Mapletree Industrial Trust (MIT) is an SGX-listed REIT that owns a portfolio of 115 industrial and data centre properties located in Singapore and North America. As of 31 March 2021, MIT has assets under management of S$6.8 billion.
COVID-19 caused substantial impact to many Singapore REITs, but industrial REITs were spared the worst and, in fact, thrived during the pandemic. I wanted to find out how MIT performed during the last financial year and attend its recent annual general meeting to learn more. Here are seven things I learnt from the MIT’s 2021 AGM.
1. Gross revenue increased 10.2% year-on-year to S$447.2 million in FY20/21, from S$405.9 million in FY19/20. Likewise, net property income (NPI) increased 10.4% year-on-year to S$351.0 million in FY20/21, from S$318.1 million in FY19/20. The growth was due to the consolidation of revenue from the 14 data centres in the U.S. — previously held under Mapletree Redwood Data Centre Trust – and a full-year contribution from 7 Tai Seng Drive.
Flatted Factories remained the largest segment contributor in FY20/21, accounting for 31.3% and 30.0% of gross revenue and NPI respectively. The next largest revenue contributors are Hi-Tech Buildings (27,7%), Date Centres (19.7%; Singapore and North America), and Business Parks (10.4%).
2. MIT’s distribution per unit (DPU) increased 2.5% year-on-year to 12.55 cents in FY20/21, from 12.24 cents in FY19/20. Distributable income of S$295.3 million was an increase of 11.3% from S$265.3 million in FY19/20. This was attributed mainly due to higher NPI and cash distributions declared by joint ventures.
DPU did not grow proportionately with distributable income due to the enlargement of MIT’s unit base through a private placement of S$410.0 million which was used to fund the acquisition of the remaining 60% interest in the 14 data centres in the U.S.
3. MIT’s aggregate leverage ratio increased to 40.3%, from 37.6% the previous year. Notably, MIT’s ratio has been on steadily rising since 2017. The management has stated that they are comfortable with the current aggregate leverage ratio which is still below the regulatory limit of 50%.
In FY20/21, MIT took on more debt to finance the acquisition of the 14 U.S. data centres, a data centre property in Virginia, and the redevelopment of 161, 163 and 165 Kallang Way. MIT’s debt maturity profile remains evenly spread with around 16% of debt due in a single year until FY24/25, and 76.8% of borrowings are hedged at fixed interest rates.
4.The acquisition of the U.S. data centres increases the share of data centres in MIT’s portfolio to 41.2% as of 31 March 2021, from 31.6% the year before. The management also stated that data centres may comprise two-thirds of MITs’ portfolio in the next 3-5 years.
Source: Mapletree Industrial Trust
The Fourth Industrial Revolution will drive technologies like the Internet of Things, cloud computing, and artificial intelligence to the fore and data centres will be needed more than ever. MIT’s North American data centres are primarily lease on a triple-net basis and have a long weighted average lease expiry of 6.2 years, adding more resilience to MIT’s portfolio.
5. Looking forward, CEO Tham Kuo Wei was positive about MIT’s Singapore and North America portfolios. Singapore’s GDP is expected to grow 4-6% in 2021 as the pandemic eases. He added that they are seeing continued demand for data centre space in North America which is expected to grow at an annualised rate of 8% between 2019 and 2025. MIT is also expecting to complete another US$1.3 billion acquisition of 29 data centres in the U.S. in 3Q2021.
Besides North America, MIT is also on the lookout for investment opportunities in established data centre markets in Europe (Frankfurt, London, Amsterdam, Paris and Dublin) and Asia Pacific (Singapore, Hong Kong, Japan and Australia).
6. Although data centres comprise 41.2% of MIT’s assets under management, they only contributed 19.7% of gross revenue in FY20/21. The management explained that MIT only completed the acquisition of the 14 U.S. data centres on 1 September 2020. Therefore, the gross revenue and NPI for FY20/21 — which runs from 1 April 2020 to 31 March 2021 — were not reflective of their full-year contributions.
7. MIT also shared details about providing rental reliefs to tenants in FY20/21. MIT extended rental reliefs of S$12.7 million to support its tenants in FY20/21, which totalled to about 2.8% of gross revenue for FY20/21. Restructuring of leases were also made available to tenants on a case-by-case basis. MIT will continue to monitor the situation and support its tenants in a targeted manner depending on the impact of the pandemic on different sectors.
The fifth perspective
MIT has delivered consistent growth in revenue and distributable income over the last five years. Its focus on expanding its portfolio towards the data centre segment looks to be a strong growth driver for the REIT over the coming few years as our lives become increasingly digitalised.
As an industrial REIT with a solid track record, I would consider being a unitholder of MIT. Its current yield — based on a unit price of S$2.85 (as of 13 September) and FY20/21 distribution – is 4.4%, which is decent. However, MIT’s gearing is slightly on the high side, and I would personally prefer a higher margin of safety and a yield of at least 5% before investing.
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