Home REITs Mapletree Industrial Trust's Latest Acquisition: Boosting Its Data Centre Weightage

Mapletree Industrial Trust’s Latest Acquisition: Boosting Its Data Centre Weightage

What’s the deal?

On 23 June, Mapletree Industrial Trust (SGX: ME8U), or MIT, announced the acquisition of the remaining 60% interest in 14 data centres located in the US.

These data centres are currently held by Mapletree Redwood Data Centre Trust (MRDCT).

MIT currently holds a 40% interest in MRDCT and will purchase the remaining 60% for US$210.9 million.

Upon completion of the acquisition, MIT will own 100% of these 14 data centres.

So what?

This acquisition highlights MIT’s confidence in the data centre segment and its belief in its resilience amid the economic downturn.

Even before COVID-19 struck the world, data centres had already been a growing trend as more companies required data storage space in a secure environment.

The pandemic has accelerated the demand for data centres as more people around the world tap on e-commerce and video-conferencing due to lockdowns and movement restriction orders.

Cloud computing revenue is slated to grow at a compound annual growth rate of 14% from 2018 to 2024, underscoring the potential of this segment.

MIT’s purchase bumps up its exposure in this resilient data centre class from 31.6% to 39%.

We should expect to see incremental increases in income too. Almost all, or 97.8% to be exact, of MRDCT’s portfolio contains rental escalation clauses of 2% or more, ensuring that cash flows grow in line with overall inflation rates.

Other benefits for MIT include diversification of MIT’s tenant base and a reduction in exposure to any single tenant from 8% to 7.2%.

The transaction will also be both distribution per unit (DPU) and NAV accretive, raising DPU by 3.4% to S$0.1266 for pro-forma FY 2019/2020 and NAV by 3.7% to S$1.68 per share.

What happens next?

MIT will be conducting a fund-raising exercise to fund the total acquisition outlay of US$218 million (around S$309.6 million).

A private placement of shares was launched on the same day at an issue price of between S$2.732 and S$2.80 to raise proceeds of no less than S$350 million.

The private placement exercise was 8.2x over-subscribed at the top end of the issue price range of S$2.80, which attests to the popularity of MIT’s shares.

A total of 146,414,000 shares were issued, raising gross proceeds of approximately S$410 million.

Existing unitholders will receive a cumulative distribution that will be computed and reported in due course, representing the DPU accruing from 1 April 2020 till the date before the announcement of the private placement.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.