Westgate and Jem Closes For 2 Weeks

Westgate

Starting today Sunday 23rd May 2021, Westgate and Jem closes for 2 weeks. The reason for the closure is to perform deep cleaning as the authorities suspected there is ongoing transmission among the visitors to these two malls located at Jurong East.

Westgate was fully acquired by CapitaMall Trust (now Capitaland Integrated Commercial Trust) through the purchase of the balance of 70.00% of the units in Infinity Mall Trust which holds Westgate on 1st November 2018. As of 31st December 2020, the mall has estimated 246 tenants.

The other shopping mall Jem was not directly owned by Lendlease Global Commercial REIT (“LREIT”). LREIT acquired a stake in Jem through an investment of 5.0% equity stake in Lendlease Asian Retail Investment Fund 3 Limited (the “Fund”) on 1st October 2020.

Westgate and Jem Closes For 2 Weeks – What is The Impact?

Deep Cleaning Cost

At this point of writing, I am not sure who will bear the cost of the deep cleaning. The cleaning is a big feat given the size and lettable area of the malls. If the cost is bear by the managers of the mall, this will add on to the operating expenses which in turn erodes away distribution to unit holders.

Tenant Rebates

Since tenants are not able to operate, it is most likely the managers will provide certain form of COVID-19 assistance or rental rebates even though there is no confirm news at this point in time that they will do so. This means lesser gross revenue and also reduced amount for distribution to unit holders.

Shopper Traffic

Even though the malls will open after 2 weeks, I bet shoppers will shun the malls for a period of time given the fear of potential lurking around viruses.

Current Dividend Yield

CapitaLand Integrated Commercial Trust Share Price 21 May 2021

Based on Capitaland Integrated Commercial Trust’s current share price of S$2.05 and FY20 Distribution Per Unit of 8.69 cents, this translate to a current dividend yield of 4.24%.

Lendlease Global Commercial REIT Share Price 21 May 2021

Based on Lendlease Global Commercial REIT current share price of S$0.74 and FY20 Distribution Per Unit of 3.05 cents, this translate to a current dividend yield of 4.12%.

Opportunity For Investors

Should the share price fall when stock market opens tomorrow, this poses an opportunity for interested investors of Capitaland Integrated Commercial Trust and Leadlease Global Commercial REIT to buy upon weakness.

Manulife US REIT 1QFY2021 Updates

Manulife US REIT

Manulife US REIT has provided their key business and operational updates for 1QFY2021 on 11th May 2021.

There are no information on Gross Revenue, Net Property Income (NPI) and Distribution since this is only an operational update.

Nevertheless, let us look at some of the key indicators to see how Manulife US REIT has performed in the first quarter.

Occupancy

Overall portfolio occupancy stood healthy at 92% with Weight Average Lease Expiry (WALE) at 5.3 years.

This is slightly lower than the last reported occupancy of 93.4%.

Lease Expiry

The number of expiring leases in 2021 and 2022 have been further reduced.

Manulife US REIT 1QFY2021 Lease Expiry Profile

From the chart below, you can see that 62.8% of the rentals have annual escalations of 2.7% p.a. in-place. This will benefit Manulife US REIT in terms of growing its revenue y-o-y.

Despite such rental escalations, new leases are minimal with 93.6% are lease renewals. This is a positive sign that Manulife US REIT is able to retain its tenants.

Manulife US REIT 1QFY2021 Rental Escalations

Debt

Gearing stood at 41.3% which is still below the MAS limit of 50%.

As you can see from the chart below, the loans due in April 2021 was refinanced. Thus, the Weighted Average Debt Maturity increased to 3.4 years.

In conclusion, there is no worrying debt for now in 2021.

Manulife US REIT 1QFY2021 Debt Maturity Profile

Current Dividend Yield

Based on the current share price of US$0.73 and FY20 full year DPU of 5.64 cents, this translate to a current dividend yield of 7.73%.

Summary

As more US citizens get vaccinated, the government lock down rules have relaxed slightly. This benefits the overall US economy which in turn will stimulate the recovery of US REITs such as Manulife US REIT.

I identified 2 key components which I feel is the strength of Manulife US REIT. They are

  1. Annual rental escalations
  2. Long WALE providing stability

The above are definitely strong reasons to keep invested in Manulife US REIT and I shall top up my stock portfolio when opportunity arises!