Mapletree Logistics Trust Buys Prime Hong Kong Warehouse for $618M

Singapore-listed Mapletree Logistics Trust (MLT) will add to its collection of 125 logistics assets by acquiring Mapletree Logistics Hub Tsing Yi, a modern warehouse in Hong Kong, for HK$4.8 billion ($617.6 million). The REIT, which is managed by an affiliate of Singapore’s Mapletree, will purchase the fully committed, 11-storey facility from Mapletree Investment, the development branch of the government-linked property conglomerate.

In move which MLT’s manager says is aimed at increasing the REIT’s exposure to Hong Kong’s logistics market, the listed trust is acquiring the newest of Hong Kong’s 14 modern warehouses. The acquisition will turn Hong Kong into the second-largest contributor to MLT’s revenue stream behind its home base in Singapore, rising from 17 percent of the trust’s net property income to 27 percent, according to a statement by the trust’s manager.

MLT, which already owns eight properties in Hong Kong, expects to earn a net property income yield of 5.7 percent from the deal, about 170 basis points higher than average for Hong Kong warehouses. The S$3.03 billion ($2.2 billion) logistics trust has properties spread across Australia, mainland China, Hong Kong, Japan, Malaysia, Singapore, South Korea and Vietnam.

Logistics REIT Buys a Prime Asset in Tsing Yi

“Hong Kong has consistently been one of MLT’s best performing markets and continues to show great promise, due to sustained demand and limited supply,” commented Ng Kiat, CEO of Mapletree Logistics Trust Management in the statement. “This acquisition will increase our net lettable area in Hong Kong by more than 70 percent to 3.8 million square feet, and strengthen MLT’s position as a major player to meet the growing logistics demand in Hong Kong.”

“With its prime logistics location, modern specifications and 100% committed occupancy with quality tenants, this acquisition will enhance MLT’s income and tenant diversification,” Ng added. Mapletree Logistics Trust Management, MLT’s manager, is a wholly owned subsidiary of Mapletree Investments.

Completed in 2016, the ramp-up warehouse has a net lettable area of 148,065 square metres and is 100 percent committed to 12 tenants including Adidas, Swatch and logistics firm Ever Gain. The high-quality shed enjoys a prime location in the Tsing Yi logistics cluster, on the island of Tsing Yi off the west coast of Kowloon. The warehouse hub is nearby the Kwai Chung container terminals and is well-connected by highways to the Hong Kong International Airport roughly 25 kilometres away and mainland China.

MLT Sees Opportunity in Hong Kong Warehousing

Hong Kong has just 14 modern warehouses, according to a presentation by the trust’s manager, citing research by property consultancy Savills. Over 79 percent of that supply is more than 20 years old, and only 12 percent is less than ten years old.

The combination of strong demand for high-quality warehouse space and limited supply due to land constraints has driven rents upward at a compound annual growth rate of 6.1 percent from 2003 to 2016. Rental growth has stabilised over the past two years but is projected to climb again from 2018 onwards on the back of surging e-commerce in China.

Through the transaction, MLT is making a substantial bet on Hong Kong logistics. The REIT has a portfolio of income-earning logistics assets across Asia Pacific with a total book value of S$5.5 billion ($4 billion) as of June 30. Following the deal, which is subject to approval by the trust’s unit holders on September 13, MLT’s portfolio will grow to S$6.4 billion ($4.7 billion). Hong Kong assets will account for the greatest share of the portfolio’s value, displacing Singapore and rising from 21 percent to 32 percent.