Mapletree Industrial Trust fiscal 1Q net property income rises 1.9 percent

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Mapletree Industrial Trust reported its net property income for the fiscal first quarter rose 1.9 percent on-year to S$69.46 million after it completed its third build-to-suit (BTS) data center development.

The distribution per unit (DPU) rose to 3.00 Singapore cents for the quarter ended 30 June, up 2.7 percent from 2.92 Singapore cents in the year earlier quarter, the trust manager said in an SGX filing after the market close on Tuesday.

Daiwa had forecast net property income of S$68.1 million and DPU of 2.92 Singapore cents.

The trust attributed the increase to income contribution from Phase Two of the BTS project for HP Singapore (Private) Ltd. and MIT’s 40 percent interest in the portfolio of 14 data centers in U.S. in addition to compensation from early termination of leases, which was partly offset by lower occupancy across most property segments.

The average portfolio occupancy fell to 88.3 percent by the end of the fiscal first quarter, from 90 percent in the preceding quarter, while the Singapore portfolio occupancy fell to 87.8 percent from 89.6 percent at the end of the fiscal fourth quarter, the filing said. U.S. portfolio occupancy remained unchanged at 97.4 percent, it said.

“The large supply of industrial space and uneven recovery in the manufacturing sector affected occupancies across segments. In addition, the increase in leasable area upon completion of the asset enhancement initiative at 30A Kallang Place resulted in a drop in occupancy for the Hi-Tech Buildings segment,” the filing said.

The trust issued a cautious outlook.

“The wider economy and business sentiments of small and medium enterprises in Singapore remain robust. However, looming uncertainties stemming from heightened global political and trade tensions continue to threaten the projected growth momentum,” it said. “Furthermore, the continuing supply of competing industrial space is exerting pressure on both occupancy and rental rates.”

But it noted that the demand for leased data center space in the U.S. was growing, driven by the movement to cloud and outsourcing and the need for data to be stored close to its end-users. It said research indicated the demand for leased data center space by net utilized square feet in the U.S. was expected to grow at a compound annual growth rate (CAGR) of 8.7 percent over 2017-2022, while the supply CAGR was expected to be only 6.8 percent over the same period.

The trust acquired a seven-storey industrial property at 7 Tai Seng Drive in Singapore on 27 June and after upgrading works with an estimated project cost of S$95 million in the second half of 2019, it will be converted into a Hi-Tech building, the filing said, adding that it will be fully leased to an established tech company for an initial period of 25 years with annual rental escalations.

The six-storey BTS data center development Mapletree Sunview 1 in Singapore also obtained its Temporary Occupation Permit on 13 July and it will be fully leased to an established data center operator for an initial lease term of more than 10 years with staggered rental increases and renewal options, the filing said.

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