Mapletree Logistics Trust’s China asset divestments could pick up as interest rates fall

[SINGAPORE] Mapletree Logistics Trust (MLT) is seeing “slightly better” interest in its China assets, with its manager noting that lower borrowing costs are helping to accelerate its planned divestments in the market.

The logistics-focused real estate investment trust (Reit) had previously outlined plans to divest about S$1 billion worth of assets, of which about half would come from China and Hong Kong.

The rest will be drawn from Malaysia, Singapore and, to a smaller extent, Australia, Japan and South Korea.

Providing an update on Wednesday (Oct 29) at its second-quarter financial results briefing, Jean Kam, chief executive officer of the manager, said the Reit is targeting divestments of between S$100 million and S$150 million across its portfolio for the current financial year.

Of this, MLT plans to divest about S$100 million of assets in China and Hong Kong. In FY2027, the trust aims to divest a further S$400 million.

“(Divestment activities) are starting to pick up, and we’re seeing more interest,” said Kam, responding to a question on the impact of falling interest rates.

“Particularly for our Greater China portfolio that we are looking to divest, we are seeing some enquiries coming in… So, from that perspective, the China divestment process, compared to last year, is slightly better.”

She added that MLT is in talks with insurance companies and state-owned enterprises on potential transactions in China.

In Hong Kong, the trust is also seeking to divest its strata-title assets, although Kam cautioned that such deals may take time, as they involve negotiations with multiple individual owners.

Overall, MLT intends to sell its assets in China and Hong Kong at valuation rather than at a discount, with some proceeds potentially channelled into a renminbi fund that the trust is currently exploring as an exit option.

Last year, MLT executed S$210 million worth of divestments.

Selective acquisitions

On Tuesday, MLT declared a distribution per unit (DPU) of S$0.01815 for its second quarter ended Sep 30, down from S$0.02027 a year earlier.

Revenue fell 3.2 per cent year on year to S$177.5 million, from S$183.3 million, mainly due to currency depreciation and the absence of contributions from divested properties.

This was partly offset by higher revenue from Singapore, Japan and Hong Kong, as well as contributions from Mapletree Joo Koon Logistics Hub.

Distributable income slipped 9.6 per cent to S$92.5 million, compared to S$102.3 million previously.

Despite lower global interest rates creating more acquisition opportunities, Kam said the manager remains “highly selective and disciplined”.

“We will be keen to increase our presence in emerging markets like India and Vietnam, as they still offer a faster growth trend and our assets under management is still very small in these two markets,” she said.

In Singapore, MLT is exploring asset enhancement initiatives as well as redeveloping older properties which are located near its existing assets.

Kam added that the manager may consider converting some of its fees from units to cash once its operations start to stabilise and distribution income improves.

“It is something that remains in our mind, and we will do some conversion as and when our DPU is able to take it,” she said.