The business model of Mapletree Investments (MIPL) combines the roles of real estate development, investment, capital and property management. As at end March 2022, MIPL owns and manages $78.7 billion of office, retail, logistics, industrial, data centre, residential and lodging properties across 13 markets in AsiaPacific, Europe and North America. According to MIPL’s annual report, its three listed REITs and seven private funds have a combined AUM of $58.5 billion as at end March.
The three listed REITs, Mapletree Logistics Trust (MLT), Mapletree Industrial Trust (MIT) and Mapletree Pan Asia Commercial Trust (MPACT), are among the largest in their respective sectors. They have also outperformed the broader Singapore market in terms of total unitholder returns of price gain and DPU over the past 10 years. Based on Bloomberg data, total return from Aug 31, 2012, to Aug 31, 2022, for MLT, MIT and MPACT were 171%, 240% and 186% respectively. In the same period, the Straits Times Index returned 51%.
In addition, MIT won The Edge Singapore’s Billion Dollar Club (BDC) weighted ROE category in 2020 and 2021 and the most profitable company award in 2019, while Mapletree Commercial Trust (MCT) now known as MPACT won the weighted average growth in earnings category in 2020.
The outperformance of the REITs can partly be attributed to MIPL’s strong support — not just in a pipeline of properties — but with financing, and with help in warehousing and stabilising portfolios in the case of all three REITs. For overseas assets, MIT also leverages the sponsor for asset management capabilities.
Over and above the support accorded to its REITs, MIPL has challenged itself to achieve six growth targets in its third five-year plan which started in FY2019/2020 (MIPL has a March yearend) by tapping its strengths as a real estate developer, investor, capital and property manager. These targets include a recurring patmi of $900 million to $1 billion by FY2023/2024, up from $732 million in FY2021/2022 for the 12 months to March 31, 2022, and fee income of $2.5 billion in FY2023/2024, up from $1.3 billion for the 12 months to March 31, 2022. Other targets involve ROE, recycled proceeds, ROIE and an AUM of $90 billion.
Supporting the REITs
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The formation of MPACT, now the thirdlargest S-REIT by market cap and the fifth-largest in Asia-Pacific (as at Aug 31, 2022, Bloomberg), is an example of MIPL’s support for its REITs. The merger of MCT and Mapletree North Asia Commercial Trust (MNACT) was intended to combine the strength of MCT and the growth of MNACT, and in doing so, create an enlarged REIT with ready footholds in the key gateway markets of Asia that is bestpositioned to capitalise on the longterm growth of Asia.
In a win-win proposal, MCT offered to acquire MNACT from its unitholders at NAV per unit of $1.1949, with the transaction at a DPU-accretive level for MCT unitholders. To MCT’s unitholders, MNACT represents a ready-growth platform that will put MCT on the best path forward.
MIPL had undertaken to subscribe for the maximum preferential offering units of up to $2.2 billion in support of the merger so as to finance the additional cash requirement arising from the introduction of the alternative cash-only consideration for MNACT unitholders.
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Following the merger, MPACT comprises a diversified portfolio of 18 properties valued at $17.1 billion of commercial assets across key gateway markets of Asia. VivoCity and Mapletree Business City, both located in Singapore, form the key pillars.
MPACT’s continued success in the retail sector stems from intensive management efforts to curate its properties such that they have become “more than a place to shop”.
VivoCity has also benefited from the confluence of the pandemic and global trends such as e-commerce. Retailers are now compelled to optimise their footprints by retaining only the bestperforming stores. This has led to the expansion of established retailers with some of them establishing flagship stores in VivoCity. These include Zara, Marks and Spencer, Adidas (which introduced two flagship stores), Puma, Gram Café and Timezone. More recently, Dyson has also set up its largest store in Southeast Asia in the mall, featuring an immersive demonstration space.
MPACT’s other retail asset, Festival Walk is currently facing challenges due to the Covid situation in Hong Kong. The MPACT Manager is determined to steer the property towards recovery and remains committed in its aim to drive long-term growth and sustainable returns for unitholders.
Transforming MIT to data centre play
MIT was listed in October 2010 with an AUM of $2.1 billion. The majority (53%) of the portfolio then were flatted factories, with the balance being business park buildings (21%), stack-up/ ramp-up buildings (16%), light industrial buildings (9%) and warehouse (1%). Fast forward to June 30, 2022, and MIT’s $8.8 billion portfolio comprises a significant portion in data centres, with 50.9% of assets being North American data centres sited predominantly on freehold land.
