Mapletree Logistics Trust announced on Oct 19 it planned to acquire a portfolio of properties from its sponsor Mapletree Investments for $1,040 million, 1.7% below the agreed property value by an independent valuer appointed by the REIT’s trustees. Including expenses, the total acquisition cost is expected to be $1,090.2 million. The acquisitions are expected to add 1.3% to DPU on a pro forma basis raising it to 8.25 cents, and 6.6% to NAV taking it to $1.28. Gearing is likely to fall from 39.5% as at Sept 30, 2020, to 37.1% on a pro forma basis.
The acquisitions are likely to be funded by a combination of debt and equity fund raising (EFR) comprising of a private placement and preferential EFR. Units amounting to $300 million will be issued to Mapletree Investments. “The consideration in units is to show the sponsor’s alignment with us,” says Ng Kiat, CEO of MLT’s manager during an analysts’ briefing on Oct 19.
MLT is proposing to buy a 100% interest in seven properties in China, and the remaining 50% interest in 15 properties in China that it already owns. The REIT is also proposing to acquire one property in Malaysia and one in Vietnam.
The NPI of the acquisition portfolio is $53.9 million, and the acquisition portfolio would lift distributable income of the REIT by $42.2 million to $343.92 million on a pro forma bases. The NPI yield of the acquisition portfolio is 5.2%, and the NPI yield of the Chinese properties around 5.1%, Malaysia 5.4% and Vietnam 7.25%. Since the 50% stake of the 15 Chinese properties already in MLT were valued at higher cap rates for the REIT’s March year-end, there could be a valuation uplift in FY2021.
“If you look at the cap rate [of the 50% stake in the 15 properties] we bought last year, it was at 5.5%, and now it’s 5.1%. There is cap rate compression. In the China logistics sector cap rate compression continues and we view it’s reasonable. The NPI of these properties has grown because they enjoyed rental escalations of 2% to 5%, so the purchase price is higher than the March (2020) valuation by 14%,” Ng says.
Ng adds that MLT decided to keep gearing lower rather than higher (which would have provided greater DPU accretion), because the trust plans to acquire around $200 million to $400 million of assets from third parties during the next several months. The possible geographies could be Australia, Korea, Vietnam and Japan.
In the six months to Sept 30, 2020, MLT’s 1HFY2021, the REIT reported a 1.2% rise in DPU to 4.1 cents.