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Mapletree Logistics Trust’s AGM: 5 Insights on Diversification

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. Earlier this week, I took a look at plans it had within five countries it operated in but in this article, I’ll see whether its ambition of diversifying its tenant base is bearing fruit.

Diversify, diversify, diversify

A key theme throughout the AGM was the management’s effort to diversify its tenant base, rejuvenate its properties and to build a network of properties across multiple countries. Ng Kiat made five key points worth noting for investors:

  • Mapletree Logistics Trust had increased its tenant base from 380 five years ago to 634 currently.
  • Food and beverage (F&B) tenants, which is the REIT’s largest customer segment, require temperature-controlled warehouses to store fresh produce and prepared foods. These warehouses also require special licenses. As a result, F&B tenants tend to stick to their existing locations. Ng added that pharmaceutical tenants are even stickier due to its high-spec requirements.
  • The REIT also has properties in eight different countries. Ng said that the REIT is now well-positioned to offer its customers a network of locations, rather than engaging them based on single leases at single locations. On this note, 35% of the REIT’s leased area is now used by multi-location tenants, a pleasing stat. 
  • Portfolio occupancy stood at a healthy 98%. Ng added that around 70% of its leasing activities are based on tenant retention.
  • On the flipside, Ng said that the tight supply can present challenges for the REIT to refresh its tenant base. She said it was a delicate balance between keeping high occupancy – and at the same time, trying to take advantage of the scarcity of high-spec buildings to secure higher rentals. The situation is a happy problem, in my eyes.

Mapletree Logistics Trust AGM slide

Source: Mapletree Logistics Trust 2019 AGM presentation

Renewal and rejuvenation

Rejuvenation goes hand-in-hand with diversification. Over the past five years, Ng said that the REIT has added higher specification buildings, attracted better quality tenants and divested older assets. 

The previous fiscal year was an unusually active one, where the REIT acquired S$1.2 billion worth of new properties. Ng highlighted three key points:

  1. The new properties come from a wide spread of countries, including China, Singapore, Australia, South Korea and Vietnam, a reflection of the team’s ability to penetrate different geographies. 
  2. Ng said that the REIT’s local teams within different countries have matured over the past five years, and its network is growing stronger. 
  3. For context, deal sizes tend to average at around S$300 million to S$500 million in a typical fiscal year. 

Interestingly, Ng also took time to highlight the REIT’s efforts around sustainability including the reduction of water and energy usage along with an increase in solar energy usage. Efforts for sustainability are not just for show. Ng added that tenants are becoming more aware of their impact on the environment and sustainability is on their agenda.

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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.