Mapletree Logistics Trust (SGX:M44U) is the 2nd Mapletree REIT to have made available its annual report early this morning (28 June 2023) following the conclusion of its financial year on 31 March – the first was Mapletree Industrial Trust, and you can read about my summary of its annual report here.
For starters, the REIT is Singapore’s first Asia Pacific focused logistics REIT, where it invests in a diversified portfolio of quality, well-located income-producing logistics real estates (185 in total at the time of writing) in the following countries (with the number of properties in brackets): Singapore (52), Australia (13), China (43), Hong Kong (9), India (2), Japan (19), Malaysia (17), South Korea (20), and Vietnam (10). Its total assets under management is S$12.8 billion.
For the benefit of those who do not have the time to go through the report, you can find my summary of it in this post, along with details about its upcoming Annual General Meeting (AGM).
Summary of Mapletree Logistics Trust’s Annual Report
- Gross revenue and net property income increased 7.7% and 7.2% to S$730.6m (FY2021/22: S$678.6m) and S$634.8m (FY2021/22: S$592.1m) respectively, which can be attributed to higher revenues generated from existing properties and incremental contributions from accretive acquisitions. However, this was partly offset by the impact of depreciation of foreign currencies against the Singapore Dollar.
- Through proactive and disciplined hedging and financing strategies, the REIT’s distributable income to unitholders was cushioned from the impact of weakening foreign currencies and interest rate hikes, where it increased by 10.8% to S$432.9m (FY2021/22: S$390.7m.)
- Distribution Per Unit (or DPU for short) grew 2.5% to 9.011 cents (FY2021/22: 8.787 cents) on an enlarged issued unit base (which increased 0.7% compared to last year.)
- Overall occupancy improved to 97.0% (FY2021/22: 96.7%), while the weighted average lease expiry (by net lettable area) of the REIT’s portfolio remained healthy at 3.1 years.
- The overall weighted average rental reversion across the REIT’s portfolio was +2.9%, with individual market rental reversions ranging from +1.0% and +8.8% across its 9 operating markets.
- Valuation of the REIT’s properties in its portfolio declined by 2.5% to S$12.8 billion (FY2021/22: S$13.1 billion) largely due to a forex translation loss of S$757.9m, attributable to the depreciation of mainly the Chinese Yuan, Japanese Yen, South Korean Won, and Australian Dollar against the Singapore Dollar during the period, partly offset by a revaluation gain of S$224.2m attributable mainly to properties in Japan and Hong Kong.
- Top 10 customers accounted for approximately 23.5% of total gross revenue with no single customer accounting for more than 4.4% of total gross revenue.
- 84% of total debt have been hedged into fixed rates, and 77% of distributable income for FY2023/24 have been hedged into or derived in Singapore Dollar – which can mitigate the impact of interest rate and foreign exchange volatilities on the REIT’s distributable income.
- Though consistent and disciplined hedging, the weighted average cost of debt achieved in FY2022/23, at 2.5%, was just slightly higher than the 2.2% recorded in FY2021/22.
- Gearing level of 36.8%, providing the REIT a debt headroom of S$3,523.6m before it reaches the regulatory limit of 50.0%, allowing it a greater flexibility in managing its capital structure and capture potential acquisitive growth opportunities.
- Debt maturity profile remains well-staggered with an average debt duration of 3.8 years, with no more than 21% of total debt expiring in any one financial year.
- 8% (or S$374m) of its total debt due in FY2023/24 – but there remains more than sufficient credit facilities (approximately S$1.16 billion) to meet its maturing debt and debt servicing obligations.
- A 0.25% movement in base rate would have an estimated S$0.04 impact on its DPU per annum.
Accelerating Portfolio Rejuvenation:
- Cognisant of the potential headwind that may emerge during this period of uncertainty (brought upon by a confluence of geopolitical and macroeconomic events that impacted investment, consumption, and growth), the REIT’s Management is focused on its portfolio rejuvenation and recycling strategy.
