Mapletree Industrial Trust vows to continue scaling up its data centre business through acquisitions in Singapore and the United States, as well as in new markets in Europe and Asia Pacific, after the Temasek-backed real estate investment trust saw its net property income jump by a third during the most recent financial year.
“Data centres may comprise up to two-thirds of MIT’s portfolio (by assets under management) in the medium term in view of the scalability and growth potential of this asset class,” MIT’s manager said in its response to investor queries at the trust’s annual general meeting held on Tuesday. “We will strive to mitigate possible concentration risk through diversification across multiple geographies, which comprise established data centre markets in Asia Pacific and Europe.”
The manager said that it is particularly interested in entering established digital infrastructure markets like Frankfurt, London, Amsterdam, Paris and Dublin, as well as major APAC locations like Hong Kong, Japan, South Korea and Australia.
Sponsored by Temasek-owned property giant Mapletree Investments, MIT’s focus on data centres helped boost its distributable income by 18.8 percent to S$350.9 million ($252 million) in the financial year ending 31 March, while its net property income improved by more than a third to S$472 million.
Cloud, E-Commerce To Boost Sector
The trust manager pointed to the highly developed infrastructure in its target markets, along with ready access to submarine communication cables in explaining its site selection criteria, but did not specify a timeline for growing its global portfolio.
In its existing markets of Singapore and the US, where MIT owned 143 properties as of 31 March, Mapletree vowed to continue to “pursue growth opportunities”. One significant acquisition opportunity in the pipeline is the stake it does not already own in the $1.8 billion Rosewood US data centre portfolio, where MIT has the right of first refusal to buy the remaining 50 percent interest from its sponsor, Mapletree.
That portfolio comprises 10 powered shell facilities and 3 hyperscale assets across North America, currently owned by the trust and its sponsor through a 50:50 joint venture.
The trust is pursuing its data centre strategy under the conviction that tech trends will bolster the global data centre industry over the long term. Citing research this year by S&P Global Market Intelligence, MIT’s manager said that the supply of data centres worldwide is estimated to grow by 6 percent annually between 2020 and 2026, while demand is expected to rise at an average of 8 percent.
“We remain positive about the demand for data centre space as the structural tailwinds such as cloud computing and e-commerce are likely to continue into the future,” it said. “We will strive to diversify our footprint in both established and secondary data centre markets in North America in order to capture demand from varied data centre users.”
In July last year, the Singapore-listed trust bought a portfolio of 29 US data centres from Florida-based Sila Realty Trust for S$1.8 billion. This was followed by a series of divestments in a bid to redeploy capital, including its S$10 million sale last month of an under-occupied data centre in Southfield, Michigan.
SG Redevelopment Project Attracts Global Tenants
Aside from data centres, MIT also identified tech offices and business parks as among its target sectors for long term growth.
Its latest investor update showed its ongoing project to redevelop a factory complex at on Kallang Way in Singapore’s central region, is on track to be completed by the first half of 2023. The S$300 million redevelopment aims to transform the property into “a high-tech industrial precinct.”
One of the buildings in the 865,600 square foot (80,417 square metre) complex has already been fully leased by an unidentified anchor tenant for a 25-year lease term, while some 211,000 square feet representing nearly a quarter of the second block has been pre-committed to German medical device company.
Tech Dominated Tenants
After gorging on data centres last year, the trust saw its net property income for the financial year ending March 2022 jump by 34.5 percent to S$472 million from S$351 million a year earlier. Its profit attributable to unitholders more than doubled to S$431 million for the financial year 2021/2022 versus S$165 million the year prior.
Distribution per unit rose 10 percent to S$13.80 from S$12.55 a year ago driven by the enlarged US data centre portfolio. The acquisition boosted the size of the trust’s overall portfolio to 143 properties spanning 24.2 million square feet compared to just 115 assets a year earlier.
MIT’s top ten tenants accounted for 30 percent of the portfolio’s monthly gross rental income as of March, with that group dominated by tech firms led by HP Singapore. Next on the list is American telecommunications firm AT&T, an unidentified global co-location provider and an unnamed multinational social media firm.
The trust now has S$8.8 billion worth of assets under management as of March, with 54.1 percent of that value coming from data centres, another 16 percent from high-tech buildings, and the remainder contributed by business parks and manufacturing facilities.