Mapletree Industrial Trust

Good morning and sorry for the delay. Welcome to MIT's 2Q and first half financial results for the financial year 19-20. It was quite an eventful quarter for us. I will let Guo Wei bring us through the results and share with us the updates during the quarter.

Hello, good morning. Welcome to this briefing for our second quarter and first half for financial year 19-20. I'll run through our usual five segments. You can see the coverage on page three and the key highlights on page five. You can see the first two points up there, distributable income for the quarter. We have delivered 12.1% better results year-on-year basis, $63.5 million for second quarter. And of course, that gave rise to a 4% increase in the DPU to 3.13 cents. And overall occupancy is 90.5% for the portfolio. I think you can look at the details later in the charts that we have given. A small dip in the Singapore portfolio occupancy of about 0.3%, so that gave rise to an aggregate figure of 90.5, partly due to the time gap for our seven Taixing drive asset from completion to commencement of lease, and partly due to the exit of one of our tenants at the Light Industrial Building at 2A Changi North last quarter. So we're seeing the effect this quarter because that exit was towards the end of the last quarter. And the portfolio average lease expiry has increased from 3.4 years to 3.6 years. mainly because of a 25-year lease that had commenced at 7 Tai Seng Drive, which is a data center we leased to Equinix. And of course, some of the more notable milestones that we have in the quarter was the acquisition of our second data center portfolio in the U.S. We have announced that just last month. So it will be the same kind of approach, a joint venture with our sponsor, Maple Tree Investments, for the transaction. So it's a 50-50 joint venture this time around, 10 powered shell facilities, or what we normally refer to as just simple core and shell kind of facilities, and three turnkey data center assets. That's in a joint venture on an 80-20 basis. with digital reality. And when we talk about turnkey, we're talking about a facility with a little bit more fit out in terms of power provisions and environment control equipment. So it's just a little more kind of complete, but we're still only looking at the real estate part of the data center facility. And of course, the seven-tising drive facility I talked about, we completed that and we have commenced the lease. With two months rent-free already accounted for, cash flow started coming in from 20th of September 2019. And the last bullet point that you see down there, capital management, essentially is equity fund raise that we have done. $400 million, that was of course to fund the acquisition of the data center portfolio in the US. And on page six, our one page report card, on the right you see the most recent quarter, 313 in terms of DPU and of course the distributor income, 63 and a half million, highest ever. Next we can go on to the financial performance On page 8, we do a comparison year-on-year basis. Second quarter, financial year 19-20 against financial year 18-19, 10.5% increase in gross revenue from $92.2 to $101.9 million. And this is, of course, on the back of new projects that we have progressively crystallized over the last 12 months. Your 30-year Ka Lang Place, which I think we have outlined earlier, is already fully committed. So we have all the leases building up. We have the data center facility at Sunview Drive, which is contributing fully already. And as you may remember, we have completed the transaction for 18 Tai Sengs. That's the acquisition from the sponsor in February this year. So this had all started to contribute to the portfolio that gave rise to higher revenue. Expenses, we have kept it very much under control on a quarter-to-quarter basis, just 1.1% increase, $21.6 to $21.9 million. So that gave rise to a higher net property income level of close to $80 million for the quarter. compared to 70.6 one year ago. Borrowing costs, of course, would have risen correspondingly upon the gradual or progressive completion of our projects. 