The Motley Fool

3 Things to Like About This REIT That Produced Total Returns of 87% Since Listing

Mapletree North Asia Commercial Trust (SGX: RW0U) is Singapore’s first commercial real estate investment trust (REIT) with properties in China, Hong Kong and Japan. Its portfolio is valued at S$7.6 billion (as of 30 June 2019) and consists of nine properties, with the Hong Kong asset taking up 66% of the total value.

Last month, my Foolish colleague Tim Phillips pointed out that Mapletree North Asia Commercial Trust delivered total returns of 32% year-to-date. Other than the impressive returns in 2019 and since its listing, let’s explore three things to like about the REIT.

Backed by strong assets

The following shows the breakdown of the nine buildings in Mapletree North Asia Commercial Trust’s portfolio:Source: Mapletree North Asia Commercial Trust investor presentation

The largest property in its portfolio is Hong Kong’s Festival Walk. The building mostly comprises of retail shops. Since 2000, Festival Walk has been 100% occupied, which showcases the building’s strong positioning. In fact, a quick Google search shows that Festival Walk is well-liked by patrons and has 4.1 out of 5 stars.

Over at TripAdvisor, a reviewer in April 2019 commented:

“This shopping centre is located right next to the Kowloon Tong MTR station and is super easy to get to. There are many shops, a lot of which are quite high end. Festival Walk contains lots of restaurants, along with a cinema and ice rink. Plenty of things to do here.”

Other than Festival Walk, its other properties also enjoy high occupancy rates, bringing the overall portfolio occupancy to 99.1%, as of 30 June 2019.

Steady DPU increase

Over the past five fiscal years, unitholders have received increasing distribution per unit (DPU).

DPU grew 17% from 6.56 cents in FY14/15 (fiscal year ended 31 March 2015) to 7.69 cents in FY18/19. The growth came on the back of gross revenue and net property income climbing on a year-on-year basis.Source: Mapletree North Asia Commercial Trust investor presentation

Improvement in latest quarterly performance

The strong performance from the REIT continued into FY19/20.

For its first quarter ended 30 June 2019, Mapletree North Asia Commercial Trust’s gross revenue, net property income, and DPU all increased by 11.1%, 10.7%, and 3.7%, respectively.

The growth was mainly due to higher rentals from Festival Walk, Gateway Plaza and Sandhill Plaza, and the higher average rate of Hong Kong dollar, which was partially offset by the lower average rate of the Chinese yuan. The full quarter contribution from the Japan assets (acquired on 25 May 2018) also added to the REIT’s income.

The Foolish takeaway

Mapletree North Asia Commercial Trust’s robust financial performance over the past few years, backed by its strong assets, has helped to deliver high unitholder return that’s the envy of many REITs. Since listing on 7 March 2013 to 31 March 2019, Mapletree North Asia Commercial Trust has produced capital gains of 41.9% and total distribution yield (based on DPU for the period divided by the listing price) of 45.5% for a total return of 87.4%, which is highly commendable considering REITs are not usually known as growth vehicles.

At Mapletree North Asia Commercial Trust’s current unit price of S$1.33 (as of the time of writing), it has a price-to-book ratio of 0.92 and a trailing distribution yield of 5.8%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.