Adding to US Data Centres

• Mapletree Industrial Trust (SGX:ME8U) has picked up its pace on acquisitions with its latest US$1.32b US data centre deal. The investment, at an initial 5.1% NPI yield is DPU and NAV accretive. It should boost the segment’s contribution from ~41% to ~54% of its AUM, while strengthening DPU visibility from a longer 4.6-year WALE (from 4.0 years).
• With its portfolio recalibration plans well underway, we see further DPU-accretive deals, as Mapletree Industrial Trust's management advances diversification efforts to deepen data centre concentration to 50-67% of AUM.
• Our DPUs forecast are intact while our DDM-based target price for Mapletree Industrial Trust stays at S$3.25 (COE: 6.0%, LTG: 2.0%) pending deal closure. BUY.

Acquires US$1.32b Portfolio From Sila Realty Trust

• Mapletree Industrial Trust will acquire a portfolio of 29 US data centres from Sila Realty Trust (previously Carter Validus Mission Critical REIT) for US$1.32b (S$1.78b) at a 1.1% discount to end-Apr 2021 valuations.
• The properties are 87.8% occupied, mostly freehold, primarily powered-shell (~64% of gross rental income) and on triple-net leases (~82%). They are tenanted to established credit-worthy names; three will rank within its top ten (at 1.4-2.5% of gross rental income), and backed by a long 7.9-year WALE, with 89.4% of leases with +1.5-3.0% pa rental escalations.
• Post-deal, Mapletree Industrial Trust's freehold properties are set to jump from 55.9% to 65.8% of AUM (by NLA).

Data Centres Underpinned by Positive Growth Fundamentals

• The portfolio will add assets in 4 new US markets (Chicago, Los Angeles, Silicon Valley, and Houston) to improves at 250 Williams Street in Atlanta.

Deal Is DPU and NAV Accretive

• The deal will be partly structure, while leverage increases from 36.0% to 40.3%. We will revise our estimates for Mapletree Industrial Trust following the deal closure, which is targeted in 3Q21.

Source: Maybank Kim Eng Research - 20 May 2021