3 Things Investors Should Know About Mapletree Industrial Trust’s Property Portfolio

Mapletree Industrial Trust (SGX: ME8U) is a real estate investment trust that focuses on the industrial property sector. It has 85 properties in its portfolio (all are in Singapore) that are collectively valued at S$3.78 billion, as of 30 September 2017.

In late October, the REIT reported its second quarter results for its financial year ending 31 March 2018 (FY17/18). There are three important pieces of information about the REIT’s portfolio that was shared in the latest results.

Occupancy and rental

The chart below shows Mapletree Industrial Trust’s portfolio occupancy rate, and gross monthly rental rate, going back to the third quarter of FY10/11:

Source: Mapletree Industrial Trust FY17/18 seocnd quarter earnings presentation

There are two important takeaways from the chart.

Firstly, the latest occupancy rate was 90.4%, one of the lowest seen in the last six years. In fact, the only other time the REIT had a similarly low occupancy rate was in the fourth quarter of FY14/15. Secondly, the REIT has had a long history of growing its rental rate. But in the latest quarter, there was a slight sequential decline in the rental rate from S$1.96 per square feet per month to S$1.94.

Given these pieces of information, it would seem that the REIT has been facing some challenges in letting out its properties at desirable rates.

The retention rate

It is always good to have recurring customers in business, since it reduces the cost of customer-acquisition and improves income stability. So how did Mapletree Industrial Trust perform in the latest quarter in terms of tenant retention? Let’s see the chart below:

Source: Mapletree Industrial Trust FY17/18 seocnd quarter earnings presentation

The latest retention rate is 77.2%, which is a respectable performance. Moreover, 65.9% of Mapletree Industrial Trust’s tenants have been leasing the REIT’s properties for more than four years.

The lease expiry profile

A REIT’s lease expiry profile is useful to study because it can give us insight on the stability of the REIT’s rental income. Here’s a chart of Mapletree Industrial Trust’s lease expiry profile in the last reporting quarter:

Source: Mapletree Industrial Trust FY17/18 seocnd quarter earnings presentation

One positive aspect of the REIT’s lease expiry profile is that the expiries are staggered – this helps the REIT avoid having to face a high concentration of lease expiries in a particular year.

What’s more, with almost 49% of Mapletree Industrial Trust’s leases expiring only after FY19/20, the REIT has some revenue stability over the next few years.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.