After buying a 50 percent stake in a portfolio of 13 North American data centres two years ago, Mapletree Industrial Trust has seen the value of those assets grow by over 31 percent and is ready to acquire the remaining ownership in the $1.8 billion dollar venture, should its sponsor and business partner, Mapletree Investments decide to divest.
In a presentation to investors earlier this month, SGX-listed MIT underlined that it still has the right of first refusal to buy the interest it does not own yet in Mapletree Rosewood Data Centre Trust – a joint venture between the trust and its sponsor, Mapletree, which holds 10 powered shell facilities ready to accommodate third party servers and 3 hyperscale assets across North America.
“Our investment focus remains in established data centre markets while leveraging on the sponsor’s extensive capabilities and network to pursue suitable investment opportunities,” an MIT spokesperson told Mingtiandi on Thursday. The timing of the potential deal, however, “will depend when the sponsor is keen to divest its interest.”
The statement came at the same time that MIT, which has 57 North American data centres in its portfolio, including the Rosewood assets, posted a 61 percent surge in profit attributable to unitholders in the period ending March, reaching S$155.56 million ($111.4 million) from just S$96.47 million in the preceding three months, according to its latest financial statement.
Trust To Take Over of $1.8B Portfolio
The trust said the total valuation of the 13 North American data centres stood at $1.82 billion as of 31 March based on independent valuations.
Equally owned by the trust and the Temasek Holdings-back developer, the JV bought the portfolio in January 2020 from Digital Realty for $1.37 billion. That acquisition, which included MIT’s right of first refusal, added 2.1 million square feet (195,096 square metres) of rack space to the assets held by the two entities.
The 10 powered shell data centres, which are worth $557.3 million, are located across Arizona, Colorado, Georgia, Massachusetts, Texas and Virginia, as well as the Canadian province of Ontario, while the three hyperscale facilities valued at $810.6 million are all situated in Ashburn, Virginia.
The Singaporean trust already paid $215 million to buy out Mapletree’s 60 percent interest in a portfolio of 14 US data centres held by Mapletree Redwood Data Centre Trust in September 2020, setting a precedent for future deals.
The trust has been actively expanding in North America with its latest move involving a $1.3 billion deal a year ago to pick up 29 US server facilities across 18 states from Florida-based Sila Realty Trust.
“To deliver sustainable and growing returns to our unitholders, we are always on the lookout for relevant asset classes that can diversify and add value to our portfolio,” the trust said.
The occupancy rate of MIT’s North American portfolio, which holds 57 data centres including the JV’s properties, remained unchanged at 93.3 percent at the end of March, with a weighted average lease expiry (WALE) 6.1 years.
The trust’s manager said it also keeps on the lookout for more acquisition and development opportunities in Singapore, where it currently has 86 assets, with a slightly higher occupancy rate of 94.4 percent last quarter compared to 93.7 percent previously, and 2.7 years WALE.
Independent valuations showed the North American portfolio is valued at S$5.82 billion ($4.3 billion) as of end-March, while MIT’s overall portfolio in Singapore is worth around S$4.3 billion ($3.08 billion).
With data centres making up more than half of MIT’s S$8.8 billion assets under management, its top tenants are dominated by tech-related firms such as American IT firm HP, telecommunications holding company AT&T, US-based Global Colocation Provider, and Singapore’s ST Telemedia.
Challenging Year Ahead
MIT’s active expansion comes amid improving earnings after its profit attributable to unitholders more than doubled to S$430.8 million for the financial year 2021/2022, which ended in March, compared to S$164.5 million the year prior. Net property income also jumped by 34.5 percent to S$472 million that same year.
On a yearly basis, its attributable profit last quarter marked a turnaround from the S$45.8 million loss recorded in January to March 2021. Its net property income for the same period inched up by 1.2 percent to S$124.2 million from the previous quarter, and is up 35 percent year on year.
The trust saw its distributions per unit – which measures the amount of dividends per unit that a unitholder receives — increase by 10 percent year on year to S$0.1308 in its latest financial year from S$0.1255 previously.
For the coming year, the listed trust said it will focus on tenant retention to maintain stable portfolio occupancy but cautioned that it could face a obstacles given rising energy costs, skyrocketing inflation and supply chain disruptions.
“We expect a challenging operating environment in view of uncertainty over the trajectory of economic recovery from the COVID-19 pandemic,” MIT said.
“Assuming medium-term inflation expectations remain well-anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds,” it added.
Note: This story has been updated to show MIT’s profit attributable to unitholders was S$96.47 million in the October-December 2021 period and S$164.5 million in financial year 2020/2021. Its DPU has also been updated to S$0.1308 for the latest financial year from S$0.1255 in the year prior, while the valuation of its North American and Singapore portfolios were S$5.82 billion and $4.3 billion, respectively. An earlier version indicated wrong figures. Mingtiandi regrets the error.