Following Mapletree Logistics Trust (which have released its Q3 & 9M FY2022/23 results last Thursday [19 January], and you can read about it here), Mapletree Industrial Trust (SGX:ME8U) is the second Mapletree REIT to release its results for the same time period after market hours yesterday (26 January.)

For those who are not familiar with the REIT, a quick introduction – its portfolio comprises of data centres, hi-tech buildings, business park buildings, flatted factories, stack-up/ramp-up buildings, and light industrial buildings; as at 31 December 2022, the REIT has a total of 85 properties in Singapore and 56 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd), with a total assets under management of S$8.8bn. Also, just like Mapletree Logistics Trust, Mapletree Industrial Trust is also a constituent in Singapore’s benchmark Straits Times Index (STI.)

In the remainder of today’s post, you’ll read about my review of the industrial REIT’s latest financial performance, portfolio occupancy and debt profile, along with its distribution payout to unitholders (the REIT is also one that declares a distribution payout to its unitholders on a quarterly basis.)

Let’s begin:

Financial Performance (Q3 FY2021/22 vs. Q3 FY2022/23, and 9M FY2021/22 vs. 9M FY2022/23)

Despite not mandated to publish its full financial results on a quarterly basis, Mapletree Industrial Trust have continued to do so – and this is something I appreciate, as it allows me to better understand its performance, and spot any possible ‘red flags.’

In this section, I’d be reviewing the industrial REIT’s results first on a quarter-on-quarter (q-o-q) basis (i.e. Q3 FY2021/22 vs. Q3 FY2022/23), and then on a year-on-year (y-o-y) basis (i.e. 9M FY2021/22 vs. 9M FY2022/23):

Q3 FY2021/22 vs. Q3 FY2022/23:

My Observations: On a q-o-q basis, the blue-chip industrial REIT’s financial figures for the third quarter was a rather muted one – where its gross revenue and net property income only edged up by 5.0% and 4.9% respectively (mainly due to contributions from new leases across various clusters in the Singapore portfolio) – personally, these 2 figures were pretty much within my expectations, as there weren’t any acquisitions completed during the quarter under review done to help bump up the financial results.

Many are probably concerned by the 1.3% dip in the distributable income to unitholders – which can be attributed to higher borrowing costs (as a result of higher interest rates in Q3 FY2022/23 compared to the same time period last year), along with higher management fees (due to a better portfolio performance and increase in the value of assets under management.) Personally, this is very much within my expectations considering the high interest rate environment we are in right now.

9M FY2021/22 vs. 9M FY22022/23:

My Observations: Looking at the REIT’s results for the first 9-months of the current financial year against the same time period last year, its performance is still considered decent – where the double-digit percentage growth in its gross revenue and net property income were helped by a good first and second quarter (which can be attributed to contribution from the 29 data centres located in the United States of America acquired in July 2021.)

However, its distributable income to unitholders saw just a modest 3.4% increase, as a result of higher borrowing costs (due to the higher interest rate environment, and additional interest arising from the acquisition of the 29 data centres in the United States), as well as higher manager’s management fees (due to better portfolio performance and increase in the value of assets under management.)

Portfolio Occupancy Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

One thing I like about Mapletree Industrial Trust (and part of the reason why I’ve invested in it) is the resiliency in its portfolio occupancy – where it has been maintained at 90.0+% over the years.

So, for the current quarter under review, did the REIT manage to continue maintaining its portfolio occupancy rate at such high levels? Let us find out in the table below, where you’ll find a comparison of its portfolio occupancy profile for the current quarter under review (i.e. Q3 FY2022/23 ended 31 December 2022) against that reported in the previous quarter (i.e. Q2 FY2022/23 ended 30 September 2022):

My Observations: The blue-chip industrial REIT’s portfolio occupancy profile remains more or less the same compared to the previous quarter – where its business park buildings, flatted factories, and stack-up/ramp-up buildings saw its occupancy rates going up, and its data centre and light industrial buildings having the same occupancy rates compared to the previous quarter. Only the occupancy rates in its hi-tech buildings fell slightly – from 98.6% in the previous quarter to 94.8% in the current quarter under review.

In terms of lease expiries, it is very well-staggered – in the final quarter of the current financial year 2022/23, only 2.4% of the leases will be expiring. In the coming financial years 2023/24, 2024/25, and 25/26 ahead, 17.8%, 16.0%, and 18.2% of the leases will be expiring. A huge majority of the leases (45.6%) will only be expiring in FY2026/27 or later.

