[SINGAPORE] Mapletree Industrial Trust (MIT) will adopt a more defensive leasing strategy and continue to rebalance its portfolio through divestments amid the current macroeconomic uncertainties, said the manager of the real estate investment trust (Reit) on Friday (May 2).
“One word to describe (the global economic outlook) is ‘uncertain’,” said Ler Lily, chief executive officer of MIT’s manager.
She noted that many economies, including Singapore, are adjusting their growth outlooks. The risk of higher operating costs as well as elevated foreign costs will continue to exert pressure, she added.
“This is something we need to ride through and deal with,” Ler said.
In the face of the trade tariffs and political tensions, Ler said that the Reit is going to be more defensive in terms of its leasing strategy. She also noted the need to be more nimble and flexible.
Operationally, MIT will focus on improving occupancy for both Singapore and US portfolios, which can hopefully enhance cash flow.
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The Reit’s efforts in rebalancing its portfolios through divestments will continue, she added. This will strengthen its financial flexibility and provide more headroom for it to make meaningful acquisitions that will provide it with sustainable growth.
“I would say we do have our challenges ahead of us, but our portfolio is diversified, and we do have (a) relatively strong balance sheet, so we do hope that this can feed us through this uncertain time,” said Ler.
For the full year ended March, MIT’s distribution per unit (DPU) for FY2024 was up 1 per cent at S$0.1357, from S$0.1343 the previous year.
The manager attributed the DPU growth to new contributions from the Reit’s Osaka data centre and from its newly acquired mixed-use facility in Tokyo which was completed last September.
Gross revenue rose by 2.1 per cent to S$722.8 million, and net property income (NPI) went up by 2 per cent to S$531.5 million.
Besides contributions from the facilities in Osaka and Tokyo, increases in NPI were also attributed to new leases and renewals across various sectors in Singapore property clusters.
However, this was partially offset by higher property maintenance and marketing costs, and non-renewal of leases in its North American portfolio.
The divestment of the Tanglin Halt cluster also incurred a loss in income, which offset the NPI growth.
Borrowing costs slipped 1.4 per cent to S$105.1 million for the financial year, from S$106.6 million the year before. This was due to repayment of loans with proceeds from the Tanglin Halt divestment, as well as lower interest on unhedged floating rate loans.
For its operational front, the manager reported a positive rental revision across all property segments in Singapore with a weighted average rental reversion rate of about 8.1 per cent in the final quarter of FY2024.
However, MIT has been one of the worst performers on the Straits Times Index so far this year.
Year to date, it has generated total returns of negative 7.6 per cent, compared with the Straits Times Index, which has returned a total of 3.3 per cent.
This share price weakness, however, is “unjustified”, said DBS Group Research analysts Derek Tan and Dale Lai in a Friday report.
The research house is maintaining its “buy” call on the Reit with a target price of S$2.60. MIT’s DPU of S$0.1357 is also in line with their estimates.
The way the analysts see it, MIT has actively managed the portfolio, and has successfully renewed or back-filled about 70 per cent of lease expiries over the past two years. This, they said, also demonstrates the continued relevance of MIT’s assets to enterprise needs.
Furthermore, they are positive that the new contributions from Japan, select US assets and leasing momentum at Hi-Tech Park @ Kallang could provide upside surprises to their estimates.
These could help offset the expected churn in occupancy rates in the US, which could happen due to non-renewal of selected leases in the upcoming quarters.
Potential divestments to optimise and rebalance the portfolio could also help to manage overall risk, and redeploy the proceeds to other uses.
Recently, the divestment of a data centre in Georgia, US, for US$11.8 million was announced. When the sale is completed in the second quarter of FY2025, the Reit can redeploy capital into other growth opportunities.
While MIT’s share price has declined 9 per cent year to date, DBS still sees investors gravitating towards the Reit – especially with the uncertain economic conditions.
“Its diversified portfolio has demonstrated resilience through past downturns,” the analysts said.
