MLT – BT

MapletreeLog sells $350m of perpetual

MAPLETREE Logistics Trust yesterday sold $350 million of perpetual securities to pay for acquisitions in South Korea and Japan, the first real estate investment trust to jump onto the perp bandwagon. The money raised will help pay for acquisitions worth $400 million, MLT said.

There was some indication that investor demand was somewhat lukewarm for MLT’s perps following a rash of sales of these securities.

The coupon for the MLT perps was 5.375 per cent following orders which reached over $1 billion.

Richard Lai, chief executive of MLTM, said: ‘We are very pleased with the strong response received for the securities, a landmark transaction for MLT as well as for the Singapore Reit market. The order book was over three times subscribed with participation from more than 60 investors.’

In the past two weeks, there have been several bond issues worth over $3 billion, including Genting’s $1.8 billion whopper and Bank of East Asia’s $600 million.

‘A lot of liquidity was sucked out, so demand for MLT was so-so,’ said one dealer.

MLT’s Temasek parentage has been touted by salespeople. ‘Mapletree Investment Pte Ltd which owns 41 per cent of MLT is 100 per cent owned by Temasek,’ said one relationship manager from a bank.

The net proceeds from the sale of the perps will be used for general corporate funding purposes, including the funding of acquisitions, said MLT. It will also help bring down its gearing of 41.4 per cent. The Reit industry has a benchmark gearing ratio of 40 per cent.

MLT has signed non-binding letters of intent on potential acquisitions in Japan and Korea. In addition to the two acquisitions it announced last month in Malaysia for $24.6 million, the cost of these transactions could reach $400 million, it said.

MLT is rated Baa1 (outlook stable) by Moody’s. The perpetual securities are expected to be assigned an issue rating of Baa3 by Moody’s, it said.

MLT invests in a portfolio of income producing logistics real estate assets in Singapore and the region comprising 98 properties with a book value exceeding $3.7 billion as at Dec 31. About half of its real estate assets are outside Singapore including 25 per cent in Japan and 13 per cent in Hong Kong.

OCBC Investment Research said that MLT’s issue is positive for its unitholders. ‘We view the initiative positively as it provides the much-needed ammunition for its acquisition plans,’ said OCBC analyst Kevin Tan. As the perpetual securities are expected to be fully accounted as equity, the issuance also has the effect of paring down MLT’s aggregate leverage, he said.

Together with an expected positive revaluation of its properties in the coming March quarter, its leverage may be brought down from 41.4 per cent as at Dec 31, 2011, to a more comfortable 36.5-38.5 per cent.

Mr Tan, who has a ‘buy’ call for MLT, said that the firm has a prudent approach towards investments. ‘In particular, MLT reiterated that it has been careful not to rush into investments but rather work closely with its sponsor on various overseas acquisitions – a prudent move in our view, given the current uncertain market conditions.

‘The group also highlighted that there are about $300 million worth of pipeline assets from sponsor that are completed, and that it may acquire some of them during the course of the year.’

He thinks that MLT will be able to continue optimising its portfolio yield, given its disciplined approach towards acquisitions. He noted that MLT’s acquisition of two properties in Malaysia just a week ago were made at attractive initial net potential income yields of 8.7-8.8 per cent, significantly higher than the implied yield of 7.1 per cent for its existing Malaysia portfolio.

MLT closed yesterday unchanged at 90.5 cents.