Listed in October 2010 with just 70 properties in its portfolio valued at S$2.1 billion, Mapletree Industrial Trust’s (SGX:ME8U) portfolio now comprises of 85 properties in Singapore and 56 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd) valued at S$8.8 billion. The REIT was also included as one of the constituents in Singapore’s benchmark Straits Times Index (STI) since June 2020.

Last evening (27 April 2023), the blue-chip industrial and data centre REIT have made available its results for the fourth quarter, as well as for the full year ended 31 March 2023 (i.e. FY2022/23.)

In this post, you’ll find my review of the REIT’s latest set of financial results, portfolio occupancy and debt profile, and also its distribution payout to unitholders.

Let’s get started:

Financial Results (Q4 FY2021/22 vs. Q4 FY2022/23, and FY2021/22 vs. FY2022/23)

I will first be looking at the REIT’s results for the 4th quarter of the current financial year under review (i.e. Q4 FY2022/23) compared against that recorded in the same time period last year (i.e. Q4 FY2021/22), followed by its full-year results (i.e. FY2021/22 vs. FY2022/23):

Q4 FY2021/22 vs. Q4 FY2022/23:

Q4 FY2021/22Q4 FY2022/23% Variation
Gross Revenue
(S$’mil)		$164.1m$171.1m+4.3%
Property Operating
Expenses (S$’mil)		$39.9m$42.2m+5.8%
Net Property
Income (S$’mil)		$124.2m$128.9m+3.8%
Distributable Income
to Unitholders
(S$’mil)		$90.3m$87.2m-3.5%

My Observations: Compared to the same time period last year (i.e. Q4 FY2021/22), I would say the industrial REIT’s 4th quarter results for FY2022/23 was pretty much a muted one – but it was within my expectations considering the lack of acquisition in the uncertain economic environment, along with high borrowing costs currently.

Gross revenue and net property income inched up by just 4.3% and 3.8% respectively due to contributions from new leases across the various clusters.

Distributable income to unitholders went down by 3.5% mainly due to higher borrowing costs attributed to higher interest rates.

FY2021/22 vs. FY2022/23:

FY2021/22FY2022/23% Variation
Gross Revenue
(S$’mil)		$610.1m$684.9m+12.3%
Property Operating
Expenses (S$’mil)		$138.1m$166.9m+20.9%
Net Property
Income (S$’mil)		$472.0m$518.0m+9.7%
Distributable Income
to Unitholders
(S$’mil)		$350.9m$356.6m+1.6%

My Observations: On a full-year basis, the REIT’s results is still considered stable (in my opinion.)

The 12.3% growth in its gross revenue, along with the 9.7% increase in its net property income, can be attributed to contributions from the 29 data centres located in the United States acquired in July 2021.

However, distributable income to unitholders only edged up by 1.6%, as higher net property income was offset by higher borrowing costs (attributed to higher interest rate environment and additional interest arising from the acquisition of the 29 data centres), as well as higher management fees (due to the increase in value of assets under management upon acquisition of the 29 data centres.)

Portfolio Occupancy Profile (Q3 FY2022/23 vs. Q4 FY2022/23)

Moving on, let us take a look at the REIT’s portfolio occupancy profile in the table below – where I will be comparing the statistics reported for the current quarter under review (i.e. Q4 FY2022/23 ended 31 March 2023) against that reported in the previous quarter 3 months ago (i.e. Q3 FY2022/23 ended 31 December 2023) to find out its resiliency:

Q3 FY2022/23Q4 FY2022/23
Portfolio Occupancy
(%)		95.7%94.9%
Portfolio WALE (by
Gross Rental Income – years)		3.9 years3.7 years

My Observations: Its portfolio occupancy profile recorded for the current quarter under review, compared against the previous quarter weakened slightly – with the 0.8 percentage point (pp) dip in its portfolio occupancy due to a fall in occupancy rates in its Singapore portfolio, as a result of an increase in leasable area upon completion of redevelopment at 161 and 163 Kallang Way.

In terms of its portfolio weighted average lease expiries (WALE), it is well-staggered in the coming years ahead – with 16.1% of the leases expiring in the coming financial year 2023/24, 16.0% of the leases expiring in FY2024/25, 17.3% of the leases expiring in FY2025/26, and the remaining 50.6% of the leases expiring only in FY2026/27 or later.

Finally, the REIT’s top 10 tenants contributed 29.5% towards its total gross rental income, with no single tenant contributing more than 5.9%.

Debt Profile (Q3 FY2022/23 vs. Q4 FY2022/23)

Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will be comparing the stats reported for the current quarter under review (i.e. Q4 FY2022/23 ended 31 March 2023) against that reported in the previous quarter 3 months ago (i.e. Q3 FY2022/23 ended 31 December 2023), to find out if it has continued to remain at healthy levels:

Q3 FY2022/23Q4 FY2022/23
Aggregate Leverage
(%)		37.2%37.4%
Interest Coverage
Ratio (times)		5.3x5.0x
Average Term to
Debt Maturity (years)		3.1 years3.7 years
Average Cost of
Debt (%)		3.3%3.5%
% of Borrowings Hedged
at Fixed Rates (%)		74.3%75.5%

My Observations: On the whole, its debt profile have weakened slightly. However, its aggregate leverage, at 37.4%, is still a very good distance away from the 50.0% regulatory limit.

