Mapletree Logistics Trust (SGX: M44U) is an Asia-focused logistics REIT that has a sizeable portfolio of 141 properties across Singapore, Hong Kong, Japan, China, Australia, South Korea, Malaysia, and Vietnam. Its portfolio of properties is worth just shy of S$8 billion and it has rewarded unitholders over the longer term with a consistently increasing distribution per unit (DPU).
I was able to attend the REIT’s AGM on Monday – it was the REIT’s 10th overall and FY18/19 (fiscal year ended 31 March 2019) was broadly solid. The CEO of the REIT manager, Ng Kiat, was in attendance to present and answer questions. One particular area I thought would be of interest to unitholders (as well as prospective investors) was its exposure to five different countries within Asia. Let’s take a look at what the REIT had to say about them.
It’s no surprise that the trade war is at the forefront of investors’ minds. In response, Ng said that Chinese tenants have become more cautious and realistic about their own expansion plans (they won’t “chope” the space, so to speak). She saw the situation as a positive as it enables the REIT to bring in clients with long-term mindsets.
Mapletree Logistics Trust’s portfolio is also focused around the Middle Kingdom’s domestic consumption and will continue to benefit from China’s urbanisation trend which continues to happen, albeit at a slower pace.
Meanwhile, JD.com (NASDAQ: JD) exited its tenancy at one of the REIT’s properties in the Middle Kingdom. Ng explained that Chinese eCommerce companies tend to “test the waters” and pivot quickly. To be sure, she added that JD.com’s move is not related to the quality of its buildings. To illustrate her point, JD.com vacated half of the aforementioned premises — but Mapletree Logistics Trust was able to bring the occupancy up to 65% shortly after JD.com’s exit and is in discussions with prospective clients to increase occupancy to 85%.
2 and 3. Malaysia and Vietnam
Southeast Asia countries such as Malaysia and Vietnam have benefited from the US-China trade war. Ng said that companies such as Alibaba (NYSE: BABA) are starting to turn its attention beyond the Middle Kingdom to Southeast Asian countries such as Malaysia and Vietnam, where the REIT is well-positioned to offer warehouse options.
Mapletree Logistics Trust’s Japan properties are mostly located in the Greater Tokyo ring road. The current locations are advantageous for the REIT because there is no more land for expansion and the warehouses are well-positioned to be a key component for the “last mile” of delivery.
Ng said that its Japanese tenants tend to be very sticky and prefer long-term contracts, commenting that the REIT has maintained near-100% occupancy over time. Ng also added that its Japan tenants are becoming more receptive to rental reversions. As such, the REIT is starting to structure its leases in a “3+3+3” format where rental reviews happen every three years.
Meanwhile, Japanese clients such as Nippon Express are also starting to look to expand into countries such as Malaysia and Singapore. Again, with its network of properties, Mapletree Logistics Trust is able to offer suitable solutions and a familiar rental model for its global-minded tenants.
A key drawback of the Lion City is that land leases are shorter compared to other countries. According to Ng, valuations for its Singapore properties will fall when the remaining lease falls below 15 to 20 years. Before that period, Mapletree Logistics Trust would typically engage with relevant officials to present a business case for redevelopment and request for lease extensions.
Tune in for my next article when I’ll be diving into what Mapletree Logistics Trust’s management had to say about their efforts to diversify the REIT’s tenant base and what the progress on that fronts looks like.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended the shares of Mapletree Logistics Trust. Motley Fool Singapore writer Chin Hui Leong owns shares in Mapletree Logistics Trust.