Mapletree Investments’ managed assets made up some 77.7% of its $77.42 billion in assets under management (AUM) as at March 31. This means some $60.18 billion in assets are held under the group’s three Singapore-listed REITs and eight private real estate funds.
Just over a year ago, Mapletree counted four REITs in its stable. The merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust, announced in December 2021 and completed in June 2022, birthed Mapletree Pan Asia Commercial Trust (MPACT). N2IU
Mapletree Investments group CEO Hiew Yoon Khong was formerly a non-executive director of Mapletree’s REITs. He stepped down from MPACT’s board following the completion of its merger.
Post-merger, MPACT’s portfolio comprises 18 commercial properties across five Asia markets: five assets are located in Singapore, one in Hong Kong, two in China, nine in Japan and one in South Korea.
MPACT aims to be recognised as “the proxy to key gateway markets of Asia that provides stability and scale”.
In Singapore, MPACT’s properties include retail mall VivoCity, mTower and Mapletree Anson. According to an Aug 11 investor presentation, the REIT’s total AUM stands at $16.5 billion with portfolio committed occupancy of 95.7%, weighted average lease expiry (WALE) of 2.6 years and gearing at 40.7%.
See also: MPACT 1QFY2024 DPU falls 3.1% q-o-q from higher utility, financing costs
Mapletree, as the sponsor, holds 55.6% of MPACT’s units, while public investors hold the remaining 44.4%. The REIT manager is wholly owned by the sponsor, and its management fee combines a base fee that is 10% of distributable income and a performance fee that is 25% of the REIT’s y-o-y growth in distribution per unit (DPU).
Mapletree’s three REITs follow their sponsor’s financial year-end in March. For 1QFY2024 ended June, MPACT declared DPU of 2.18 cents, 3.1% lower q-o-q and 12.8% lower y-o-y.
MPACT’s topline growth in the latest quarter was weighed down by foreign exchange impact owing to a stronger Singapore dollar, as well as higher utilities and interest expenses, says Sharon Lim, CEO of MPACT’s manager.
See also: Mapletree Industrial Trust reports DPU of 3.39 cents for 1QFY2024, 2.9% lower y-o-y
Gross revenue and net property income (NPI) for the quarter grew 75.6% and 68.0% y-o-y to $237.1 million and $179.2 million respectively; the surges were driven by the effects of the merger.
Compared to the previous quarter, MPACT’s revenue and NPI grew 1.6% and 1.0% respectively.
All markets except Greater China, which is struggling with a protracted property slump, recorded positive rental uplifts, contributing to a portfolio rental reversion of 2.4%.
Commenting on the results, CGS-CIMB Research analysts Natalie Ong and Lock Mun Yee point to the depreciation of the Hong Kong dollar, renminbi and yen against the Singapore dollar; the absence of one-off income and government subsidies; and reduced occupancy in MPACT’s China assets.
While CGS-CIMB kept “hold” on MPACT, Maybank Securities analyst Krishna Guha maintained “buy”; both houses lowered their target prices to $1.76 and $1.70 respectively.
Against a net asset value (NAV) of $1.75 per unit, units in MPACT closed at $1.56 on Aug 14.
MIT enters Japan
See also: Mapletree Logistics Trust holds 1QFY2024 DPU steady at 2.271 cents
Meanwhile, Mapletree Industrial Trust (MIT) ME8U declared a DPU of 3.39 cents for 1QFY2024, up 1.8% q-o-q but down 2.9% y-o-y. This is despite NPI growing 1.5% q-o-q and 0.7% y-o-y, as distributable income grew 3.1% q-o-q but fell 2.5% y-o-y.
The lower distributable income was further diluted by a private placement on May 25 and a distribution reinvestment plan for distributions from 3QFY2022 to 3QFY2023 ended December.
According to MIT’s results released on July 26, the REIT’s 141 properties across six property segments in Singapore and North America total some $8.8 billion in AUM. These property segments include data centres, business park buildings and flatted factories.
Of the 141 properties, 85 are located in Singapore and 56 in North America. This is more evenly split by asset value, with 49.6% of AUM located in Singapore.
As at June 30, portfolio occupancy stood at 93.3%, with WALE at 3.9 years and gearing at 38.2%.
