Listed on the Main Board of the Singapore Exchange since 21 Oct 2010, Mapletree Industrial Trust (SGX:ME8U) invests in a diversified portfolio of income-producing real estate used primarily for industrial purposes in Singapore (where its portfolio comprises of hi-tech buildings, business park buildings, flatted factories, stack-up/ramp-up buildings, and light industrial buildings), as well as data centres worldwide beyond the country.
Currently, its portfolio comprises 85 properties in Singapore, along with 56 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Private Limited.) In late-May, the REIT have also announced the acquisition of a new data centre in downtown Osaka, Japan (you can read the full news report about it here.)
Following the conclusion of the financial year on 31 March 2023, the REIT have made available its annual report early this morning. For the benefit of those who do not have the time to go through it, you can read about a summary of the report in this post, along with information about its upcoming annual general meeting (AGM).
Summary of Mapletree Industrial Trust’s Annual Report
Updates on the Rejuvenation & Rebalancing of the REIT’s Portfolio:
- Completion of Mapletree Industrial Trust’s largest redevelopment of flatted factories into the new Mapletree Hi-Tech Park @ Kallang Way (161, 163, and 165 Kallang Way) on 23 March 2023. The redevelopment, which increased the utilised plot ratio from 1.5 to 2.5, comprises two 9-storey buildings that cater to companies seeking high-quality industrial space at the city fringe, as well as a 7-storey built-to-suit facility fully leased to a global medical device company for a minimum lease term of 15 years with annual rental escalations. To date, the committed occupancy of the Hi-Tech Park was about 44.1% by net lettable area.
- Divestment of non-core properties in 19 Changi South Street 1, Singapore, for S$13.0m (higher than the independent valuation of S$11.9m as at 5 November 2021) in 21 April 2022, along with 19675 West Ten Mile Road, Southfield, Michigan, for US$10.0m (higher than the independent valuation of US$6.9m as at 31 March 2022) on 9 June 2022, with capital being redeployed for committed investments, and working capital requirements.
Financial Performance Highlights:
- Gross revenue and net property income increased by 12.3% and 9.7% year-on-year (y-o-y) to S$684.9m (FY2021/22: S$610.1m) and S$518.0m (FY2021/22: S$472.0m) respectively, mainly driven by the full year contribution from the portfolio of 29 data centres in the United States of America acquired in July 2021, along with renewals and new leases as well as service charge increases for the Singapore portfolio.
- The amount available for distribution to unitholders grew by a more moderate 1.6% y-o-y to S$356.6m (FY2021/22: S$350.9m) as the increase in net property income was partially offset by higher borrowing costs (attributed to higher interest rate environment and additional interest expenses arising from the full year borrowing costs associated with the 29 data centres acquired in July 2021), as well as manager’s management fees (due to an increase in valuer of assets under management resulting from the 29 data centres acquired in July 2021.)
- Distribution per unit fell by 1.7% y-o-y to 13.57 cents (FY2021/22: 13.80 cents) on an enlarged unit base (up by 2.4% from 2,676,562 in FY2021/22 to 2,739,870 in FY2022/23) with additional units issued under the dividend reinvestment plan.
Portfolio Performance Highlights:
Despite challenging conditions, the REIT’s average overall portfolio occupancy rate increased from 93.9% in FY2021/22 to 95.5% in FY2022/23.
As at 31 March 2023, the lease expiry profile for the overall portfolio remains well-distributed with a Weighted Average Lease to Expiry (WALE) of 3.9 years, with about 28.1% of the leases due for expiry only in FY2028/29 and beyond.
The REIT has large and well-diversified tenant base, where there were 2,366 tenants with 2,803 leases in the overall portfolio. Top 10 tenants accounted for 29.5% of the overall portfolio’s monthly gross rental income as at 31 March 2023.
The following is a breakdown of its portfolio performance in Singapore, as well as in the North America:
Singapore Portfolio Performance:
- Average portfolio occupancy rate rose from 93.8% in FY2021/22 to 96.2% in FY2022/23, an all-time high since the REIT’s listing – which can be attributed to higher occupancies in most property segments except for its Hi-Tech Buildings due to the increase in leasable area upon the completion of Mapletree Hi-Tech Park @ Kallang Way.
- Average passing rental rate increased from S$2.13 per square foot per month (psf/mth) in FY2021/22 to S$2.15 psf/mth in FY2022/23, driven by positive average rental reversion for renewal leases and higher average rental rate secured for new leases in FY2022/23.
- Retention rate was robust at 86.3% in FY2022/23.
North America Portfolio Performance:
- Average portfolio occupancy rate fell from 94.2% in FY2021/22 to 93.8% in FY2022/23, due to the non-renewal of a lease at 2 Christie Heights Street, Leonia, New Jersey.
