Mapletree Logistics Trust Achieves DPU Uptick After Expanding Portfolio

Mapletree Logistics Trust (MLT) increased distributions per unit (DPU) in the third quarter compared to year-earlier levels as the Singapore-listed REIT overcame currency fluctuations and higher interest rates after expanding its portfolio through an acquisition from CBRE Investment Management earlier this year.

DPU for the trust rose S$0.023 cents for the three months from July to September, up 0.9 percent from the same period last year, the trust manager revealed in a press release. Distributable income was up 4.2 percent to S$112.5million ($82 million) in the same time frame.

The improved performance for the trust managed by Temasek Holdings-backed Mapletree Investment came despite a 10.2 percent rise in borrowing costs due to elevated interest rates and currency depreciation which dented income from its properties in Japan and mainland China. MLT attributed their increase in DPU to higher contributions from non-Chinese properties, especially those in Singapore and Australia.

“At the operational level, our diversified portfolio continues to be resilient with high occupancy and strong tenant retention. However, higher borrowing costs and weaker regional currencies continue to impact our financial performance,” said Ng Kiat, executive director of MLT.

Mapletree Logistics Trust’s uptick in distributions comes as other SGX-listed REITs, have seeen earnings slip, with Keppel DC REIT reporting a 6.5 percent year-on-year drop in DPU in the third quarter. Suntec REIT saw DPU decline 14 percent from the previous year.

Expanded Portfolio

The trust’s portfolio was 96.9 percent occupied as of 23 September, which helped to generate a 1.2 percent increase in net property income for the quarter. The REIT’s properties cover a total of 8.1 million square metres (87 million square feet), with the portfolio dominated by holdings in Japan and China, with income from those assets dented by currency slides against the Singapore dollar.

In the July to September period, the trust witnessed a rise in gross revenue of 1.5 percent to S$187 million contributing to 1.2 percent growth in net property income to S$162 million.

Quarterly earnings climbed after the trust spent S$904 million acquiring a 329,028 square metre portfolio of warehouses in South Korea, Australia, and Japan from CBRE Investment Management via a set of transactions which closed during the second quarter.

Excluding properties in China, the trust’s manager was able to increase rents by an average of 9.1 percent on new leases signed during the period with Hong Kong-based properties achieving 16.5 percent increases on average. Including China, weighted average rental reversions for during the quarter increased at a rate of 0.2 percent.

The manager also achieved S$8.8 million in distributable income from the trust through divestment of properties during the quarter.

Among the assets Mapletree Logistics Trust sold in the third quarter was the Moriya Centre warehouse in Japan. Located an hour’s drive north of Tokyo in Ibaraki prefecture, the asset spans 42,450 square metres of gross floor area, with an undisclosed buyer completing a purchase of the property on 26 September at S$92.2 million, which was a 12 percent premium compared to the warehouse’s valuation of S$82.2 million.

MLT also completed its sale of a warehouse at 8 Loyang Crescent in Singapore during the period. An unnamed third party paid S$27.8 million – a 17.3 percent from the property’s valuation – to purchase the shed near Changi Airport in a deal which closed on 8 September.

China Concerns

MLT’s bets on the China logistics proved expensive during the third quarter with the trust’s management signing new leases for its 43 mainland properties at an average 8.6 percent below previous rates.

In a call with analyst, James Sung, head of asset management at MLT, said that northern, western and central China have an excess supply of logistics and industrial space, while sounding optimistic about a future recovery.

“The operational situation in China itself, we expect to recover hopefully in four quarters around there, or earlier if the government has stimulated the economy with a booster,” he said.

Sung’s cautious outlook contrasts with earlier statements by Lee Ark Boon, Mapletree’s chief executive officer for logistics development in China. Commenting in a May statement Lee said,

“As the business environment improves, China is well placed to be the world’s top growth economy in the near to medium term with its GDP growth target of over 5 percent this year.”