Date: October 1, 2024
Broker: CGS International
Acquisition of a Mixed-Use Property in Tokyo
On October 1, 2024, Mapletree Industrial Trust (MINT) announced its acquisition of a 98.47% stake in a mixed-use property located in Tokyo, Japan. The property, valued at ¥14.3 billion (S$127.8 million), was acquired at a 3.3% discount from its independent valuation of ¥15 billion (based on 100%). The acquisition is expected to be completed by the fourth quarter of the calendar year 2024.
Key Features of the Property
- The freehold property consists of a data center, back offices, training facilities, and an adjacent accommodation wing, with a total gross floor area of 319,330 square feet.
- It is fully occupied by a well-established Japanese conglomerate with a remaining weighted average lease expiry (WALE) of five years.
- The property has a traditional regular lease with an option for renewal and follows a net lease structure, minimizing capex and operational obligations for the landlord during the current lease term.
Stable Cash Flow with Redevelopment Potential
MINT expects the property to provide a stable cash flow for the next five years, with a net acquisition yield of 4%. Additionally, the property holds redevelopment potential, particularly for conversion into a new data center due to its strategic location in West Tokyo, a network-dense area that accounts for 40% of Greater Tokyo’s IT supply. This redevelopment could unlock further value and potentially enhance the property’s yield.
Financing and Leverage
The acquisition will be financed through yen-denominated debt to create a natural capital hedge. MINT’s aggregate leverage is projected to increase to 39.8%, up from 39.1% as of June 2024. However, the acquisition is expected to be distribution per unit (DPU) accretive, raising the proforma DPU by 0.4-0.5%.
Portfolio Expansion
Following this acquisition, MINT’s total portfolio will expand to S$9.1 billion, with 65.9% of properties being freehold. Japan’s contribution to the portfolio will increase to 6.4%. MINT management expects this deal to contribute positively to the trust’s growth and income stability over the coming years.
ESG Commitments
MINT has shown a strong commitment to environmental, social, and governance (ESG) principles. It scored a ‘B’ for its FY3/23 ESG ranking from LSEG, with high marks in governance (A-) and a strong performance in ESG controversies (A+). The trust has established long-term sustainability goals, including reducing building electricity and greenhouse gas emissions intensity and increasing solar energy capacity by FY30. Its sustainable building certifications and achievements in energy savings have bolstered its ESG credentials.
Financial Summary
- Gross Property Revenue: Expected to grow from S$697.3 million in FY24 to S$722.1 million in FY25.
- Net Property Income (NPI): Projected to grow from S$521 million in FY24 to S$538 million in FY25.
- Net Profit: Expected to increase from S$120.5 million in FY24 to S$402.4 million in FY25.
- DPU Growth: A forecasted 3.81% increase in FY25 with a dividend yield rising to 5.64%.
- Leverage: Aggregate leverage expected to increase to 39.8% following the acquisition.
Key Risks
MINT’s management identified two primary risks associated with this acquisition:
- The tenant may exercise its right to extend the lease, which could delay the potential redevelopment of the property.
- A global economic slowdown may affect rental vacancies and property recovery times.
Conclusion
CGS International maintains its Add rating on MINT, with an unchanged target price of S$2.82 and projected FY25-27 dividend yields of 5.6%. The trust’s resilient portfolio and proactive management, combined with this strategic acquisition, position it well for continued growth.
