MapletreeLog expects tougher year ahead

Singapore

MAPLETREE Logistics Trust, which on Monday released its fiscal second-quarter results, said it expects to face some headwinds in its Singapore portfolio over the next 12 months amid a more challenging leasing environment with tighter regulatory restrictions on the use of industrial space.

These restrictions include the ruling that the main occupier of a JTC site can only lease out at most 30 per cent of the building space to non-anchor subtenants, up from 50 per cent previously. This takes effect in October. Ng Kiat, CEO of Mapletree Logistics Trust Management, said: "On the operational front, we expect to face some headwinds in our Singapore portfolio over the next 12 months as more properties are expected to be converted from single-tenanted buildings to multi-tenanted buildings. We will continue to focus on tenant-repositioning and retention."

MLT said that for the rest of the current fiscal year ending March 31 next year, about 8.8 per cent of its leases (by net lettable area) are due for renewal of which 5.3 per cent are leases for single-tenanted buildings and 3.5 per cent for multi-tenanted buildings.

"In Singapore, the manager expects that some of the single-tenanted buildings will be converted to multi-tenanted buildings. During this transition, portfolio occupancy will likely continue to be under pressure, while property expenses are expected to remain on an uptrend," the trust said in its financial statement. "In this environment, active lease and asset management, and portfolio review remain key management focus."

For the fiscal second quarter ended Sept 30, 2014, portfolio occupancy dipped to 97.2 per cent, from 97.6 per cent in Q1, due to the conversion of several single-tenanted buildings to multi-tenanted. Perhaps for this reason, the trust has also been forging ahead in its expansion plans to deepen its presence in overseas growth markets such as China, South Korea and Malaysia. In six months, it has made four accretive acquisitions of about S$149 million in these countries. Some of these new assets have helped the trust to perform in its second quarter, it said.

Mapletree Logistics Trust's Q2 net property income rose 3.1 per cent to S$68.7 million, while gross revenue rose 5.8 per cent to S$81.5 million.

The trust said the revenue increase was mainly driven by contributions from Mapletree Benoi Logistics Hub and two recent acquisitions in Malaysia and South Korea, as well as higher revenue from existing assets in Singapore, Hong Kong and Malaysia. This also led to a 3.3 per cent increase in Q2 available distribution per unit (DPU) to 1.88 Singapore cents, on the back of a 4 per cent increase in the amount distributable to unitholders to S$46.3 million.

The trust's gross revenue would have risen more if not for a foreign exchange impact from the depreciation of the Japanese yen (which was partly offset by a stronger Korean won). Thankfully, income streams from Japan are "substantially hedged", which helped mitigate the impact to distributions, it said.

Revenue growth was also partly offset by lower occupancy in several recently converted multi-tenanted buildings in Singapore, as well as the absence of revenue from a Toh Guan warehouse and office building which is undergoing redevelopment, and Mapletree Xi'an Distribution Centre which was damaged by fire in February this year.

The trust closed half a cent higher at S$1.195 on Monday.