- During FY2022/23, the 2 asset enhancement projects were embarked to create value for the portfolio:
- Redevelopment of 51 Benoi Road, Singapore (at a cost of approximately S$197m, it will see the property transformed into a six-storey ramp-up facility built to modern specifications; Gross Floor Area will be increased by 2.3x to 82,400 sqm; construction is expected to commence in July 2023, and targeted for completion in Q1 2025.)
- Amalgamation of 2 newly acquired land parcels (acquired on 14 July 2022) with the REIT’s existing assets, Subang 3 & 4, in Subang Jaya, Malaysia (project is expected to increase plot ratio of Subang 3 & 4 by five-fold; upon completion in Q1 2027, the project is poised to be the first modern mega logistics facility in Subang Jaya.)
- To further accelerate the REIT’s portfolio towards a resilient and future-ready one, the REIT had announced the proposed acquisitions of 8 modern logistics properties in Japan, Australia, and South Korea at a purchase price of S$904.4m on 30 March 2023. The acquisition will deepen the REIT’s presence in the major logistics markets of Tokyo, Sydney, and Seoul, where logistics facilities are in tight supply and vacancy rates are low.
- This is in addition to acquisitions of 3 properties in China (completed on 01 April 2022), South Korea, and Malaysia (completed on 08 April 2022) with an aggregate value of S$166.0m during the financial year.
- On the divestment and capital recycling front, the REIT have announced the divestment of 3 Changi South Lane in Singapore for S$22.0m (which is a premium of 39% to the independent valuation of S$15.8m) on 31 March 2023. This was on top of the proposed divestment of 2 non-core assets in Malaysia (in Subang 1 and Chee Wan) for an aggregate value of MYR50.2m (a premium of 6% to valuation) during the year, which is expected to be completed in the first half of FY2023/24.
- A green roadmap was launched in FY2022/23 to sharpen the REIT’s focus in driving sustainability forward, where it includes ambitious targets to achieve carbon neutrality for Scope 1 and 2 emissions by 2030 – an intermediate goal that is aligned with the Mapletree Group’s commitment to achieve net zero emissions by 2050.
- In FY2022/23m significant progress on the sustainability performance of its properties were made, including:
- A 295% increase (from 422,360 sqm in FY2021/22 to 1.7 billion sqm in FY2022/23) in green certified space with the attainment of new green certifications of 14 properties. With this, 22% of the REIT’s total portfolio gross floor area (or GFA for short) is now green certified, compared to 5% a year ago; the REIT targets to increase green certified space to cover 80% of its portfolio GFA by 2030.
- More than doubling of the REIT’s portfolio cumulative solar generating capacity to 36.3 MWp, up from 13.8 MWp in FY2021/22, with the installation of rooftop solar panels in 10 properties. Target is to expand the REIT’s total solar generating capacity to 100 MWp by 2030.
- A tenant ESG engagement programme, and a green lease initiative have also been rolled out in Singapore to help raise awareness and promote green practices among its tenants.
- Management is cautious about the uncertain market conditions over the next 12 months, but at the same time, believes the REIT is well-placed to navigate the current economic headwinds given its resilient portfolio and healthy financial position.
- Logistics industry’s long-term fundamentals remain sound, supported by positive secular trends such as e-commerce and supply chain diversifications, which will continue to drive demand for logistics space.
- REIT’s Management will remain vigilant and proactive in managing the hedging of interest rate and foreign-sourced income to mitigate the impact of rising borrowing costs and forex volatilities on the REIT’s distributions.
Details of Mapletree Logistics Trust’s 14th AGM
Mapletree Logistics Trust will be holding its AGM for the financial year ended 31 March 2023 on Thursday, 20 July 2023 at 2.30pm.
Unitholders have the option to attend the meeting either physically (you will need to pre-register as well for verification purposes) or virtually (and vote live – a big thumbs up to the REIT for making this available), and you need to pre-register here (please note the deadline to do so will be on Monday, 17 July 2023, by 2.30pm) – https://go.lumiengage.com/mltagm2023
I have opted to attend the meeting virtually, and will provide a summary of it in due course.
Disclaimer: At the time of writing, I am a unitholder of Mapletree Logistics Trust.
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