Singapore investors have gotten used to a relatively quiet year for REITs in the city state, at least when it comes to acquisitions.
That’s because interest rates have been hiked at a furious pace in the past year, leading to higher funding costs for REITs.
However, that doesn’t mean that Singapore REITs are completely sitting on their hands. There were a few sizeable acquisitions in 2022.
And just last week, Mapletree Logistics Trust (SGX: M44U) announced that it planned to purchase eight logistics assets across Japan, Australia, and South Korea.
So, for Singapore REIT investors, here’s what they need to know about the latest proposed property buys from this Straits Index Times (STI) constituent.
Increasing exposure to developed Asia markets
First off, the proposed acquisitions comprise of six properties in Japan for a cost of JPY 64 billion (S$652.7 million), one property in Sydney, Australia for A$125.7 million (S$112.2 million), and one property in Seoul, South Korea for KRW 144.8 billion (S$148.7 million).
In total, the aggregate cost of all these properties, including transaction fees, amounts to S$946.8 million – so just shy of S$1 billion.
That’s a hefty proposed set of acquisitions but Mapletree Logistics Trust management has clearly seen value in the logistics markets in these countries as well as all the advantage of all these properties being located on freehold land.
As a result, post-the-acquisitions, the proportion of the REIT’s net leasable area (NLA) that’s on freehold land will increase from 20.4% to 23.6%.
Solid fundamentals and attractive locations
For Mapletree Logistics Trust, all eight properties are modern logistics properties located close to key logistics infrastructure, such as metropolitan highways, as well as being in close proximity to large consumption centres.
In addition, the vacancy rates in those markets are low, indicating tight supply (see below). All eight proposed properties have occupancy rates of 100%, so it’ll raise the REIT’s overall occupancy rate slightly when the acquisitions close.
Source: Mapletree Logistics Trust investor presentation, 30 March 2023
The properties have a combined weighted average lease expiry (WALE) of 4.4 years, higher than the REIT’s current portfolio’s 3.2 years.
By adding an extra S$900 million or so in AUM via the properties, Mapletree Logistics Trust’s total AUM post-acquisitions will rise 7.4% to S$13.5 billion.
Higher dividend or DPU?
As always, whether the acquisition is accretive to distribution per unit (DPU), otherwise known as the dividend, is crucial.
Thankfully, this deal will be DPU-accretive to the tune of 2.2% on a pro-forma basis (see below). The REIT is also in the process of divesting of an older Hong Kong property for around S$100 million.
Mapletree Logistics Trust plans to fund the acquisitions through a mixture of debt and equity. It will take on additional debt of S$746.8 million while also raising equity via a private placement for the amount of S$200 million.
Separately, the REIT is also planning on purchasing two properties in China for a total of RMB 1.08 billion (S$209.6 million) but this deal is separate to its planned eight-property acquisition.
Source: Mapletree Logistics Trust investor presentation, 30 March 2023
While its gearing ratio will increase to 39.9% post-acquisition, this is still at a manageable level for the REIT given the 50% mandatory gearing ratio cap imposed by the Monetary Authority of Singapore (MAS).
Promising portfolio expansion and advanced distribution
Overall, the proposed acquisitions are a solid expansion of Mapletree Logistics Trust’s current portfolio.
It helps expand its footprint in developed Asian markets, particularly in areas where prime logistics facilities are in high demand (Tokyo, Sydney, and Seoul).
Broad support for the acquisitions could be seen from the private placement results. There was strong demand from institutional investors for the placement (it was 3.9 times oversubscribed) and it enabled Mapletree Logistics Trust to price the offering at the top of the indicated price range (S$1.649 per new unit).
For current shareholders, Mapletree Logistics Trust announced an advanced cumulative distribution for the period 1 January 2023 to 10 April 2023, to be payable on Monday 22 May 2023.
Management has indicated that this cumulative DPU will be in the range of 2.40 to 2.60 Singapore cents and the exact amount will be announced in due course.
Currently, Mapletree Logistics Trust shares give investors a 12-month forward dividend yield of 5%.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Mapletree Logistics Trust.
