After comparing two healthcare REITs last week, we now move back to looking at the industrial REIT space.
This round, we look at two popular industrial REITs – Keppel DC REIT (SGX: AJBU) and Mapletree Industrial Trust (SGX: ME8U), or MINT.
Keppel DC REIT is a pure data centre REIT with a portfolio of 23 data centres located across nine countries as of the first quarter of 2024 (1Q 2024).
The REIT has a strong sponsor in blue-chip asset manager Keppel Ltd (SGX: BN4).
MINT, on the other hand, is a diversified industrial REIT with 140 properties across three countries as of 31 March 2024.
MINT also has a reputable sponsor in the form of real estate giant Mapletree Investments Pte Ltd.
We decided to compare these two REITs to determine which is the most attractive one.
Portfolio composition
Looking at both REITs’ portfolio composition, MINT has significantly more properties compared with Keppel DC REIT, at 140 versus 23.
MINT’s properties are varied and comprise data centres (nearly 55% of its assets under management or AUM), Hi-Tech Buildings (17%), and Flatted Factories (15.6%), among others.
Keppel DC REIT is a pure-play data centre REIT with 100% of its portfolio invested in data centres.
In terms of country diversification, Keppel DC REIT is one up over MINT as the data centre REIT’s properties are spread out across nine countries.
MINT, however, has a larger AUM compared with Keppel DC REIT.
We like the property diversification for MINT and feel that it helps to buffer against a downturn in the data centre industry.
The rental income is also spread out across more properties for MINT with the largest tenant taking up just 6% of gross rental income (GRI).
Keppel DC REIT’s largest tenant took up 34.7% of the REIT’s GRI.
Winner: MINT
Financials and DPU
Financials-wise, both REITs saw their gross revenue enjoy a year-on-year increase.
Investors should note that Keppel DC REIT saw a jump in gross revenue because of a settlement sum received concerning a tenant dispute.
MINT managed to grow its distribution per unit (DPU) by a minor 0.9% year on year to S$0.0336, contributed by higher rental income from its redevelopment project, Mapletree Hi-Tech Park @ Kallang Way, and a new data centre acquisition in Osaka, Japan.
Keppel DC REIT saw its DPU tumble by 13.7% year on year to S$0.02192 because of a loss allowance made for rental arrears from its Guangdong data centres.
Winner: MINT
Debt metrics
Moving on to each REIT’s debt metrics, both MINT and Keppel DC REIT share nearly the same level of aggregate leverage.
MINT, however, has a lower overall cost of debt at 3.1% versus 3.5%. Its fixed-rate debt percentage was also higher than Keppel DC REIT’s at 84.6% versus 73%.
Winner: MINT
Operating metrics
When it comes to operating metrics, both REITs score high in the occupancy department with portfolio occupancy levels above 90%.
However, Keppel DC REIT’s occupancy rate is much higher than MINT at 98.3% versus 91.4%.
Data centre leases are also longer, enabling Keppel DC REIT to sport a much longer weighted average lease expiry (WALE) than MINT.
Winner: Keppel DC REIT
Distribution yield
Finally, we come to the crux of the matter – each REIT’s distribution yield.
The key reason why income investors purchase REITs is because of their steady and dependable dividends.
In this department, MINT offers a better distribution yield with an annualised yield of 6.2% versus Keppel DC REIT’s 4.9%.
One reason for the lower yield at the pure-play data centre REIT could be because of the sturdy fundamentals for the data centre industry spurred by generative artificial intelligence and increasing digitalisation.
Winner: MINT
Get Smart: Acquisitions and rental escalations
Tallying up the score, it’s clear that MINT comes out ahead, being the winner of four of the five aspects that we compared.
Investors, however, should also consider other factors aside from the ones discussed above.
For investors who wish to have a more concentrated exposure to data centres, Keppel DC REIT will provide them with that.
Another factor to consider is acquisitions and rental escalations to help grow the rental income for the portfolio.
MINT reported a positive rental reversion of 6.6% for renewal leases and recently purchased a data centre in Osaka to add to its portfolio.
Keppel DC REIT boasts a strong pipeline of more than S$2 billion of data centre assets from its sponsor that can be injected into the REIT in due course.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Mapletree Industrial Trust.
