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Mapletree Industrial Trust’s Gravity-Defying Distributions

It seems the slowdown in the property market has not really arrived – at least not for Mapletree Industrial Trust (SGX: ME8U). As one of the largest industrial property owners in Singapore, the trust owns more than 80 properties in 5 different property segments – Flatted Factories, Business Park Buildings, Hi-Tech Buildings, Stack-up/Ramp-up Buildings and Light Industrial Buildings.

Its properties are currently valued at S$3.2 billion and have more than 2000 companies as their tenants. It is one of the four REITs listed under the Mapletree brand with the others being Mapletree Logistics Trust (SGX: M44U), Mapletree Greater China Commercial Trust  (SGX: RW0U) – which just released its fourth-quarter earnings on Monday – and Mapletree Commercial Trust (SGX: N2IU).

Mapletree Industrial’s report card

The trust, which just released its fourth-quarter earnings yesterday for the financial year ended 31 March 2014, was able to increase gross revenue by 8.3% for the year to S$299 million even though its portfolio occupancy rates had been falling throughout the year (from 95.5% in the first quarter to 91.3% in the last quarter);  a steadily increasing average rental rate for the trust had helped to make up for the declining number of tenants.

Meanwhile, the trust’s net income before the effects of fair value gains were included had improved by 12.4%, ending the year at S$163.6million. More importantly for unitholders, the amount available for distribution had increased by 10% to S$166million. Due to some increase in its total outstanding units for the year, the trust’s distribution per unit only managed to improve by 7.4% to 9.92 Singapore cents for the financial year. With a current unit price of S$1.43, that gives investors a trailing distribution yield of about 7%.

The net asset value per unit for the trust also strengthened by 8.1% – mainly due to the fair value gains (i.e. revaluation gains) from its properties – from where it was at the end of 31 Dec 2013, ending 31 March 2014 at S$1.20. The trust was also able to reduce its aggregate leverage, which dropped almost 2 percentage points to 34.4%, partly due to the increase in assets. Much of the REIT’s debts are due within the next 3 years and so there’s a risk that it might need to face higher interest rates when it refinances some of its borrowings.

In other operational highlights, the trust’s lease profile looks healthy, with lease-renewals being well-staggered. Over the next three years, the trust will need to renew about 20% of its leases every year.

Currently, the manufacturing segment takes up the largest proportion of its tenant mix at 42%. The next biggest contributor is the wholesale and retail trade sector, which makes up 25.4% of Mapletree Industrial Trust’s clientele.

Growth plans

The trust has a busy schedule over the next few years. It has a build-to-suit (BTS) data centre project for Equinix that’s currently under construction; it is upgrading its properties in Toa Payoh North, which can hopefully bring in an improved yield in the future; and lastly, there’s another BTS project in Telok Blangah, Singapore – one of the trust’s largest BTS projects with a value of S$250 million – that’s expected to start in the second half of this year.

While Mapletree Industrial Trust’s falling portfolio occupancy rates might bear some watching, with that many growth initiatives going on for Mapletree Industrial Trust, things does look bright.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.