Temasek investment vehicle Mapletree proved its ability to access capital in any climate with a solid deal in early April, further boosting Singapore’s reputation as the region’s top destination for listed trusts.
If proof was needed that Singapore developer Mapletree Investments was considered a low-risk proposition, its ability to continue raising funds, despite terrible market conditions, has surely provided it.
In April, Mapletree Commercial Trust managed to price its S$893m (US$705m) IPO at S$0.88, above the midpoint of guidance, despite a devastating earthquake in Japan weeks earlier that had prompted analysts to revise their growth predictions for much of Asia. The deal was covered on the first day of bookbuilding and ended more than eight times subscribed.
Shortly afterwards, Mapletree Industrial Trust managed to raise S$177m in a dual-tranche placement and preferential offering in July, at a tight 2.2% discount to VWAP. This came less than a year after listing, following a S$853m IPO that was 39 times covered. MCT and MIT remain the two largest S-REIT listings on record.
Mapletree Logistics Trust, the first of the company’s trusts to list, has also raised fresh equity in the past 12 months, completing a two-part S$305m offering in September 2010.
The trusts have also received a warm reception from debt investors and, in August, MIT Treasury set up a S$1bn multicurrency MTN programme.
“Mapletree Logistics Trust’s aggregate leverage ratio is approximately 41%, with interest cover of 6.5 times,” said Richard Lai, CEO of Mapletree Logistics Trust Management, manager of Mapletree Logistics Trust. “Given that we are a cross-border REIT, our debt provides natural hedge against fluctuation in the foreign currency rate and provides tax shelter in countries where the corporate tax is relatively high. With this, we are comfortable with aggregate leverage ratio of 40%–50%.”
The share prices of the three trusts have struggled somewhat this year, but the weak performance of the SGX, in general, is likely to have been the biggest contributing factor, even as the Singapore property market has maintained its strength.
“Mapletree is all about Singapore, and it has got that an added safety net of a Temasek backing,” said one South-East Asia ECM head.
However, in pursuit of growth, the parent company is moving away from its roots as a Singapore-focused developer, with new projects elsewhere in some of Asia’s fastest-growing economies, which have quite different characteristics to its home territory. In 2009, Mapletree set a five-year target to double its assets under management to S$20bn–$25bn come 2014. At the end of the 2010 financial year, its AUM stood at S$15.4bn, meaning it is on track to meet that target.
“Our focus on Asia is driven by the growth potential here, anchored by a few important socio-economic trends,” said group CEO Hiew Yoon Khong, in the company’s most recent annual report. “For emerging markets like China, Vietnam and India, these trends include: strong economic growth, based on rising domestic consumption, as well as exports; large populations and markets, especially in China and India; and growing middle-class affluence and increasing urbanisation. These trends will continue to support demand for good quality commercial, residential, industrial and logistics properties.”
In July, Mapletree signed two memoranda of understanding with the government of Zhengzhou in Henan Province, central China, to build two distribution centres there. It has already developed five logistics facilities in China, valued at more than S$300m, in Beijing, Tianjin, Yangshan and Wuxi. “China currently holds about 12% of the group’s total real estate assets and, going forward, we see opportunities for us to grow even further,” said Hiew in a statement. “Apart from the logistics real estate space, Mapletree will continue to pursue our strategy to scale up our presence in China across various asset classes, not only in the Tier 1 cities, but also the inland cities.”
It also broken ground this year on VivoCity Nanhai, a four-storey shopping mall modelled after its Singapore property.
Last year, Mapletree broke ground on a new logistics park in North Vietnam, Mapletree Bac Ninh Logistics Park, which will be offered to MLT when fully leased.
“MLT was listed in 2005 with only 15 assets in Singapore. Today, it has grown its portfolio to 98 assets in seven countries with about 50% of its assets in Singapore,” said Lai.
“The diversification effect arising from the geographical expansion of the portfolio adds stability to its performance. With each country in the Asia region developing and growing at a different rate, the portfolio is better prepared to deal with global economic crises as the impact across the Asian region varies.”
Lai added that the REIT planned to increase its activities in Singapore, Japan, China, Malaysia and South Korea, and was also exploring emerging markets such as Indonesia and India through greenfield developments with Mapletree Investments.
Mapletree has also acquired properties through its US$1.16bn Mapletree India China fund, which invests in the office, retail and residential sectors in those two countries.
It also plans to launch a fund this year to invest in Japanese business properties, with ¥25bn–¥40bn of assets. Mapletree will provide at least 30% of the funds. It will start two more funds of around US$500m each to invest in China and Vietnam in the next couple of years.
This will give future ventures a slightly different risk profile to its existing REITs and management company, but Mapletree’s strong track record should be enough to give investors confidence going forward. Mapletree’s status as a wholly owned subsidiary of Singapore state investment holding company Temasek, undoubtedly, gives investors assurance of its stability, but the management firm itself is believed to be lining up an IPO.
Bankers will be falling over themselves to win the mandate when RFPs eventually go out, while investors are also likely to be keen to take direct exposure to the developer, with the size of the fundraising expected to be well over US$1bn. The deal is not expected to come to market in the near term.