- Average passing rental rate rose from US$2.35 psf/mth in FY2021/22 to US$2.38 psf/mth in FY2022/23, primarily due to the built-in rental escalations in the leases.
- WALE remained long at 5.6 years, where about 48.4% of the leases have expiries beyond 5 years.
- About 90.1% of the leases (by gross rental income) was on triple net leases where all outgoings were borne by the tenants, thus protecting the portfolio against rising utilities cost.
- Total proceeds of about S$184m were raised from the DRP for distributions from Q3 FY2021/22 to Q3 FY2022/23 (where 76,467,606 new units had been issued, with issue price ranging from S$2.1500 to S$2.6097, representing an average take-up rate of 40.1%) to finance the redevelopment project at Kallang Way. It also kept the REIT’s aggregate leverage ratio healthy at 37.4%, and a debt headroom of about S$686.5m and S$1,140.9m to the aggregate leverage ratios of 45% and 50% respectively as at 31 March 2023.
- Average borrowing costs increased from 2.5% in FY2021/22 to 3.1% in FY2022/23 due to higher benchmark reference rates.
- To manage the impact of interest rate and foreign currency fluctuations on distributions, about 75.5% of the REIT’s total borrowings as at 31 March 2023 had been hedged into fixed rates, and 85.8% of its FY2022/23 foreign currency net income stream had been hedged into Singapore Dollars.
- Sustainability goals are aligned with Mapletree Group’s ambition to achieve Net Zero emissions by 2050.
- The REIT have also adopted its sustainability roadmap to drive the transition towards net zero emissions.
- Moving forward, the REIT will be introducing sustainability clauses for all new and renewal leases for the Singapore and North American Portfolios, as it believes continued alignment with its tenants will be vital in reducing its carbon footprint.
- Mapletree Industrial Trust was rated an ‘A’ for GRESB Public Disclosure 2022 and ‘Low Risk’ by Morningstar Sustainalytics ESG Risk Ratings, on top of being rated Top 10 in Singapore for Gender Equality in 2022 by Equileap.
- Focus in the year ahead will be on strengthening the portfolio through accretive acquisitions and developments, as well as opportunistic divestments of non-core assets.
- The REIT Management will explore investment opportunities in key data centre markets in Asia and Europe.
- Right of First Refusal from the Sponsor for the acquisition of its 50% interest in Mapletree Rosewood Data Centre Trust (‘MRODCT’) remains featured in the REIT’s acquisition pipeline.
Details about Mapletree Industrial Trust’s 13th Annual General Meeting
Mapletree Industrial Trust will be holding its upcoming annual general meeting on Wednesday, 19 July 2023, at 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439, at 2.30pm. There will be no option for unitholders to attend virtually, unfortunately.
Even if your units are in the CDP, you are required to pre-register (for verification purposes) to attend the AGM via the following link by Sunday, 16 July 2023, at 2.30pm:
For unitholders whose units are held in a custodian account, you will need to send a request to your brokerage firm to appoint you to attend the meeting as a proxy.
I have posed the following question to the REIT’s Management together with my submission of details to attend the meeting:
“I would like to ask why the option for unitholders to attend the meeting was not made available.
There are multiple advantages to having one (even if its just for watching of the proceedings online), including those who are not able to attend physically for various reasons will at least be able to receive updates from the REIT’s management virtually. Also, by allowing attendees the option to attend virtually, it can reduce carbon footprint (where attendees do not need to travel to and from the meeting venue) and it helps to play a part as far as sustainability is concerned (something I understand that the REIT is very much into.)
Additionally, technology was already made available during the pandemic for such meetings to be conducted online. To scrap everything right now is a total waste, and a huge pity considering Singapore is moving towards a digital society, but it seems like blue-chip companies are moving ‘backwards.’
If the reason behind the REIT’s decision to hold only a physical version of the meeting was to allow unitholders to interact with the management in-person, then it will be good also for the management to mingle with the attendees in the reception area an hour or so before, as well as after the meeting – that way, it can foster a much better 2-way communication.”
I have already pre-registered for the meeting. For those who like to meet-up in-person, please let me know. I would love to meet up with you at the meeting venue.
Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.
Launch Event for My First Book: building your REIT-irement portfolio
After months of hard work, my first book, 'Building Your REIT-irement portfolio' is finally ready! In this easy-to-follow 178-page guide, you'll learn everything you need to know about building a REIT portfolio that can provide for you in your retirement years. You can check out a preview of the book here.
I'm extremely thankful to the team at InvestingNote and ShareInvestor for their help to organise a book launch event for me on Tuesday, 26th September 2023, from 6:00pm to 8:00pm at their office in New Tech Park.
For more details and to RSVP (seats are extremely limited), click on the link below: