MapleTree – UOBKH
Equity fund raising required but not imminent
Mapletree Logistics Trust (MLT) is an Asia-focused logistics REIT investing in a diversified portfolio of income-producing logistics real estate. It has a portfolio of 72 assets in Singapore, Hong Kong, Japan, Malaysia, China and South Korea valued at S$2.4b at Mar 08. Sponsor Mapletree Investments, a wholly owned subsidiary of Temasek Holdings, has a 30.2% stake in MLT. MLT was assigned Baa2 corporate rating with negative outlook by Moody’s Investors Service.
Continuing to expand via acquisition. MLT has announced acquisitions of eight properties in Singapore (30 Boon Lay, 22A Benoi Road, 3A Jalan Terusan and 76 Pioneer Road), China (ISH WaiGaoQiao and Northwest Logistics Park), Malaysia (G-Force) and Japan (Kashiwa Centre) valued at S$291.4m pending completion at Mar 08. These acquisitions will expand its portfolio by 12% to S$2.7b. They will be financed by debt and will increase gearing from 56.3% to 60% when completed. This places MLT dangerously close to regulatory limit of 60% for gearing.
Collaborating with Mapletree Investments on regional expansion. Sponsor Mapletree Investments has invested S$846m in 10 development projects in the region, including logistics parks, build-to-suit and ready-built logistics facilities in China (six properties), Vietnam (3) and Malaysia (1). These assets will be offered to MLT under the right of first refusal, which is valid until 2010. MLT has identified Singapore, Hong Kong and Japan as priority markets. It plans to have 70% to 75% of portfolio value in developed markets and the balance 25% to 30% in emerging markets. MLT plans to grow its asset base to S$5b by 2010.
Equity fund raising required but not imminent. MLT has total borrowings of S$1,360.4m and gearing is 56.3% at Mar 08. We believe the preferred mode for equity fund raising is via a rights issue given goal to have gearing reduced to optimal level of 40-45%. However, MLT has flexibility in terms of timing for the fund raising exercise as suitable acquisitions can be warehoused or parked with Mapletree Investments till a more opportune time for the stock market.
MLT has short-term borrowings of S$600m. It has converted S$155m of shortterm borrowings into three-year term loans. Another S$300m of short-term borrowings is in process of being converted to terms pending completion of documentation. This will complete the refinancing of short-term borrowings.
Benefitting from positive rental reversion. MLT maintained almost full occupancy of 99.6% at Mar 08. It renewed leases for 539,712sf of space on average 28.7% higher than preceding rates, with strong rental reversion for Singapore. Management expect average rental reversion of 12% in FY08 with contributions from Singapore, Hong Kong and China. MLT declared DPU of 1.9 cents for 1Q08, representing annualised distribution yield of 8.4%.