SINGAPORE’S largest mall, VivoCity, with over a million square feet of lettable area, is much loved by shoppers. However, the mall’s owner – Mapletree Pan Asia Commercial Trust (MPACT) – receives little affection from investors.
In terms of trading price relative to book value, MPACT is performing the worst among the seven real estate investment trusts (Reits) that are members of the benchmark Straits Times Index (STI).
As at May 6, MPACT, which owns properties owned primarily for office and/or retail purposes, traded at a 32 per cent discount to its end-March 2025 net asset value (NAV) per unit of S$1.78.
Is MPACT’s poor market valuation largely due to its ownership of Festival Walk in Hong Kong’s Kowloon Tong? Maybe, the trust should aim to get better valuation from investors by turning much more Singapore-centric.
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Festival Walk was valued at HK$23.8 billion, or around S$4.1 billion at end-March. The shopping and entertainment strip and VivoCity accounted for about 25.6 per cent and 24.2 per cent of MPACT’s end-March property portfolio valuation, respectively. At end-Mar, VivoCity’s valuation was up 14.8 per cent, but Festival Walk’s fell 5.2 per cent in local currency terms from its level the year before.
VivoCity, located in Singapore’s HarbourFront area, is way more productive than Festival Walk – the former’s net property income (NPI) for the financial year ended Mar 31 (FY2025) of S$176.6 million was 18.7 per cent higher than the latter’s NPI of S$148.8 million.
Amid a challenging environment for Hong Kong’s retail landlords, tenant sales at Festival Walk fell 8.4 per cent year on year in FY2025. Rental reversion at Festival Walk was down 6.9 per cent, while VivoCity’s climbed 16.8 per cent.
Selling Festival Walk
By selling Festival Walk, MPACT becomes much more Singapore-centric, which might help its unit price re-rate upwards.
At end-March, Singapore assets accounted for 56.5 per cent of MPACT’s property portfolio valuation of nearly S$16 billion, with the properties in Hong Kong, China, Japan and South Korea contributing the remainder.
Excluding Festival Walk, the Singapore assets contribute about 75.9 per cent to the trust’s end-March property valuation. Besides VivoCity, MPACT’s other assets here are Mapletree Business City and mTower in the Alexandra area, and Bank of America HarbourFront in the HarbourFront area.
However, can Festival Walk transact at or above its latest valuation? If needed, MPACT’s sponsor Temasek-owned Mapletree Investments could buy Festival Walk at valuation.
While acquiring Festival Walk may not be at the top of its agenda, Mapletree can show it is a strong sponsor who adds value to MPACT’s unitholders by taking Festival Walk off the trust’s hands.
Showing that it is a strong sponsor will enhance Mapletree’s credibility in property fund management. The Temasek-owned group is active in managing Singapore-listed Reits and private equity real estate funds that own assets across diverse geographies and property asset types.
Moreover, as Mapletree is a major unitholder of MPACT, it gains from any improvement in the trust’s trading price.
Divesting Festival Walk not only makes MPACT more Singapore-centric, but also raises cash to potentially make additional acquisitions in Singapore.
MPACT could possibly buy The Woodleigh Mall, in which Cuscaden Peak has ownership interest. Mapletree jointly owns Cuscaden Peak, alongside Temasek’s CLA Real Estate.
Over time, MPACT might eye buying Paragon along Orchard Road, after a potential major asset enhancement initiative. Cuscaden Peak will fully own Paragon after privatising Paragon Reit.
Pursuing a merger
Alternatively, MPACT could add scale and Singapore-centricity by merging with another trust.
An MPACT-Suntec Reit merger can make sense. Suntec Reit owns properties that are used mainly for office and/or retail purposes in Singapore, Australia and UK, with a total valuation of S$11.8 billion at end-2024. The Singapore assets contributed about 78 per cent of the said valuation.
As Suntec Reit trades at a larger discount to NAV than MPACT, Suntec Reit’s unitholders may be happy to exchange units in it for units in a merged MPACT-Suntec Reit.
Another possibility is for MPACT to merge with CICT, which owns about S$26 billion of properties as at end-2024 and has Singapore assets accounting for nearly 95 per cent of property valuation.
A potential CICT-MPACT merger would enable MPACT’s unitholders to hold units in a larger entity that is more Singapore-centric and likely to trade at a far superior multiple to book value than MPACT. Can Mapletree, which owns MPACT’s manager, stomach possibly losing lucrative recurrent fund management income as part of this merger?
Reits have been a major success story on the local bourse. For them to continue to win the confidence of investors, sponsors and managers, they need to pro-actively create unitholder value.
MPACT has scale and a crown jewel in VivoCity. The mall’s performance might improve further when ongoing major asset enhancements works are completed, possibly by end-2025.
However, managing VivoCity well is not enough. MPACT’s manager must urgently address the trust’s poor equities market valuation.
MPACT’s manager should consider selling Festival Walk and/or a merger to help improve MPACT’s unit price, thereby benefiting all unitholders.
The writer owns units in MPACT
