Mapletree Logistics Trust (SGX:M44U) held an Extraordinary General Meeting (EGM) earlier this afternoon (13 January 2022) to seek unitholders’ approval on the acquisition of 13 properties in China, and 3 properties in Vietnam – Due to the current safe management measures where only a small amount of physical attendees were allowed, I’ve opted to attend the meeting virtually.
What impressed me most about the meeting was how it was structured to allow even for virtual attendees to submit their votes live (together with the physical attendees), along with the option for virtual attendees to ask any questions live via video (even though no one did it throughout the course of the meeting) – for that, I must say it’s a good job well done by the REIT (as this really help facilitate an efficient 2-way communication between the unitholder and the management, even though the former is attending virtually), and I’ve submitted my survey after the meeting to reflect this point.
For the benefit of those who were unable to attend the meeting, in this post, you’ll find a summary of the presentation made by CEO Ms Ng Kiat and CFO Ms Charmaine Lum, questions raised during the meeting (along with the management’s response), and finally, results of the 3 resolutions that were put to vote “live” during the meeting:
Presentation by CEO Ms Ng Kiat and CFO Ms Charmaine Lum
Rationale of the Proposed Acquisition:
- The WALE of the Chinese and Vietnam properties are 2.6 years and 3.9 years respectively, which Ms Ng said it augments well with the REIT’s current portfolio (where its portfolio WALE is around this duration.)
- Following the acquisition, Mapletree Logistics Trust will expand its business presence in new cities, along with introducing 34% new tenants to their portfolio – in so doing, it increases the REIT’s reach into growing cities (and tap into opportunities associated with it), and with an expanded tenant base, it provides further diversification and at the same time further reduce any possible concentration risks.
- On top of that, Ms Ng shared that there is a limited supply of Grade A warehouse space in both China as well as in Vietnam, as well as the fact that such warehouse spaces are favoured by tenants despite their higher premiums (compared to traditional warehouse spaces) – and this presents an opportunity for the REIT to come in and fill this gap.
- Pertaining to concerns on why the REIT choose to acquire the Chinese properties (located in Tier-2 and Tier-3 cities) at this point in time instead of waiting till growth in these cities have stabilised, Ms Ng explained that demand will be saturated by then, and they will be pushed out of the market (and as a result, miss out on the growth opportunities in those cities.)
- Finally, Ms Ng also shared that the 2 properties in North of Vietnam in which the REIT have proposed to acquire at at very attractive locations which will attract tenants adopting the “China Plus One” strategy due to its close proximity to China (which will help to ease the flow of goods.)
Mapletree Logistics Trust’s Development Strategy:
- Ms Ng shared that currently, about 75% of the REIT’s assets under management are in developed markets (in Singapore, Hong Kong, Japan, Australia, and South Korea.) Following the acquisition, its assets under management in developments will be reduced to 69.3% – this is in-line with the REIT’s strategy to scale up presence in higher growth markets.
- Addressing a concern from a unitholder on the REIT’s capability to acquire assets from third-parties, Ms Ng said that to-date, the REIT have acquired $8 billion worth of assets from third-parties, compared to just $4 billion worth of assets from the Sponsor. She added that the REIT will continue to grow its portfolio by acquiring properties from both its Sponsor, as well as from third-parties.
- CFO Ms Lum explained that total acquisition cost is estimated to be approximately S$1,058.0m, comprising of the following: S$894.1m for the 13 China properties, S$134.1m for the 3 Vietnam properties, S$5.1m of acquisition fee, and another S$24.7m consisting of estimated professional and other fees and expenses incurred in connection with the acquisitions and equity fund raising.
- To fund for the acquisition, CFO Ms Lum shared that S$358.0m will come from loan facilities, S$494.9m from equity fund raising (where Ms Lum updated that approximately $693m was raised in a private placement and preferential offering exercise done towards the end of last year), and consideration units of S$200.0m.
Mapletree Logistics Trust Post-Acquisition:
- DPU up by 1.1% from 8.326 cents/unit to 8.415 cents/unit
- NAV up by 3.3% from S$1.33 to S$1.37
- Aggregate leverage remains more or less the same at 39.0% pre-acquisition vs. 39.1% post-acquisition
- Portfolio occupancy down by 1.1% from 97.8% to 96.7%
- Portfolio WALE down by 2.7% from 3.7 years to 3.6 years
Questions Raised by Attendees, along with Responses by the Management
- A unitholder was concerned about the timing of the acquisition, given the current situation in China (where the Chinese government are currently clamping down on companies in the technology, and in the real estate sectors.) Chairman Mr Lee Chong Kwee explained that the current situation in China were mainly due to real estate developers over-extending themselves, data security issues, and income inequality – all of which have no impact on the industrial and logistics sector. He further added that China is a rising economy, where its progress have been growing by leaps and bounds in recent years, and this gives the REIT a very good platform to achieve sustainable growth.
- The same unitholder also sought the management’s clarification on rumours of a possible merger between Mapletree Logistics Trust and Mapletree Industrial Trust. In response, Mr Lee reassured the unitholder that this issue has not been discussed by the management and all, and there is no intention by the management to do so (as a merger between the 2 Mapletree REITs are not on the cards), as both REITs have their own areas of focus.
- Another unitholder was concerned by the fall in the REIT’s unit price of late, which Mr Lee’s advise was to remain invested in the REIT for the long haul. He also shared that he is a unitholder of the REIT and is not concerned by the unit price volatility (as it could be due to a magnitude of reasons) and will continue to remain as one. Instead of focusing on unit price movements, he advised the unitholder to focus on the REIT’s growth prospects, which have been providing stable and sustainable returns to its unitholders.
Results of the 3 Resolutions Put to Vote
- Resolution #1, which is on the proposed acquisitions of (a) a 100.0% interest in 13 logistics assets located in the PRC through the acquisition of 13 property holding companies and (b) a 100.0% interest in three logistics assets located in Vietnam through the acquisition of three property holding companies, as interested person transactions, was passed with 99.67% (or 1,510,844,712) of the votes for, and 0.33% (or 5,066,681) of the votes against.
- Resolution #2, which is on the proposed issue of 106,382,979 new units of MLT as partial consideration for the PRC acquisitions, was passed with 99.66% (or 1,509,995,758) of the votes for, and 0.34% (or 5,106,881) of the votes against.
- Resolution #3, which is on the proposed Whitewash Resolution, was passed with 92.86% (or 1,406,882,211) of the votes for, and 7.14% (or 108,133,739) of the votes against.
Disclaimer: At the time of writing, I am a unitholder of Mapletree Logistics Trust.
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