Data centres could soon make up 75% of MIT’s portfolio, but don’t call it a data centre Reit

THE manager of Mapletree Industrial Trust (MIT) said that two-thirds of its portfolio may be made up of data centres within the next two years – with the “possibility” that this might be increased to 75 per cent further down the line.

“In terms of asset type, for the time being, our focus will still be on data centres,” said Tham Kuo Wei, chief executive officer of the manager, at a briefing on Friday (Apr 28). “That’s the reason why we will probably be comfortable with letting the ratio creep up to, say, three-quarters.”

However, he stressed that this was not a target that the real estate investment trust (Reit) manager has in mind.

“Would we want to push for 75 per cent as a target? No. We are only looking at that as a band that we might see how the portfolio will be represented,” he said. “It is not a destination.”

“(It is) for us to gauge the level of support and level of interest,” Tham added. “But, I think, at this point in time, it is safe for us to say we are not turning ourselves into a data centre real estate investment trust (Reit).”

Already, data centres account for 53.7 per cent of MIT’s S$8.8 billion in assets under management as at end-March. Its data centres in North America alone make up just over half – or 50.3 per cent – of the Reit’s entire portfolio.

The remainder of its portfolio comprises hi-tech buildings (17.3 per cent), flatted factories (16.4 per cent), business park buildings (6.2 per cent), stack-up or ramp-up buildings (5.8 per cent), and light industrial buildings (0.6 per cent).

But the Reit manager is not writing off the other types of industrial assets.

“At the same time, we are keeping an eye out on other asset or property types that fall within the industrial mandate, whether they are high-tech buildings, R&D facilities, or even biotech pharma facilities,” Tham said.

“If those opportunities were to surface and we are able to find a good match, we will certainly think of bringing them into the portfolio as well,” he said.

He added that MIT will also look to diversify beyond Singapore and North America, into developed markets in Europe and Asia. “We will continue to look at these locations. Hopefully, we are able to find the right assets to bring into the portfolio,” he said.

For the full year ended March, MIT reported a 1.7 per cent dip in distribution per unit (DPU) to S$0.1357, from S$0.138 in FY21/22.

This was largely due to an enlarged unit base with additional units issued under the distribution reinvestment plan.

The amount available for distribution to unitholders rose 1.6 per cent to S$356.6 million, from S$350.9 million the year before.

FY22/23 gross revenue was 12.3 per cent higher at S$684.9 million, while net property income grew 9.7 per cent to S$518 million.

The Reit manager attributed the growth to contribution from the acquisition of 29 data centres in the US, partially offset by higher borrowing costs.

Citi analyst Brandon Lee noted that MIT’s FY22/23 results missed consensus estimates.

“(This) illustrated the negative impact from higher debt cost, which more than offset still-decent organic growth within its Singapore portfolio,” he said.

Still, the analyst saw a silver lining in the Reit’s data centre assets.

“Interestingly, valuation of its US data centre portfolio inched up marginally despite 25 basis point cap rate expansion, which showcased the bright supply-demand and rental growth dynamics of this sector, in our view,” Lee said. He added that the marginal valuation uplift was due to higher market rents.

Units of MIT closed flat at S$2.38 on Friday.