REITs have proven to be an oasis of calm amid the economic storm wrought by surging inflation and high interest rates.
Their ability to churn out consistent dividends makes them attractive candidates for income-seeking investors.
In this regard, some REITs have performed better than others in ensuring that they steadily increase their distribution per unit (DPU) over the years.
These REITs have certain characteristics that make them more resilient and enable them to steadily grow their DPU.
One such REIT is Mapletree Logistics Trust (SGX: M44U), or MLT.
MLT has seen its DPU climb 28% over the past nine years from its fiscal 2013 (FY2013) to FY2022 (the REIT has a 31 March year-end).
Of course, investors will be more interested in the REIT’s future and whether it can continue to increase its DPU.
Let us dig deeper to find out.
An impressive DPU record
MLT’s DPU rose from S$0.0686 in FY2013 to S$0.08787 in FY2022 for a rise of 28.1%.
FY2013 was the first full year of DPU after the REIT changed its fiscal year-end to 31 March.
Even before this, the REIT had already reported growing DPU.
If we go way back to FY2006, the first full year of operations since the REIT’s IPO back in July 2005, the DPU stood at just S$0.0507.
Measured since then, MLT’s DPU would have grown an impressive 73.3%, for a compound annual growth rate of 3.5%.
This growth has carried on into FY2023 too, with DPU for the first nine months of the fiscal year (9M FY2023) rising by 3.4% year on year to S$0.06743.
Portfolio tailwinds and a strong sponsor
As of 31 December 2022, MLT’s portfolio comprised 186 logistics properties across eight countries with assets under management (AUM) of S$12.6 billion.
Being in the logistics sector is a boon for the REIT as the pandemic had created strong tailwinds for the industry due to the boom in e-commerce.
Vacancy rates for logistics spaces are set to stay at historic lows as rents are expected to rise further in core markets around the world.
In short, demand cannot keep up with supply and this means that MLT’s stable of properties should see healthy leasing demand and buoyant rental rates.
The REIT is also anchored by a strong sponsor in Mapletree Investments Pte Ltd, a wholly-owned unit of Temasek Holdings.
Mapletree Investments is a global real estate development, investment, and management group with an AUM of S$78.7 billion as of 31 March 2022.
Multiple growth avenues
Aside from the above-mentioned long-term tailwind, MLT can also grow via multiple avenues.
One effective method has been the manager’s consistent focus on acquisitive growth.
For FY2022, MLT completed a total of seven acquisitions in countries such as Singapore, Australia, Malaysia, and South Korea.
And in FY2021, the logistics REIT made a total of six acquisitions of 18 properties worth S$1.6 billion to boost both its asset base and DPU.
A second method involves active portfolio rejuvenation, which involves the manager performing capital recycling to maximise the value of MLT’s portfolio.
For 9M FY2023, the manager has divested three properties to unlock value and redeployed the capital to modern, high-specification facilities offering better prospects.
The REIT is also undertaking redevelopment projects to increase the total gross floor area (GFA) of the properties.
These projects stretch over several years and can deliver a significant GFA uplift once completed.
One of these is the redevelopment of 51 Benoi Road in Singapore where GFA is projected to jump by 2.3 times from 391,000 square feet (sqft) to 887,000 sqft.
The total cost of redevelopment is S$197 million and the project should be completed by the first quarter of 2025.
There is a third method whereby MLT can enjoy higher rental rates, and that is through positive rental reversion.
The REIT has reported a positive rental reversion of 2.9% for its latest quarter ending 31 December 2022.
Rental reversion has also been positive for every single quarter since the third quarter of FY2020, a testament to the strong demand enjoyed by MLT’s portfolio of properties.
Get Smart: The future looks bright
Investors should rest assured that MLT can continue to deliver increases in its DPU.
The REIT enjoys tailwinds for its logistics properties and is anchored by a strong sponsor.
The manager also regularly undertakes yield-accretive acquisitions and has just completed one last week.
Furthermore, the REIT also enjoys consistent positive rental reversions and is active in capital recycling.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
