Thursday, 25 May 2023

The One Thing That Sucks Big Time With Mapletree Industrial Trust Latest Japan Data Centre Acquisition.

Mapletree Industrial Trust ("MIT") just announced on May 25, 2023 its maiden acquisition of a data centre in Osaka, Japan for a consideration of S$507.9Mil with cash outlay of S$196Mil funded by a private placement and S$310.2Mil from JPY loan. While the 20 years long lease from the data centre operator for the this acquisition brings upon much stability and visibility to earnings, the fund raising at a proposed price range of S$2.16 to S$2.212 per unit represented up to 5.2% discount of the last traded unit price of S$2.28 as at May 24, 2023. I have to lament the fact that existing unit-holders of MIT are left high and dry by this private placement without an opportunity to take part in acquiring more MIT units at a discounted price. This is extremely disappointing. 

1. Good News: New Data Centre Acquisition Expected to be DPU and NAV per Unit Accretive.

2. Osaka Data Centre Fully Leased to Established Data Centre Operator For 20 Years
The long WALE of about 20 years offers much stability as well as visibility to MIT. Moreover, it will further reduce concentration risk of existing major tenants via income diversification with the new acquisition. 

In addition, the property to be acquired is a fully-fitted data centre, which was substantially completed in November 2022. It is leased on a net lease structure with minimal landlord operational obligations. Such lease arrangements thus minimises operating risk for MIT, which will ease MIT’s entry into a new geographical market of Japan.

Parting Thoughts
Overall, I quite like the new acquisition which was well crafted out by MIT's acquisition team. Even the JPY loan taken functions as a natural forex hedge against the overseas asset being acquired. MIT is growing well with its original strategic vision to expand data centres to about two-thirds of its "Assets under Management". The latest acquisition bumps its data centres portfolio to 56.3%. Hopefully, MIT's management will remember existing unit-holders in its next major acquisition and not place out units privately to external parties while MIT is trading at close to a 52 weeks low during this bear market period.

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