Also, in terms of its debt expiry, only 6.1% (or S$175.0m) of borrowings will be expiring in the coming financial year 2023/24, 4.4% (or S$125.0m) of borrowing expiring in FY2024/25, 21.0% (or S$598.4m) of borrowings expiring in FY2025/26, and the remaining 68.5% (or S$1,950.0m) of borrowings expiring only in FY2026/27 or later.

In terms of impact of interest rate hikes on the REIT’s distribution per unit, a 100bps increase in base rates will result in the distribution per unit falling by approximately 5 cents.

Distribution Payout to Unitholders

The management of Mapletree Industrial Trust declares a distribution payout to its unitholders on a quarterly basis.

For the 4th quarter, a distribution payout of 3.33 cents/unit was declared, a 4.6% decline compared to the payout of 3.49 cents/unit declared in the same time period last year (i.e. Q4 FY2021/22), due to a higher unit base. Distribution payout this time round includes the distribution of a net divestment gain of S$15.7m from 26A Ayer Rajah Crescent over 8 quarters from Q2 FY2021/22 to Q1 FY2023/24, along with a distribution of tax-exempt income of S$6.6m withheld in Q4 FY2019/20 over 3 quarters from Q3 FY2022/23 to Q1 FY2023/24. This time round, scrip dividend scheme will not be applied, meaning all unitholders will receive their distributions in cash only.

For the full year, together with its payout of 3.49 cents/unit in the first quarter, 3.36 cents/unit in the second quarter, and 3.39 cents/unit in the third quarter, the REIT’s distribution payout amounts to 13.57 cents/unit. Compared to last year’s payout of 13.8 cents/unit, this represents a slight 1.7% decline, again this was due to a higher unit base with additional units issued under the REIT’s Distribution Reinvestment Plan.

If you are a unitholder of the REIT, do take note of the following dates about its distribution payout:

Ex-Date: 05 May 2023
Record Date: 08 May 2023
Payout Date: 07 June 2023

Comments & Outlook (from the REIT’s Press Release)

CEO Mr Tham Kuo Wei’s Comments:

“The challenging macroeconomic environment as well as headwinds from higher operating expenses and borrowing costs have affected MIT’s financial performance for the financial year. With a strong balance sheet, we will focus on strengthening the portfolio through accretive acquisitions and developments, such as the Mapletree Hi-Tech Park @ Kallang Way. We will also explore opportunistic divestments in our portfolio rebalancing efforts.”

Outlook Ahead:

Global growth was projected to bottom out at 2.8% in 2023 before rising modestly to 3.0% in 2024. Numerous risks, such as sharp deterioration in financing conditions, systemic debt distress due to higher borrowing costs and lower growth, persistent inflation, and geopolitical fragmentation, could cause the global growth forecast to decline further.

2023 will be a challenging year with increased risk to global financial stability due to the banking crisis and geo-economic fragmentation. Increasing property operating expenses and borrowing costs continue to exert pressure on distributions. The Manager will adopt cost mitigating measures while focusing on tenant retention and forward lease renewals to maintain a stable portfolio occupancy.

Closing Thoughts

Not one of the best results reported by the REIT I must say – but given the current uncertain economic environment, coupled with high borrowing costs hindering acquisition, the latest set of financial results reported by the REIT was pretty much expected.

While its portfolio occupancy and debt profile have weakened slightly, for the former, it was attributable to an increase in leasable area following the completion of redevelopment of its property at 161 & 163 Kallang Way (hence not an issue here); also, at an overall occupancy rate of 94.9%, it is considered very resilient; for its debt profile, the further weakening was pretty much expected, considering the high interest rate environment we are in right now; but that said, its aggregate leverage continues to remain very healthy.

With that, I have come to the end of my review of Mapletree Industrial Trust’s latest fourth quarter, and full year results. As always, do take note that all the opinions above are purely mine to share based on my analysis, and they do not imply any buy or sell calls for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Interested to Learn More about Mapletree Industrial Trust?

If you like to learn more about the industrial and data centre REIT, you can do so at the upcoming REITs Symposium 2023 on Saturday, 20 May 2023, from 9am to 6pm, at Suntec Convention Summit 1 & 2, as the REIT will be having a booth set up with representatives available for you to ask any questions you may have.

Apart from the 3 Mapletree REITs (in Mapletree Industrial Trust, Mapletree Logistics Trust, and Mapletree Pan Asia Commercial Trust), 19 other REITs will also be setting up booths during the event for you to learn more about. On top of that, you can also join some of the panel discussions with industry experts, and CEOs of REITs to hear their views about ‘hot button’ topics such as the market outlook for the second half of 2023, whether investing in REITs is still viable in the current high interest rate environment, how you can manage your REIT investments passively and effectively, opportunities and challenges in a post-pandemic era, and more.

This year, I’m honoured to be invited as one of the panelists, where, together with veterans Gabriel Yap (author of bestselling book ‘Making Your Millions in REITs’) and Willie Keng (founder of financial blog ‘Dividend Titan’), we will be sharing our experiences on how we have built our REIT portfolio (with the session held from 5.00pm to 5.45pm.)

You can find out more about the event, and at the same time, secure your seat here (apply the following discount code RS23JY for a 50% discount off your ticket if you are among one of the first to do so – however, if the discounted price is not reflected after you’ve keyed in, it means that it has been fully redeemed.)

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Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.

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