CapitaLand Ascendas REIT (SGX:A17U), previously known as just Ascendas REIT, and Mapletree Industrial Trust (SGX:ME8U) are names which most of you should be familiar with.
Both REITs have a number of similarities, including:
- they are both constituents of Singapore’s benchmark Straits Times Index (STI);
- they invest in industrial and data centre properties;
- while both of them have properties overseas, but most of them are located in Singapore;
- they have very strong Sponsors – for CapitaLand Ascendas REIT, its Sponsor is CapitaLand Investment Limited (SGX:9CI), a leading global real estate investment manager with a strong Asia foothold; for Mapletree Industrial Trust, its Sponsor is Mapletree Investments Pte Ltd, a global real estate development, investment, capital and property management company which holds a diverse portfolio of assets in Asia Pacific, Europe, the United Kingdom, as well as in the United States.
Recently, I was asked the following:
“Between CapitaLand Ascendas REIT and Mapletree Industrial Trust, if I only have funds to invest in just one (of the two), which one will it be, and why?”
I thought the above question was an interesting one (which is why I’ve decide to write a post about it), and the best way to answer this question is to look at both REITs’ past years’ performances, along with its distribution payout to unitholders.
However, as both REITs have different financial year ends (with CapitaLand Ascendas REIT having a financial year ending every 31 December, and Mapletree Industrial Trust having a financial year ending every 31 March), for CapitaLand Ascendas REIT, I will be looking at its financial performance and distribution payout between FY2013/14 (the REIT used to have its financial year ending every 31 March as well before CapitaLand Limited acquired the REIT back in June 2019 and changed its financial year end to 31 December) and FY2022; for Mapletree Industrial Trust, I will be looking at its financial performance between FY2012/13 and FY2021/22. As for its debt profile and portfolio occupancy, I will take the figures as at 31 December 2022 and do an analysis.
Let’s begin:
Market Capitalisation
As at market close last Friday (17 February 2023), both the REITs’ market capitalisation is as follows:
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Market Capitalisation (S$’billion) | $11.65bn | $6.37bn |
Comments: CapitaLand Ascendas REIT’s market capitalisation is close to twice the size compared to Mapletree Industrial Trust.
Geographical Concentration of Properties
For CapitaLand Ascendas REIT, as at the end of FY2022 (on 31 December 2022), it has a total of 227 properties in the following locations (with the percentage concentration in brackets): Singapore (41%), Australia (16%), United States (21%), and United Kingdom (22%).
For Mapletree Industrial Trust, as at the end of financial year 2021/22 (on 31 March 2022), it has a total of 143 properties in the following locations (with the percentage concentration in brackets): Singapore (60%), and United States (40%).
Comments: Not only does CapitaLand Ascendas REIT have more properties in its portfolio, it is also more geographically diversified.
Financial Performance
Some of the key financial performance statistics of both REITs, along with their compound annual growth rates (CAGR) over a 10 year period are as follows:
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Gross Revenue (S$’mil) | CAGR: 8.3% FY2013/14: $613,592m FY2022: $1,352,686m | CAGR: 8.2% FY2012/13: $276,433m FY2021/22: $610,063m |
| Net Property Income (S$’mil) | CAGR: 8.3% FY2013/14: $435,973m FY2022: $968,753m | CAGR: 9.2% FY2012/13: $195,436m FY2021/22: $471,981m |
| Distributable Income to Unitholders (S$’mil) | CAGR: 6.9% FY2013/14: $342,005m FY2022: $663,901m | CAGR: 8.8% FY2012/13: $342,005m FY2021/22: $471,981m |
Comments: Over a 10-year period, both of these blue-chip REITs have a pretty steady financial performance in terms of its CAGR growth. However, Mapletree Industrial Trust edged out for having a better CAGR in terms of its net property income, and also in its distributable income to unitholders.
Distribution Payout to Unitholders
When it comes to distribution payout, the management of Ascendas REIT declares one on a half-yearly basis (once when it releases its results for the first half of the financial year, and once when it releases its results for the second half of the financial year), while the management of Mapletree Industrial Trust declares one on a quarterly basis.
