MIT's DPU down 1.0% for Q2; rental reliefs to hit FY20/21 distributable income

THE distribution per unit (DPU) of Mapletree Industrial Trust (MIT) fell to 3.10 Singapore cents for the second quarter ended Sept 30, from 3.13 cents a year ago.

This is despite distributable income rising 14.8 per cent to S$72.9 million on the back of higher net property income and distributions declared by joint ventures; distributable income was, however, partially offset by higher manager's management fees.

Gross revenue was up 1.5 per cent to S$103.4 million for the second quarter, from S$101.9 million a year ago; net property income (NPI) grew 2.0 per cent to S$81.6 million from a year ago.

This was mainly driven by new revenue contribution from the 14 data centres in the US, but partly offset by the rental reliefs extended to tenants and the loss of revenue due to the redevelopment of the Kolam Ayer 2 Cluster.

The manager of MIT on Sept 1 completed the acquisition of the remaining 60 per cent interest in the 14 data centres in the US from its sponsor. The purchase consideration amounted to US$215.3 million.

The agreed property value of the data centres on a 60-per-cent basis was US$494.0 million, said MIT. Prior to this date, gross revenue and net property income did not include MIT's 40 per cent interest in the data centres, it added.

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The amount available for distribution increased 14.8 per cent year on year to S$72.9 million, from S$63.5 million. Distributions from joint ventures were higher as a result of the acquisition of the North America portfolio held under Mapletree Rosewood Data Centre Trust (MRDCT), which was completed in two phases in the second half of the FY19/20.

Property operating expenses, which consist of impairment allowance of trade receivables and depreciation, narrowed slightly to S$21.7 million, from S$21.9 million a year ago. This was mainly attributable to lower property maintenance expenses and marketing commission, which was partially offset by additional costs from the consolidation of data centres previously held under MRDCT, higher property tax and allowance for doubtful debts.

Average portfolio occupancy for Q2 rose to 92.3 per cent from 91.1 per cent in the preceding quarter. Data centres and stack-up/ramp-up buildings registered lower average occupancy rates; the average occupancy rates of other property segments went up or were flat, compared to the preceding quarter.

The average rental rate of the Singapore portfolio fell further to S$2.03 per square foot per month (psf/month) in Q2 this year, from S$2.08 psf/month in Q1. All property segments except the data centres in Singapore and light industrial buildings registered lower average rental rates, mainly because of rental rebates.

As of Sept 30, MIT's total borrowings outstanding increased quarter on quarter to S$2.03 billion, mainly due to consolidation of borrowings following the completion of the acquisition of the data centres in the US.

The aggregate leverage ratio was 38.1 per cent, down from 38.8 per cent as at June 30. MIT's balance sheet remained "healthy" with more than S$400 million of committed facilities available, it said.

However, with 54 per cent of the Singapore portfolio - 40 per cent of its overall portfolio (by gross rental income) - comprising of small and medium-sized enterprise (SME) tenants, the manager estimates that the rental reliefs extended to tenants would amount to about S$20 million.

This will affect MIT's distributable income for FY20/21, it said. Rental reliefs of approximately S$7.1 million had been extended to tenants in the first and second quarter of the year, with additional rental reliefs expected to be given in FY20/21. The manager will not withhold any income in the second quarter despite the gradual stabilisation of the Covid-19 situation in Singapore, it said.

An advanced distribution of 0.03 Singapore cents per unit for July 1 had been paid to unitholders on July 28. Unitholders will receive a distribution of 3.07 cents per unit for the period from July 2 to Sept 30, after books closure on Nov 4.

In its business outlook, MIT said that its "large and diversified tenant base" with "low dependence on any single tenant or trade sector" will continue to underpin its portfolio resilience. The long leases in data centres in Singapore and North America, as well as build-to-suit projects will further strengthen the portfolio's resilience, it added.

The counter closed flat at S$3.100 on Tuesday before the results were out.