MIT is entering the Japanese data centre market by the third quarter of this year. On May 25, MIT announced the acquisition of a newly built data centre in Osaka for JPY52 billion ($480 million).
According to Tham Kuo Wei, CEO of MIT’s manager, the property is fully leased to an “established” data centre operator for about 20 years on a net lease structure with “minimal” landlord operational obligations.
The property is being progressively fitted out over four phases, with the first phase completed in November 2022.
Increasing digitalisation and the rise of AI mean demand for data centres is increasing, says Mapletree’s Hiew. Among data centre operators, business is competitive, with some “very strong players”, he adds. “But [on] the real estate side, we are seeing growth.”
Data centre operator Cyxtera Technologies, Digital Core REIT’s second-largest tenant and MIT’s third-largest tenant, filed for Chapter 11 bankruptcy relief on June 4. Cyxtera is also a tenant of Keppel DC REIT in Europe.
Hiew says he is not concerned about a possible contagion effect. “As far as we know, most of the other operators are still resilient. So, the problem seems to be very specific to this particular [tenant]. We have not been told, nor are we aware of, any other operators having any difficulties.”
Beyond real estate availability, Hiew points to one “peculiarity” of data centre assets. “Because of the power consumption, this particular market is quite influenced by the availability of power. The location of the specific property has to have the ability to be supported by provision of power.”
Like in many countries, Singapore’s government is rationing power quite tightly, says Hiew. “Therefore, the ability to grow the space is a little bit limited.”
Analysts are mixed on MIT’s latest set of results, with target prices ranging from $2.30 to $2.78.
OCBC Investment Research, DBS Group Research and CGS-CIMB kept their “add” and “buy” calls, while Maybank maintained “hold”.
While Maybank’s Guha notes that MIT’s 5.7% dividend yield is “relatively high” compared to peers, he warns of a slowdown in the local manufacturing sector, as well as the possibility of non-renewal for some US leases and a “fluid funding environment”.
Against a NAV of $1.85 per unit, units in MIT closed at $2.21 on Aug 14.
MLT divests assets
Finally, Mapletree Logistics Trust (MLT) M44U declared a DPU of 2.271 cents for 1QFY2024, flat both q-o-q and y-o-y. While gross revenue and NPI both fell slightly y-o-y, NPI grew 2.5% q-o-q.
Meanwhile, distributable income grew 2.5% q-o-q and 3.1% y-o-y.
Notably, MLT has maintained a stable DPU throughout rapid asset recycling and a unit base that has crept up 3.2% y-o-y.
MLT started 1QFY2023, or April 2022, with 183 properties and ended 1QFY2024, or June 2023, with 193 properties.
MLT also announced two divestments this month. On Aug 7, the REIT’s manager proposed to divest Century, a 17-year-old industrial building in Selangor, Malaysia, for MYR60.0 million ($17.58 million), 15.4% above its latest valuation in March.
Three days later, the manager proposed to divest 8 Loyang Crescent, a 22-year-old warehouse in Singapore for $27.8 million, 17.3% above valuation.
MLT’s manager expects to complete the Singapore divestment within the current quarter, or 2QFY2024, and the Malaysia divestment by the end of FY2024, or March 2024.
Taking into account two other proposed divestments in Malaysia from July, MLT’s portfolio will consist of 189 properties.
As at June 30, MLT’s AUM is $13.5 billion, with portfolio occupancy of 97.1%, WALE of 3.1 years and gearing at 39.5%.
Ng Kiat, CEO of MLT’s manager, says she continues to see the impact of weaker currencies and higher borrowing costs. “However, the improved quality and resilience of our portfolio have continued to provide stability to our results. Given the economic uncertainty, our focus is to maintain portfolio stability, while continuing our efforts to rejuvenate the portfolio towards high-spec, modern assets.”
Analysts have praised MLT’s “resilient performance”, with CGS-CIMB, Maybank and OCBC keeping “add” or “buy” at target prices between $1.80 and $1.88.
More accretive acquisitions and accelerated asset recycling activities are potential upside catalysts, according to CGS-CIMB, while a challenging operating environment in China is a downside risk that will continue to drag on rental reversions.
Against a NAV of $1.42 per unit, units in MLT closed at $1.64 on Aug 14.
