Mapletree Industrial Trust to distribute S$13 million of divestment gains over next 4 quarters

MAPLETREE Industrial Trust (MIT) plans to distribute some S$13 million of gains from divesting its Tanglin Halt Cluster over the next four quarters, its manager said on Friday (Apr 26).

MIT completed the divestment of 115A & 115B Commonwealth Drive, Singapore – referred to as the Tanglin Halt Cluster – at a sale price of S$50.6 million last month. The sale price represented an 8.4 per cent premium above book value.

“Relative to our original cost, plus our capitalised cost, we have gains of roughly S$13 million,” said Tham Kuo Wei, chief executive of the real estate investment trust (Reit) manager at an earnings briefing.

“Our intention is to distribute this S$13 million equally over the four quarters in this financial year,” he said, adding that the distributions will start from next quarter.

MIT reported on Thursday distribution per unit (DPU) of S$0.0336 for the fourth quarter of its financial year ended March, an increase of 0.9 per cent on year. Total distribution to unitholders rose 4.4 per cent on year to S$95.2 million in Q4 FY24.

The manager is looking more closely at divestments in the current financial year.

It had previously reached out to the market to obtain interest for a broad range of assets in its portfolio, including business park buildings in Singapore and some data centres in the US. 

“The demand has not been that strong, it’s fairly lukewarm,” Tham said, adding that it did not reach a stage where the manager could enter into a transaction.

“We will continue to look at this divestment initiative this year, we think the market should be more conducive,” he said.

Tham said the manager does not have a specific target on the quantum of assets to divest. “But I think anything between S$200 million amd S$500 million would be a good band to shoot for.” 

He added that the possibility of getting “fantastic acquisition deals this year is not high”.

“The market is still in a state of flux, and the way for us to get dry powder, and…to move a little ahead of the curve for rebalancing our portfolio, I think we need to look at a bit more divestments,” he said.

The Reit’s aggregate leverage ratio rose to 38.7 per cent as at March 2024, up from 37.4 per cent a year earlier. Interest coverage ratio, meanwhile fell to 4.6 times from five times over the same period.

“Leverage ratio, we think, is still relatively healthy,” Tham said, adding that it still gives a bit of headroom to take on projects and consider possible acquisitions to help diversify and strengthen the portfolio.

In terms of operational performance, MIT has continued to report positive rental reversion across all property segments, with a weighted average of 6.6 per cent reversion.

Tham noted that the Reit has logged positive rental reversions over the past 10 quarters, and they are reaching a point of “diminishing returns”.

The Reit would likely continue to have positive reversion in the next few quarters, but it is likely to range between 4 and 5 per cent, rather than high single digits, as some of the rents being renewed had already been raised previously.

“That kind of additional upshift from the rental rate perspective will be a bit more muted,” he said.

Units of MIT closed flat on Friday at S$2.27.