Moody's Investors Service has changed the outlook of Retail REIT Mapletree Commercial Trust's (MCT) (SGX:N2IU ) BAA2 issuer rating and (P) BAA2 programme rating to positive from stable.

The change in ratings have been interpreted by the managers of the REIT as a reflection of Mapletree Commercial Trust’s enhanced asset quality and improved operating performance.

Occupancy at ARC has improved to 80.4 percent from 50.3 percent a year ago. 

The American ratings agency was particularly impressed with the REIT’s ability to keep its gearing within a modest level despite an acquisition of a property in the Central Business District of Singapore earlier this year. "Within its first two years of operations, MCT has improved its operating performance and enlarged its asset portfolio, while maintaining stable financial metrics within our parameters. The REIT made its first acquisition of Mapletree Anson in February 2013, which was funded with a mix of equity and debt, demonstrating its commitment to maintain its leverage at around 40%," says Jacintha Poh, a Moody's Analyst.

The performances of Mapletree Commercial Trust’s retail properties have also impressed the rating agency. “Over the last two years, VivoCity has consistently achieved positive rental reversions, while also maintaining strong occupancy rates at close to 100 per cent. Its shopper traffic and tenant sales have also grown by around per cent”, the company said in an official statement.

Moody's expects VivoCity's performance to remain healthy as the residential catchment in the southern corridor ofSingapore grows and there are no competing malls or new supply available in the vicinity.

"MCT has also successfully diversified its funding sources, in addition to bank loans, by issuing bonds out of its MTN programme, which was established in August 2012," adds Poh.

Units of MCT are currently trading at S$1.21 on the SGX. Is this the optimal level of entry? An analysis and further elaboration of Mapletree Commercial Trust will be further covered in the next issue of REITSWEEK.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.