To The Moon

Tiger Singapore Weekly Focus Logistics/Industrial S-Reits to ride on e-commerce growth

Source: https://thesmartinvestor.com.sg/

Singapore REITs are resilient to a global economic slowdown in 2023 due to healthy leverage, limited exposure to rising interest rates and utility costs, and robust financing flexibility.

Logistics will benefit from rising e-commerce adoption, supply-chain reshoring and inventory stockpiling. Industrial REITs exposed to high-tech buildings and data centres will be shielded by long-term leases to large corporate tenants.

The pandemic has significantly accelerated the penetration rate of e-commerce, which requires three times more logistics space than sales through traditional brick and mortar sales. A potential double-edged sword for industrial REITs, the "retail apocalypse" does put further pressure on their brick and mortar-based tenants and has driven investments into logistics technologies that could eventually lead to higher utilization rates and marginally reduce the need for physical space.

1. $MAPLETREE LOGISTICS TRUST(M44U.SI)$

 $MAPLETREE LOGISTICS TRUST(M44U.SI)$ is Singapore’s first Asia-centric logistics REIT with a diversified portfolio of logistics properties that span across Singapore and the Asia-Pacific. As of June 30 2022, MLT has a portfolio of 185 properties in Singapore, Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Vietnam with assets under management of S$13 billion.

Value of investment properties grew by 21.1% year-on-year from S$10.8 billion in 2021 to S$13.1 billion in 2022. Overall growth in portfolio value was attributed to the acquisition of 20 properties made during the year and a portfolio revaluation gain of S$572 million largely contributed by properties in Australia, Hong Kong SAR, andChina.

MLT’s distribution per unit (DPU) grew to 8.787 cents, representing a 5.5% year-on-year growth. Since MLT’s listing in 2005, the company has provided consistent long-term returns with total returns amounting to 346%.

MLT holds a well-diversified tenant base with little concentration risk for the business. MLT tenant base comprises 840 local and international companies. Its top 10
tenants account for 24.2% of total gross revenue, with no single tenant contributing more than 6.3%.

Around three quarters of MLT’s tenant portfolio serves consumer-related sectors which have proved relatively resilient as demand for essential goods remain strong despite the uncertain environment. Portfolio occupancy rates remain at a healthy region of 96.7% and weighted average lease expiry is at 3.5 years.

2. $FRASERS LOGISTICS & IND TRUST(BUOU.SI)$

Frasers Logistics & IND Trust has a portfolio comprising 105 logistics and commercial properties worth approximately S$6.5 billion, diversified across five major developed countries – Australia, Germany, the United Kingdom, Singapore and the Netherlands.

FLCT logistics and industrial properties, making up about 60% of its portfolio, are strategically located with good access to key transport networks. It also has high quality tenant with a relatively long weighted average lease expiry profile of 5.2 years as of Jun 30 2022.

In June 2022，the Trustannounced the proposed acquisition of 3 prime logistics and industrial properties in Victoria, Australia, for a portfolio purchase price of A$61 million (S$60.4 million).

Located in key industrial precinct Truganina and approximately 20 km from Melbourne’s central business district, the 3 buildings were newly completed in early May 2022 and have a total lettable area of 25,089 sqm. The 3 freehold properties are fully leased to 4 tenants, with a weighted average lease expiry of 6.6 years and fixed annual rent increments of 3 per cent.

This investment marks a continuing deployment of the Trust divestment proceeds from the sale of Cross Street Exchange in Singapore, and will provide FLCT with further exposure to the attractive Melbourne logistics and industrial market.

With accelerated digital transformation, shifts in consumer trends and a greater focus on supply-chain resilience, the global logistics industry remains central to the rapid growth of e-commerce.

Robust demand for logistics space from these trends of speed and resilience should more than offset the near-term impacts from the potential reduce in demand for physical space by traditional brick and mortar-based tenants.