Well, as usual, I am a bit slow in providing inputs on certain events happening in the investment scene. For this blogpost, I shall talk a bit about the proposed merger between Mapletree Commerical Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT), forming the Mapletree Pan Asia Commercial Trust (MPACT).
If you had remembered, we used to have MNACT in our portfolio (see here), but we had divested fully our position (see reasoning here). I had also talked about MCT being the “King of the South” (see here), and the trend of REIT mergers (see here), hence I feel I should write a piece about these two coming together.
If one looks at the intentions, it makes sense for this merger to go through: MPACT will be in the top 10 largest REITs in Asia in terms of market capitalization, and with it comes economies of scale in managing debt and acquisition of new assets. Depending on which side you are at, the merger could either be welcoming or unwelcoming for either side’s unitholders, or both if one has invested in the two.
Based on some of the responses I gathered online and offline, from MCT unitholders’ perspective, granted that MPACT would be accretive in terms of yield and net asset value (NAV), the price consideration for absorbing MNACT, which is at SGD 1.1949 (close to MNACT’s NAV), may be a bit difficult to swallow for some MCT unitholders as they feel it is too high a premium to pay. Furthermore, there is the impression of the dilution of geographical concentration, whereby MCT investors may not want to have exposure to other property assets overseas.
On the other hand, MNACT unitholders, from what I read, may benefit from this deal in terms of seeing their investment going up a few notches to book value; after all, since the second half of 2019 (the unrest in Hong Kong and the subsequent COVID-19 pandemic), MNACT’s price is on a downtrend, and this offer could be seen as a deliverance. However, I do not see this price enthusiasm going on judging from the closing price of SGD 1.08 as at 10 Jan 2022 (or probably due to the likely coming interest rate hikes, which is a REIT’s common bogeyman).
The Bedokian’s Take
It might not be fair for me to comment as I do not hold these two counters directly (apart from using exchange traded funds), but there are several answers and reactions to this merger, depending on where one is coming from. The points provided in the presentation from the trusts (see under Reference below) are reasonable, and the views in the previous two paragraphs are legitimate, too.
Barring any other macroeconomic factors (yes, that includes interest rates), in my opinion, one should ask the following two questions on whether to participate in the merger: the first would be what the long-term view of MPACT is; if one thinks that there is potential in the retail and commercial property sectors in Singapore AND (emphasis mine) Asia-Pacific region, and their economies in general, then MPACT is a good proxy to go for.
The second question is somewhat related to the first; what the growth potentiality of MPACT is; a cursory check of Mapletree Investments’ mixed-use, office and retail properties located in Asia which are not in any publicly-listed trust showed a number of assets in Singapore (e.g., Harbourfront Centre, etc.), Vietnam (e.g., Saigon South Place), China (e.g., Nanhai Business City), India (e.g., Global Technology Park) and Japan (TF Nishidai Building). These are possible injections to MPACT by the sponsors, not counting those that could be acquired by the trust itself.
If the answers to the above two questions are positive, then one might consider going for the offer. Still, further fundamental analysis is required to have a more solidified view of the whole picture.
Proposed Merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust (the “Merger”), 31 Dec 2021. https://www.mapletreecommercialtrust.com/~/media/MCT/Newsroom/Announcements/2021/5%2020211231%20%20Joint%20Presentation%20%20Proposed%20Merger%20of%20MCT%20and%20MNACT.pdf (accessed 10 Jan 2022).