Over the past 10 years, the 2 REITs’ distribution payouts to unitholders are as follows:
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Distribution Per Unit (S$’cents) | CAGR: 1.4% FY2013/14: 13.740 cents FY2022: 15.795 cents | CAGR: 4.1% FY2012/13: 9.24 cents FY2021/22: 13.80 cents |
Comments: The CAGR of Mapletree Industrial Trust’s distribution payout over a 10 year period was was superior compared to CapitaLand Ascendas REIT. Also, for those who prefer to receive distributions more regularly, then Mapletree Industrial Trust will be the one to look at.
Portfolio Occupancy
The following are the 2 blue-chip REITs’ portfolio occupancy profile as at 31 December 2022:
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Portfolio Occupancy (%) | 94.6% | 95.7% |
| Portfolio WALE (by Gross Revenue – years) | 3.8 years | 3.9 years |
Comments: While the portfolio occupancy rates of both REITs are at very high levels (above 90.0%, and it is good to note), but comparatively, Mapletree Industrial Trust has a slightly better portfolio occupancy and portfolio WALE (Weighted Average Lease Expiry.)
Debt Profile
With the current high interest rate environment we are in (and unfortunately, we have to continue to live with it for a while more – at least until the year 2025, which is when I foresee interest rates could come down to around 3+%, barring any unforeseen circumstances), REITs with a higher percentage of borrowings hedged at fixed rates, as well as a lower percentage of borrowings due for refinancing from now till the end of 2025 are less likely to be impacted than others.
That said, let us take a look at some of the key statistics (as at 31 December 2022) as far as both of the REITs debt profile are concerned:
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Aggregate Leverage (%) | 36.3% | 37.2% |
| % of Borrowings Hedged to Fixed Rates (%) | 79.4% | 74.3% |
| % of Borrowings Due for Refinancing from Now till End-2025 (%) | ~27% | ~31% |
Comments: Comparing the debt profile of the 2 REITs, CapitaLand Ascendas REIT’s edged out here, due to its aggregate leverage being slightly lower, and at the same time, it has a higher percentage of borrowings hedged to fixed rates, as well as a lower percentage of borrowings due for refinancing from now till end-2025.
Which is the ‘Cheaper’ of the 2 REITs?
To find out which is the ‘cheaper’ between the 2 blue-chip REITs, I have compared the valuations based on their unit price at close last Friday (17 February 2023):
| CapitaLand Ascendas REIT | Mapletree Industrial Trust | |
| Unit Price | $2.78 | $2.34 |
| P/E Ratio | 11.6 | 13.9 |
| P/B Ratio | 1.1 | 1.2 |
| Distribution Yield (%) ** | 5.7% | 5.9% |
Comments: Between the 2 REITs, even though CapitaLand Ascendas REIT’s unit price is more expensive in dollar terms, but in terms of valuations, it is the ‘cheaper’ one (as its P/E and P/B ratios are lower compared to Mapletree Industrial Trust’s.)
In Conclusion
Both REITs have the own strengths. In summary:
CapitaLand Ascendas REIT: It is more diversified in terms of business presence, less impacted by headwinds posed by the high interest rate environment (due to its higher percentage of borrowings hedged at fixed rates, and a lower percentage of borrowings due for refinancing over the next few years), and finally, it is the ‘cheaper’ of the 2 REITs currently as its current P/E and P/B ratios are lower compared to Mapletree Industrial Trust.
Mapletree Industrial Trust: It has a recorded a better financial performance and distribution payout in terms of its CAGR over the past 10 years. On top of that, the REIT pays out a distribution once every 3 months (compared to just once every 6 months by CapitaLand Ascendas REIT.) Its portfolio occupancy profile is also slightly better in comparison.
With that, I have come to the end of my comparison of 2 the blue-chip REITs. Please note that the contents above are purely for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. As always, you should do your own due diligence before you make any investment decisions.
Disclaimer: At the time of writing, I am a unitholder of CapitaLand Ascendas REIT and Mapletree Industrial Trust.
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