Mapletree Logistics Trust (“MLT”) is Singapore’s first Asia-focused logistics real estate investment trust. Listed on the Singapore Exchange Securities Trading Limited in 2005, MLT invests in a diversified portfolio of quality, well-located, income producing logistics real estate in Singapore, Hong Kong SAR, Japan, China, Australia, South Korea, Malaysia, Vietnam and India.
Their strategy can be broken into three parts;
a. optimising organic growth and hence, property yield from the existing portfolio;
b. making yield accretive acquisitions of good quality logistics properties; and
c. managing capital to maintain MLT’s strong balance sheet and provide financial flexibility for growth.
Asia Pacific logistics rents are expected to rise across most markets in 2021, according to CBRE’s Asia Pacific Real Estate Market Outlook 2021. Within the region, CBRE expects Tier 1 cities in mainland China to see rental growth accelerate on recovery of leasing demand and limited urban supply, rents in Hong Kong to stabilise, and Singapore rental growth to be limited. In Australia, CBRE expects incentives to increase and sees the logistics sector as a beneficiary of the structural shift to e-commerce that was accelerated by Covid-19.
Moreover, CBRE believes there is room for further logistics yield compression in 2021. This is the first year that the industrial and logistics sector was named the most popular sector for investment in CBRE’s Asia Pacific Investor Intentions Survey. The demand is also reflected in investors’ pricing expectations, with 23% of investors stating that they are willing to bid above the asking price for industrial and logistics.
This sets the scene for further yield compression for quality assets in 2021.
Portfolio – Geographic Diversification
Portfolio – Characteristics
Balance sheet – Debt
- Well staggered Debt maturity profile
Balance sheet – Interest Rate Risk Management
- 76% of total debt is hedged or drawn in fixed rates
- Every potential 25 bps increase in base rates will result in ~S$0.64m decrease in distributable income or 0.01 cents in DPU per quarter. The hedging provides a lot of certainty.
Recent activity – 23rd November
MLT acquired a S$1.4bn portfolio across China, Vietnam and Japan. The portfolio consist of 13 logistic assets in China and three in Vietnam for a consideration of S$999.9m at a 5.1% net property income yield (China portfolio at 4.7%) with a blended occupancy of 91% (Vietnam 100% but China at 89.1% with undergoing stabilisation). A Rmb20.9m income support is structured to last for 365 days for the China portfolio. MLT also plans to acquire a recently completed ramp-up logistics asset in Nagoya for S$416.3m at 4.0% yield and 82.5% occupancy.
The deal is to be funded via debt and equity with MLT raising S$200m in consideration units and S$700m in equity fundraising with the balance of S$562.4m in debt. Overall, the deal should drive +2.2% dividend per security accretion and a 4.4% NAV uplift.
Making yield accretive acquisitions is part of MLT’s articulated strategy. They are executing it well and reflects strongly on management.
Company Commentary from recent 2Q 2022 earnings call
- Recent resurgence of COVID-19 infections has hampered the Asia Pacific recovery momentum and caused disruptions to global supply chains
- More countries are moving to a “living with COVID-19 strategy” as vaccination coverage widens => ease restrictions and re-open borders to aid economic recovery
- MLT’s tenants continue to operate with minimal disruptions to their operations. Overall demand for warehouse space has remained resilient with stable rents and occupancy rates
- MLT remains focused on optimising yield from the existing portfolio while pursuing strategic investment opportunities that deliver long-term value. This will be supported by a prudent capital management approach
Overall, MLT are executing well on their strategy to optimize organic growth, making value added acquisitions and to manage the balance sheet with prudent hedging and duration. They are exposed to the ever-expanding logistics sector which is benefitting from global eCommerce. They have underperformed recently due to the GDP slowdown within China, however this may be the driver of future share price strength if China stimulates their economy post the Winter Olympic Games (note: China has reduced its steel production ahead of the Olympics to improve the air quality). We have purchased a position in this REIT.
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Chief Investment Officer
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