For MIT’s first overseas acquisition in 2017, MIPL and MIT formed a joint venture to acquire 14 US data centres for US$750 million. MIPL held 60% interest in the joint venture while MIT held the remaining 40%. In FY2020/2021, MIT acquired the remaining 60% of the joint venture from its sponsor at a purchase consideration of US$210.9 million. The agreed property value of the 14 US data centres on a 60% basis was US$494 million. Also, in FY2019/2020, MIPL and MIT acquired 13 North American data centres via a 50:50 joint-venture for US$1.4 billion. MIT has a right of first refusal over the 50% it does not own.
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Separately, MIT completed the acquisition of a data centre in Virginia for US$220.9 million in March 2021, and the acquisition of 29 US data centres for US$1.32 billion in July 2021. These transactions helped to boost distributable income for the three months ended June 30, 2022, by 11.4% y-o-y to $92.1 million and DPU by 4.2% y-o-y to 3.49 cents.
MIT’s North American data centre portfolio is resilient, with a long weighted lease to expiry of 6.2 years as at June 30, 2022, and a high proportion of leases with rental escalations of 2% to 2.5%.
The portfolio is primarily leased on a powered shell basis with minimal tenant servicing and capital expenditure commitments. About 90.3% of the North American data centres are on triple net leases where maintenance expenses are borne by tenants. These tenants are diverse, comprising mainly co-location providers (46.2%), enterprise/end users (34.2%) and cloud/hyperscale providers (13.7%).
During the Covid-19 pandemic, MIT completed three data centre acquisitions in the US, a challenging endeavour. MIT’s manager says: “These were executed within tight timeframes with strong support from the sponsor’s team in the US which assisted with the due diligence of data centre acquisitions amid the tightening of border controls during the pandemic. The strong presence of the sponsor’s US team was integral in providing support during the acquisition phase and onboarding of tenants. As the portfolio grew, the sponsor strengthened the US-based team dedicated to managing MIT’s North American data centres.”
Resilient, diversified New Economy play
As a pan Asia-Pacific logistics REIT, MLT is focused on expanding and deepening its network connectivity in the region through the addition of modern, welllocated assets in key logistics hubs. A growing network presence enables MLT to offer a variety of leasing solutions to support customers in multiple locations, strengthening customer relationships and MLT’s competitive position.
In line with this focus, MLT’s regional network has expanded significantly since its listing in 2005, growing from 15 assets in Singapore with a value of $422 million, to today’s portfolio of 186 properties across nine markets in AsiaPacific valued at $13 billion.
MLT’s portfolio is well-diversified across geographic markets, tenant base and industrial sectors. This enhances its portfolio and income resilience, enabling MLT to ride through different economic cycles and weather recent global economic disruptions such as the pandemic, geopolitical tensions and trade conflicts. The scale and breadth of MLT’s platform also position the trust well to capture attractive market opportunities driven by structural growth trends such as rising e-commerce and supply chain diversification.
In addition, MLT remains focused on driving its portfolio rejuvenation strategy to identify opportunities that offer the potential for redevelopment or intensification of land use to create greater value. In FY2022/2023, MLT will be embarking on the redevelopment of 51 Benoi Road in Singapore that will add a high-specs ramp-up facility and generate a 2.3 times increase in gross floor area post redevelopment.
At the same time, older properties with outdated specifications and limited redevelopment potential may be considered for divestment. The capital released will be redeployed into investments in modern facilities with higher growth potential.
More funds and listed REITs
MIPL’s global logistics portfolio, including MLT, with an AUM of $29.3 billion as at end March, positions it as one of the top five logistics players globally. MIPL announced the successful closing of Mapletree US Logistics Private Trust (MUSLOG) at US$1.4 billion in total fund equity in 2021.
MIPL’s other existing funds are Mapletree Global Student Accommodation Private Trust (with AUM of US$1.3 billion or $1.82 billion), Mapletree US & EU Logistics Private Trust (MUSEL, US$4.3 billion AUM), Mapletree Australia Commercial Private Trust (MASCOT) with A$1.4 billion ($1.34 billion) in AUM, Mapletree Europe Income Trust (MERIT, EUR1.2 billion ($1.68 billion)) and Mapletree US Income Commercial Trust (MUSIC, US$1.3 billion).
“MIPL’s business objective is to deliver consistent and high returns, hence the group plans to sponsor more public-listed REITs and private funds to reinvest capital, develop more quality investment products and generate returns for our shareholders,” says Mr Chua Tiow Chye, Deputy Group Chief Executive Officer, Mapletree.
If the performance of its listed REITs is anything to go by, investors can look forward to more value-creating investments from MIPL.
