Mapletree Industrial Trust (MIT) is a REIT with a portfolio of 87 industrial properties in Singapore and a 40% stake in 14 data centres in the U.S. (through a joint venture with Mapletree Investments).
The properties in Singapore include hi-tech buildings, flatted factories, business park buildings, stack-up/ramp-up buildings, and light industrial buildings. As at 31 March 2019, MIT’s total assets under management was S$4.8 billion.
Here are eight things I learned from the 2019 Mapletree Industrial Trust AGM:
1. Gross revenue grew 3.5% year-on-year to S$376.1 million in 2019 and net property income (NPI) grew 3.7% y-o-y to S$287.8 million. This was mainly driven by new revenue contributions from development projects, HP Phase Two and Mapletree Sunview; the acquisition of 18 Tai Seng; and the completed asset enhancement initiative of 30A Kallang Place in Singapore.
2. Distributable income increased 7.4% y-o-y to S$231.8 million while distribution per unit (DPU) increased 3.5% y-o-y to 12.16 cents. The rise in distributable income was attributed to higher NPI and full-year contribution from MIT’s 40% interest in the portfolio of 14 data centres in the U.S.
3. Gearing ratio is 33.8% as at 31 March 2019. Average debt to maturity is 4.4 years and 78.6% of the debt is hedged at fixed interest rates. Average cost of debt rose 10 basis points to 3.0%.
4. Weighted average lease expiry is 3.6 years and 23.4% of the portfolio — largely composed of flatted factories — is expiring in FY19/20. Weighted average land lease is 37.2 years and all U.S. data centres – comprising 24.0% of MIT’s total portfolio — are sited on freehold land.
5. Portfolio occupancy rate decreased from 89.6% in 2018 to 88.4% in 2019. This is primarily due to the decline in occupancy rate in the Singapore portfolio, affected by a slowdown in manufacturing and a huge supply of industrial space.
6. A unitholder wanted to know why the data centre at 1805 Center Park Drive, North Carolina had a low occupancy rate of only 66.7%. CEO Tham Kuo Wei explained that the remaining vacant space had been set aside for the existing operator’s expansion plans and he hopes that the operator would expand as soon possible. But in the grand scheme of things, this doesn’t have a huge impact as the U.S. portfolio has an overall occupancy rate of 97.4%, and filling the space represents a small upside.
7. Another unitholder also highlighted the low occupancy rate (79.9%) in the business park segment and asked about the management’s plans to fill the space. The CEO remarked that he is seeing some pressure in the business park segment. A previous major tenant, Johnson & Johnson, vacated 160,000 square feet of space — which comprises 28% of net lettable area at The Strategy — and it’s proving challenging to fill the space. The vacancy rate at International Business Park (where The Strategy is located) is about 40%, so landlords there are willing to offer competitive rates to attract tenants. So far, MIT has been able to lease half of Johnson & Johnson’s previous space and is close to signing another tenant that will bring the occupancy rate of The Strategy to 85%.
8. A unitholder wanted to know how MIT identified the potential in redeveloping the Kolam Ayer 2 flatted factory cluster into a hi-tech industrial precinct. The CEO explained that it involved pinpointing centrally located properties with underutilized plot ratios that could be meaningfully redeveloped. In Kolam Ayer’s case, the old plot ratio of 1.5 could be increased to 2.5. It also helped that an anchor tenant, a global medical device company, committed to a 15-year lease for a quarter of the space before the project is completed.
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