Mapletree Industrial Trust (MIT) announced that it has formed a 50:50 JV with its sponsor Mapletree Investments Pte Ltd for the acquisition of 10 powered shell data centres from Digital Realty for a purchase consideration of ~US$557.3m (~S$774.2m). At the same time, this JV has also formed an 80:20 JV with Digital Realty for the coinvestment in three fully fitted hyperscale data centres (turnkey portfolio) for a purchase consideration of US$810.6m.

The 13 data centres are located across North America with a total transaction value of ~US$1,367.9m, of which MIT’s share is approximately US$683.9m. All properties are fully leased to nine established tenants, with a long WALE of 9.1 years (by gross rental income) and 92.2% of the leases have fixed annual rental escalations of 2% or more. 94.1% of the land area of the properties is freehold.

Expected completion date for the turnkey portfolio acquisition is in late 2019 while the powered shell data centres are expected to be acquired in early 2020.

Separately, MIT has launched a private placement exercise to raise gross proceeds of at least S$350m. The indicative issue price is between S$2.211 and S$2.265, representing discounts of 2.8-5.1% to MIT’s last closing price prior to the announcement. The bulk of the gross proceeds will be used for the aforementioned acquisitions, with the remaining acquisition cost to be funded by debt.

On a pro forma basis, MIT’s FY19 DPU and NAV is expected to increase by 3.5% and 3.3%, respectively, while pro forma aggregate leverage will increase from 33.4% to 38.5%. We will provide more details after speaking with management.

We currently have a HOLD and S$2.29 fair value on MIT.

Source: OCBC Research - 17 Sept 2019