3 Things Mapletree Industrial Trust’s Management Wants You To Know About Its Business

In late January, Mapletree Industrial Trust (SGX: ME8U) released its third quarter results for its fiscal year ending 31 March 2018 (FY17/18). As a quick introduction, Mapletree Industrial Trust is a REIT with 85 industrial properties in Singapore, and 14 data centres in the US (through a 40%-owned joint venture).

The Manager of Mapletree Industrial Trust had given a presentation on the REIT’s latest results. In the presentation deck, I saw three slides on the REIT’s business that I think investors should pay attention to.

The first slide shows a high-level summary of Mapletree Industrial Trust’s income statement for the third quarter of FY17/18:

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

We can see that the REIT had a good quarter. Gross revenue, net property income, distributable income, and the distribution per unit (DPU) all grew.

Mapletree Industrial Trust’s growth was due to the revenue contribution from its build-to-suit project for HP Singapore, which more than offset lower occupancy in its overall portfolio.

The 14 data centres that Mapletree Industrial Trust owns were acquired in December 2017. The REIT had co-invested with its sponsor, Mapletree Investments Pte Ltd, which holds the other 60% ownership in the 14 data centres. Mapletree Industrial Trust has the right of first refusal to acquire the 60% stake.

The next slide I want to look at shows the occupancy rates for the REIT’s portfolio, and its rental rates, going back to the third quarter of FY10/11:

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

There are two things – one negative and one positive – that really stand out from the chart above. On the negative aspect, Mapletree Industrial Trust’s latest occupancy rate of 90.1% is the lowest seen since the fourth quarter of FY14/15.

Coming to the positive observation, there has been a clear upward trend over the years in the rental rate that the REIT’s portfolio is able to command. In the third quarter of FY17/18, the REIT’s rent increased by 2.1% year-on-year to S$1.97 per square feet per month.

The last slide I want to talk about illustrates the tenant retention rate of Mapletree Industrial Trust:

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

What’s useful to note is that 67.1% of the REIT’s tenants have stayed with the REIT’s properties for more than four years. The latest retention rate is also a respectable 73.3%. I think these numbers are positive, since they indicate that Mapletree Industrial Trust has managed to retain its tenants over the years. Such performance, if continued, could reduce the REIT’s cost of tenant acquisition, and improve the stability of the REIT’s income.

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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.