Mapletree Logistics: Trade war driving China companies’ interest in Asia properties

China yuan coins

Mapletree Logistics Trust said on Tuesday that the U.S. trade war on China is creating fresh opportunities, both for acquisitions within China and for Chinese companies looking to make an end-run around U.S. restrictions.

The trust’s Malaysian properties are seeing “good traction” from Chinese companies, Ng Kiat, CEO of Mapletree Logistics Trust’s manager, Mapletree Logistics Trust Management (MLTM), said on Tuesday in a live webcast on the second-quarter results.

“We are seeing them asking us to make some investments for them in certain locations in Malaysia,” she said, noting that its two properties at Shah Alam were seeing good traction. “China’s growth is slowing down for their business so in order for them to maintain the growth momentum they’re expanding into Asia.”

She described the companies as “Alibabas” and similar companies.

She added there was some spillover interest from Chinese companies looking at Vietnam, with the trust considering acquisitions there. But she noted that those acquisitions would not be from the sponsor and that the assets in the country tended to be small.

The trust’s sponsor is Mapletree Investments, which owns and manages around S$46.3 billion of property assets, across the office, retail, logistics, industrial, residential, serviced apartment, and student accommodation segments, and is fully owned by Singapore state investment company Temasek.

However, Ng said she was taking a cautious stance on working with some Chinese companies.

“They change their strategies very fast. So the situation is this trade tension is on-going. We’re not sure where its going to land,” she said. “We’re also taking a cautious view with these Chinese companies because the moment the course changes, they reverse their decisions very quickly. So I think this where the characteristics of the tenants are playing a more critical role in our selection.”

Mapletree Logistics was also looking at using the depreciation in the Chinese currency, caused in part by the U.S. trade war, as an opportunity to look for acquisitions, Ng said.

She said the trust remained “very keen” on China.

Citing conversations from the trust’s network, its ties with Temasek and interactions with Chinese officials, “we think they are still very focused on maintaining stability in the country. So with that, we think that making the acquisitions in China will be very attractive for us,” she said.

She noted that the trust holds a 50 percent interest in 11 properties in China, with the remainder held by its sponsor, and indicated acquiring the remaining 50 percent, potentially after the first round of rental reversions finishes next year, was a possibility.

Around 88 percent of the tenants of the China properties are skewed toward domestic consumption, Mapletree Logistics Trust said in the webcast, indicating they could be less affected by the U.S. trade war.

In its earnings statement outlook, Mapletree Logistics Trust’s manager had pointed to concerns over trade tensions, currency market volatility and rising interest rates. But it added that the assets in its portfolio are mainly used to support domestic consumption and leasing activities have remained stable.

Mapletree Logistics Trust reported on Monday net property income for the fiscal second quarter rose 14.6 percent on-year to S$90.19 million on organic growth in its existing portfolio and contributions from two recent acquisitions in Hong Kong.

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