On July 23, MPACT's manager announced the proposed divestment of two non-core Japan properties, TS Ikebukuro Building and ABAS Shin-Yokohama Building, to two unrelated third parties for a total divestment consideration of JPY8,730.0 million ($78.7 million).
The sale consideration in JPY was at a 1.7% premium to the purchase price.
However, in SGD terms, the sale price was below the SGD purchase price of $104.1 million.
The sale consideration was also a tad below the valuation of the two buildings in SGD, which was $80 million. Nonetheless, it drew a line under a challenging market.
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In its 1QFY2026 business update, MPACT reported a 7.6% y-o-y decline in gross revenue to $218.6 million and a 7.5% y-o-y decline in net property income to $166 million. DPU fell by 3.8% y-o-y to 2.01 cents.
JP Morgan believes DPU growth in the current financial year ending end-March 2026 to be driven by a 30 basis points (bps) y-o-y drop in borrowing cost to 3.2%. “We also see occupancies improving due to the backfilling of vacancies and retaining tenants at Mapletree Business City (MBC), with China to stay resilient. The divestment of two Japan properties should improve gearing to 37.6% and enable MPACT to kick-start acquisition-led growth,” the report says.
Occupancies are likely to improve with vacancies at MBC having bottomed out with a potential tenant assessing 1.5 floors of the two floors of vacant ex-Google space, JP Morgan says.
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Among MPACT’s top-10 tenants, one has already renewed its lease at MBC with renewal discussions ongoing for another.
Completion of the VivoCity asset enhancement initiative (AEI) from September should see 50,000 sq ft of space returning to revenue contribution at over $1 million per month, JP Morgan estimates.
“While China remains a concern, we expect the current 86% occupancy to be maintained in line with company guidance. We anticipate positive portfolio reversions in Singapore to balance negative reversions in China (double-digit), Hong Kong (single-digit) and Japan. More active asset recycling following the two Japan divestments could lead to a restart of acquisitions, with management assessing opportunities in existing markets of Japan, Korea and Singapore,” the report adds.
JP Morgan has also revised upwards its price target to $1.50 from $1.20. MPACT closed at $1.32 on Aug 5.
