On 22nd November 2021 just before midnight, Mapletree Logistics Trust (MLT) announced the following acquisitions of 17 Grade A logistics facilities to its portfolio:
- 13 properties in China for RMB4.16 billion (S$880.6 million) – acquired at 1.2% discount to valuation
- 3 properties in Vietnam for US$97.9 million (S$132.7 million) – acquired at 0.8% discount to valuation
- 1 property in Japan for JPY35,000 million (S$416.3 million) – acquired at 1.7% discount to valuation
China – These were acquired from the Sponsor with the properties having an average land tenure of 45 years. The properties have an average age of 1.5 years. The China properties are mainly in the fast growing northeast region of China which are well positioned to capture growth in domestic consumption backed by rising e-commerce sales.
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Vietnam – These were acquired from the Sponsor with the properties having an average land tenure of 36 years. The properties have an average age of 1.5 years. The Vietnam properties are in Bac Ninh and Binh Duong provinces which are warehousing, logistics and distribution hubs for domestic consumption catering to electronics multinationals such as Samsung, Microsoft and Google and also e-commerce distributors.
Japan – While not disclosed by MLT, a quick google search indicated that the seller of the asset could possibly be the Daiwa House Group.
This is MLT’s 3rd property in Greater Nagoya and 18th in Japan, of which eight are in the Greater Tokyo area.
Completed in May 2019, the Japan Property is a freehold multi-tenanted, 5-storey dry logistics facility sited on approximately 70,253 sqm of freehold land with a gross floor area of 158,034 sqm. It is a Ramp-up warehouse which is highly sought-after and remains a scarcity in the Greater Nagoya area.
The Japan Property has a diverse tenant mix comprising of eight established and reputable tenants. They include a subsidiary of a leading car manufacturer, as well as domestic and international market leaders for third-party logistics such as Nohi Transport, Marubeni Logistics and Hitachi Transport System.
Why is it a good acquisition?
The assets are located in key logistics hubs and in close proximity to large population catchments. These key hubs are also home to many established companies.
This will allow MLT to deepen presence in these fast growing logistics markets and capture opportunities not only from structural trends but also from cross selling across multiple locations. The targets are also of high quality with a strong and diversified tenant base.
Are there any negatives?
MLT has been on one of the biggest acquisition spree in Singapore REIT history since the beginning of 2020 with an enlarged asset base of S$12.2 billion after these acquisitions compared to just S$8.5b in March 2020 and S$7.7b in March 2019.
Being a REIT, the acquisitions have to be funded by a portion of equity so as to stay within the aggregate leverage ratio of 50.0%. With nearly 200 properties housing a total of 827 tenants, one would begin to wonder if the REIT would start to become unwieldy and whether they can continue to grow at this pace.
How is it funded and is it financially accretive to shareholders?
MLT will fund the China and Vietnam acquisitions using S$700.0 million of equity and S$313.3 million of borrowings with the equity comprising the following components:
- Private placement of 212,766,000 new units at S$1.88, which is a 3.5% VWAP discount
- Preferential offering of 159,109,907 at S$1.84, which is a 5.6% VWAP discount
MLT has not finalised the funding details for the Japan acquisition yet but have provided an illustration issuing 104.2 million shares at S$1.92 to raise S$200.0 million of equity and S$224.6 million in debt.
Mapletree has always pride its acquisitions on being accretive both from a DPU and NAV perspective and these acquisitions are no different.
MLT’s DPU is projected to increase by 2.2%, NAV by 4.4% and its aggregate leverage ratio will remain constant at 39.0%. This attests to MLT’s ability to source for properties providing great returns to shareholders.
Closing statement
MLT was able to quickly complete the private and preferential placements, raising S$700.0 million with a blink of an eye and resumed trading within 3 business days.
The share price resumed trading at $1.90 which is above both the private placement and preferential offering price. This attests to investors positive view about the company.
With an aggregate leverage ratio of 39.0%, a strong sponsor pipeline, available opportunities in many markets and structural tailwinds, there is ample opportunity for MLT to carry out further accretive acquisitions to investors.
