MI-REIT – Phillip

A String Of Purchases

Developments to-date. MI-REIT added 6 properties to its portfolio following our last report on 25 Oct.. Additionally, MIREIT made its first overseas foray into the Japanese industrial market with the purchase of the Asahi Ohmiya warehouse located in the Saitama Prefecture, in the Greater Tokyo area.

With the acquisition, MI-REIT effectively entered into a strategic alliance with Atlas Partners Japan (APJ), a Japanese real estate fund and asset management firm, as asset management of the property will be outsourced to APJ. This further strengthens MI-REIT’s presence in Japan as APJ will also source for acquisition opportunities and provide asset management support for MI-REIT’s future Japanese acquisitions.

Annual revaluations on six properties resulted in an increase of $9.8 million to book value. Together with an earlier revaluation carried out in September on another six properties, total revaluation added $47.6 million to its book over its initial value at listing. Including all annouced
acquisitions, MI-REIT counts 22 properties in its portfolio with an asset value of $646.9 million and average lease term to expiry of 6.64 years. All the acquisitions are expected to be funded by debt and this will bring gearing up to 39% for FY08.

MI-REIT will steer its portfolio towards an allocation of 50% in Singapore, 20% in Japan and the remainder spread across other Asian markets.

Valuation. With the 6 acquisitions, we raise our FY08 DPU assumption by 4.7% from 7.41 cents to 7.76 cents and a 3 years DPU CAGR of 9.78% At the closing price of $1.13, these translate to a yield of 6.7% for FY08 and 8.1% for FY09. We increase our 12 month forward fair value from $1.39 to $1.43. Cost of debt assumption is reduced slightly to 3.8% as the Japanese denominated borrowing has a lower cost of funding. Our projected earnings remain conservative as we do not factor in unannouced acquisitions. Maintain BUY.