Debt Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

Next, let us take a look at the REIT’s debt profile. Just like how I have reviewed its portfolio occupancy profile in the previous section, I will also be comparing the stats reported in the current quarter (i.e. Q3 FY2022/23 ended 31 December 2022) against that reported in the previous quarter 3 months ago (i.e. Q2 FY2022/23 ended 30 September 2022) to find out if it has continued to remain healthy:

My Observations: It was well within my expectations that the REIT’s debt profile have weakened compared to the previous quarter as a result of the high interest rate environment we are in right now.

Looking ahead, with another 11.8% (or S$337.4m) of borrowings due for refinancing in the final quarter of the current financial year, it is inevitable that we will see a further weakening in the REIT’s debt profile ahead, and distributions further impacted as a result of higher financing costs.

Finally, on the REIT’s debt maturity profile in the coming years, it has 10.0% (or S$283m) of the borrowings expiring in FY2023/24, 5.3% (or S$150m) of the borrowings expiring in FY2024/25, 16.1% (or S$460.9m) of the borrowings expiring in FY2025/26, and 56.8% (or S$1,623.3m) of the borrowings expiring in FY2026/27 or later.

Distribution Payout to Unitholders

As I’ve mentioned in the beginning of this post, the management declares a distribution payout to its unitholders on a quarterly basis (this is one of the reasons why I’ve invested in the REIT because, as an income retail investor, my preference is towards companies that pays out dividends on every quarter.)

For the current period under review (i.e. Q3 FY2022/23), the management have declared a distribution payout of 3.39 cents/unit – a 2.9% dip compared to the payout of 3.49 cents/unit declared in the same time period last year (i.e. Q3 FY2021/22.)

Together with the distribution payout of 3.49 cents/unit in the first quarter, and 3.36 cents/unit in the second quarter, its total distribution payout for the first 9 months of FY2022/23 amounts to 10.24 cents/unit – compared to its distribution payout of 10.31 cents/unit, it is a slight 0.7% decline.

For those of you who are wondering whether or not there is a ‘distribution reinvestment plan’ (DRP) like in the previous quarters, the answer is ‘yes.’ You have the option to receive your distributions either in cash (which is the default option if you do not do anything), in a combination of cash and additional units of the REIT (the price of each unit will be determined at a later date), or additional units of the REIT only – for the latter 2, you will need to indicate your choice in a letter which you will be receiving in due course (if your units are held in a CDP account), or indicate your preference to your brokerage (if your units are held in a custodian account.)

Finally, here are the dates regarding the upcoming distribution payout/crediting of additional units of the REIT (if you choose this option) to take note of:

Ex-Date: 02 February 2023
Record Date: 03 February 2023
Payout/Crediting of Units Date: 14 March 2023

Management’s Comments & Outlook

CEO’s Review of the Current Set of Results:

“While MIT's operating metrics remained strong, we encountered headwinds from higher operating expenses and borrowing costs. We have reached another milestone in our portfolio rejuvenation and rebalancing efforts with the completion of the first block of the new high-tech industrial redevelopment project at Kallang Way in November 2022."

Outlook Ahead:

“2023 is expected to be a challenging year as the main engines of global growth - the United States of America, Europe, and China - experience weakening economic activity while about one-third of the world's economy is expected to contract. Numerous risks, such as geopolitical fragmentation, inflation, higher interest rates and new COVID-19 variants, could weigh on the global economy.

The uncertain global outlook and the lacklustre manufacturing momentum may persist in the year ahead. Increasing property operating expenses and borrowing costs will continue to exert pressure on distributions. The Manager will manage these pressures through cost-mitigating measures and focus on tenant retention to maintain a stable portfolio occupancy.”

Closing Thoughts

If there’s one thing that this latest set of results reported by Mapletree Industrial Trust teaches us, it will be that even the strongest of companies will also see its results weaken from the tough economic environment – that said, one quarter of “not so ideal” results does not break the REIT.

Moving forward, with the high interest rate environment set to stay for some time – my guess is that the current condition will remain as such till next year (at the earliest) before there’s any chance of interest rates coming down. As such, the REIT’s financial results will continue to be impacted (where it is likely to record just a low to mid single-digit percentage growth) due to the lack of acquisitions, along with higher financing costs (when they refinance their borrowings due in the coming quarters) further affecting its distribution payout to unitholders. However, this is not something that only Mapletree Industrial Trust have to navigate through, but all other Singapore-listed REITs and other non-REIT companies too.

As far as Mapletree Industrial Trust is concerned, its business fundamentals continue to remain very sound, and as such, I will continue to stay invested in it.

With that, I have come to the end of my review of the blue-chip industrial REIT’s latest “report card” for the third quarter, as well as for the first 9 months of FY2022/23. Please note that everything you’ve just read above is purely for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.

Related Documents

• Press Release
• Financial Statements
• Presentation Slides
• Application of Distribution Reinvestment Plan for Q3 FY2022/23

Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.