China, Hong Kong SAR, Japan and South Korea.
The Merged Entity will comprise a diversified and high-quality portfolio, with a broadened investment mandate to invest in income-producing real estate used primarily for office and/or retail purposes, with an expanded geographic scope to key gateway markets of Asia.
What are your priorities for the next 1-2 years post-Merger? How will you split the work with Ms Cindy Chow? (CEO of MNACT)
We have envisaged our “4R” Asset and Capital Management Strategy to be implemented post-Merger. These have been developed with the goal of providing unitholders of the Merged Entity with a relatively attractive rate of return on their investment through regular and steady distributions, and to achieve long-term stability in DPU and NAV per unit, while maintaining an appropriate capital structure for the Merged Entity.
The following summarises the key tenets of our “4R” Asset and Capital Management Strategy:
- Recharge – Driving NPI and DPU growth by incorporating best practices across the Merged Entity’s portfolio to maximise operational performance.
- Reconstitute – Optimising the Merged Entity’s portfolio by pursuing selective strategic divestments at an opportune time and redeploying capital into value accretive opportunities.
- Refocus – Pursue accretive strategic acquisitions and participate in strategic developments whilst leveraging on the local market expertise of the Merged Entity’s on the ground teams and the Sponsor’s strong Asia network and extensive pipeline.
- Resilience – Adopt a comprehensive capital management strategy to maintain a strong balance sheet, maximise liquidity and minimize risk.
(Unitholders should refer to Section 4.2 of the Unitholders’ Circular for an in-depth view on the Merged Entity’s post-Merger strategy.)
It is intended that Ms. Sharon Lim will retain her position as Chief Executive Officer and Executive Director in the manager of the Merged Entity following the completion of the Merger and continue to lead the MCT Manager. For further details on MPACT’s leadership team, please refer to future SGXNet announcements by the MCT Manager.
Assuming the merger with MNACT is successful, please share some insights on:
- Where are the synergies to improve the top line and bottom line?
- At first glance, I don’t see any synergy in terms of the portfolio as the the properties are at different locations whereby the tenants base are different, lease management, property management and regulatory environment are different. Please share some insights how MPACT is going to manage this?
Following the Merger, our immediate priorities will be the combination of management teams, leveraging on the strong local expertise and on-the-ground presence of MNACT. The MNACT team’s on-the-ground experience in relation to its strong capabilities in asset and property management and their established network will be invaluable and necessary for the execution of our post-merger strategy.
Operational synergies can be realised through the implementation of best practices across the enlarged platform and the integration and cross-pollination of the MCT and MNACT teams across core functions and geographies. With access to both tenants of MCT and MNACT, the Merged Entity will have the ability to provide choice locations for tenants across Singapore and other parts of North Asia.
Operational synergies can be realised through the implementation of best practices across the enlarged platform and the integration and cross-pollination of the MCT and MNACT teams across core functions and geographies.
Post-Merger, the enlarged platform will be better positioned to unlock upside potential. For instance, the enhanced financial flexibility will enable the Merged Entity to pursue more growth opportunities such as larger acquisitions, capital recycling opportunities, The Merged Entity will also have a bigger debt headroom to undertake asset enhancement and development initiatives.
MPACT will also be able to leverage on the domain expertise of the Sponsor to pursue active asset management and enhancement and capture accretive investment opportunities more proactively
3. Please share how much time MPACT needs to streamline the business operations post-Merger?
We value our people and the diverse experiences that come with them. As mentioned earlier, we will focus on realising the benefits of the enlarged platform through the integration and cross-pollination of legacy MCT and MNACT teams across core functions and geographies.
Rather than streamlining, we will seek to harness valuable intellectual capital and best practices that can be implemented across the enlarged platform to capture efficiencies, enhance portfolio optimisation and capitalise on market recovery trends to drive NPI and DPU growth.
We expect that any integration to be seamless as both managers are part of the Mapletree Group with a shared culture and operational procedures.
4. Which segments/ cities does MPACT have in mind for portfolio expansion? What is the estimated timeline?
The Merged Entity’s enlarged portfolio consists of 18 commercial properties spanning five Asia gateway markets, including Singapore, China, Hong Kong SAR, Japan and South Korea. Singapore will continue to provide core and stability to the portfolio through this phase of growth.
We aim to expand the Merged Entity’s AUM by pursuing a primarily acquisitive growth strategy within its existing markets, and leveraging its enlarged balance sheet to focus on opportunities within key gateway cities that can drive growth in NPI and DPU.
Particular areas of interest for us are office and office-like business park assets, anchored by tenants in high growth sectors including tech-enabled and biomedical tenants.
Part 2 (Interview with MNACT CEO, Ms Cindy Chow) can be read here.
