The REIT sector is not completely out of the woods yet.
While interest rates have dipped slightly by one percentage point in 2024, the spectre of a “higher for longer” scenario looms large with Trump’s latest set of comprehensive tariffs.
Tariffs look poised to raise prices across the board, potentially causing inflation to spike once again.
Mapletree Industrial Trust (SGX: ME8U), or MIT, is one of the REITs that saw its unit price come under pressure this year.
Year-to-date, the industrial REIT’s unit price has slid nearly 10% to end at S$2.02 after hitting a 52-week low of S$1.83.
Is there light at the end of the tunnel for the REIT?
A resilient set of earnings
MIT reported a robust set of earnings for its third quarter of fiscal 2025 (3Q FY2025) ending 31 December 2024.
Gross revenue rose 2% year on year to S$177.3 million while net property income (NPI) increased 2.6% year on year to S$133.2 million.
Distribution per unit (DPU) edged up 1.5% year on year to S$0.0341.
The better performance was driven by higher average rental rates, with positive rental reversions recorded in Singapore.
In addition, the growth in DPU was contributed by the newly acquired freehold mixed-use facility in Tokyo.
For the first nine months of fiscal 2025 (9M FY2025), gross revenue improved by 3% year on year to S$534 million.
NPI increased by 2.8% year on year to S$400.3 million while DPU crept up 1.4% year on year to S$0.1021.
MIT also saw its finance costs rise by just 0.6% year on year to S$79.3 million for 9M FY2025, a sign that the REIT is managing its cost of debt well.
Distributions, interrupted
The industrial REIT has seen steady DPU increases since its IPO back in FY2011.
Its first full fiscal year of operation saw DPU come in at S$0.0841, and following that, DPU has kept up a continuous, unbroken increase to S$0.138 in FY2022.
That fiscal year happened to coincide with the sharpest surge in interest rates as the US Federal Reserve jacked up interest rates to deal with runaway inflation.
Because of the sharp increase in interest rates, MIT saw its DPU fall for two consecutive years to S$0.1357 in FY2023 and S$0.1343 for FY2024.
The good news is that 9M FY2025 saw a small year-on-year increase in DPU that may see a reversal of this decline.
Sturdy portfolio metrics
Apart from its financial metrics, MIT also reported healthy operating metrics across its portfolio of 141 properties.
Portfolio occupancy stood high at 92.1% as of 31 December 2024, though this number was slightly lower than the previous quarter’s 92.9%.
The portfolio’s weighted average lease expiry (WALE) by gross rental income (GRI) stood at 4.5 years, with the Japan portfolio helping to lengthen the WALE.
Just 2.7% of the REIT’s leases will come due in the remainder of FY2025.
The industrial REIT also has a diversified tenant base of more than 2,000 tenants, of which the largest contributes 5.9% to GRI.
Together, the top 10 tenants make up close to 30% of the portfolio’s GRI and include solid names such as HP Inc. (NYSE: HPQ), Bank of America (NYSE: BAC), and Equinix (NASDAQ: EQIX).
The Singapore portfolio also registered a positive rental reversion of 9.8% for renewal leases.
As for MIT’s US data centre portfolio, it’s useful to refer to Keppel DC REIT’s (SGX: AJBU) recent business update.
The data centre REIT believes that agentic artificial intelligence (AI) will boost demand for data centres.
Keppel DC REIT saw a positive rental reversion of 7% for its data centre portfolio for the first quarter of 2025.
Acquisitions and divestments
The manager of MIT has also been busy with acquisitions and divestments over the past two calendar years.
As interest rates stabilised, the REIT announced its maiden acquisition of a data centre in Osaka, Japan, in May 2023.
This transaction was both yield-accretive and helped to lift the REIT’s net asset value (NAV).
Just last September, the industrial REIT acquired a 98.47% stake in its second Japan property, this time in Tokyo and for around S$134.2 million.
This property has the potential to be redeveloped into a new data centre and will provide an immediate DPU uplift.
MIT was also active in capital recycling to rejuvenate its portfolio.
Tanglin Halt Cluster was sold for S$50.6 million in February 2024 at an 8.4% premium to its book value.
Get Smart: Keep a close eye on the upcoming results
MIT has proven resilient during tough times, and though the REIT reported two consecutive years of DPU decline, investors could see a turnaround this fiscal year.
The REIT also sports healthy operating metrics and has been active in acquisitions to help boost DPU and its asset base.
Income investors should keep an eye on MIT’s FY2025 earnings which are slated to be released in the evening of 30 April 2025.
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Disclosure: Royston Yang owns shares of Keppel DC REIT and Mapletree Industrial Trust.