10% increase, $10.3 million to $11.3 million. But if you look at our actual borrowing costs on a percentage basis, very much the same. And in terms of the profit for the period, it tracks the net property income line fairly closely, 13.8% increase, $56.3 million to $64 million. And of course, if you look at the declaration by the joint venture, that is our first data center portfolio that we acquired in 2017, December. It's fairly stable, around the $4 million level, about 3.95, one year back, about 3.85 this round. And that, of course, gave rise to, in aggregate, a 12.1% increase in the amount available for distribution, $56.7 million to $63.5 million this quarter. And, of course, that gives you that 4% increase in the DPU to 3.13 cents On page nine, we compare the performance on the six-month basis for the first half between financial year 19-20 and financial year 18-19. Similar kind of profile that you see, also close to 10% increase in gross revenue, 9.7% from $183.7 million to $201.4 million. So property expenses, as I've outlined earlier, very much under control. A marginal 0.3% difference, which is a little lower, actually, from $43.7 to $43.5 million. So net property income, similar kind of observation as well, 12.8% increase from $140 to $157.9 million. So similar kind of... profile that we see as well for borrowing costs as well as the amount declared by the joint venture, which is the data center portfolio. So DPU level, we are seeing a 3.7% increase, 601 to 623. Going on to the next page, we compare The quarter-to-quarter shift from first quarter to second quarter this financial year. Of course, you see a smaller increase in the gross revenue, 2.3% increase from $99.6 million to $101.9 million. Same thing, property expenses are well under control, 1% increase. Net property income, 2.7% increase. You see, of course, a more muted economy. kind of amount available for distribution, 0.4% increase, 632 to 635. So that gives you that 1% increase in the distributive income from the previous quarter, 3.1 cents, so 3.13 cents this quarter. On page 12, for the balance sheet, very stable. The average tenure of that is 4.2 years. Our aggregate leverage ratio has come down from 33.4% to 29.2%. This, of course, is mainly due to the proceeds we have received from the equity fundraise exercise end of September. That is, of course, in preparation for the acquisition of the new data center portfolio. So in the interim, we have utilized the proceeds to pay down existing debt wherever we can do meaningfully. So that has, of course, resulted in a slightly lower leverage level. And on page 13, that's a picture that you see as of the 30th of September. The average tenure of that is 4.2 years. As you can see, it's very well spread over almost the next nine-year period. For this financial year, nothing due to be refinanced, and we only have a very small amount, $100 million in financial year 2021. So I think as far as risk and exposure for funding is concerned, from our point of view, very, very small. On page 14, we outline you know, the kind of risk exposure we see for our balance sheet. The amount of debt that is already fixed, about 88%, so we think that will protect us from much of the volatility. As far as the weighted average hedge tanner is concerned, it's about the same as our debt tanner, so it's about 4.2 years as well. So as I've mentioned earlier, in the presentation, the weighted average all-in funding costs still very stable. Of course, our total borrowing cost has gone up because our portfolio had grown due to the completion of the new projects, but weighted average cost is still about 2.9%, very similar to what we have one quarter back, which was 3%. So, interest coverage is fairly strong as well, 6.6 times. And on page 15, distribution details, of course, in conjunction with the equity fundings exercise, we have done an advanced distribution. So, for this quarter, out of the 3.13 cents, 2.93 had already been distributed. So we had a balance 0.2 cents, which is just for that start period of five days for that quarter. So we will be distributing this together with the third quarter distribution because it's not meaningful for us to carry out an exercise just for a few days of distribution. On page 17, that's where we start going through the portfolio update. And on page 17, this is, of course, a picture as of now. Let's not take into consideration the acquisition effect yet. Total asset management, $4.8 billion. In terms of data center exposure, 17.8%. That has shifted up later, mainly because of currency effects. So we're still, at the present moment, In 90-10 split, 90.8% Singapore and a balance of 9.2% USA. And of course, you would have found that high-tech certainly has become the largest contributor to the portfolio. On page 18, we have a portfolio overview. As I outlined earlier, the 0.3 percentage point drop in occupancy for the Singapore portfolio, you see that being carried through to the overall portfolio from 90.8% to 90.5%. The U.S. portfolio, of course, remains very stable at 97.4%. But as far as this expiry profile is concerned on page 19, we think this is practically a business as usual profile for us, just 7.2%. due to be renewed for the balance of the financial year. And of course, the weighted average lease to expiry has increased compared to the previous quarter. Now it's 3.6 years because of the Seven Tai Seng lease commencement. And on page 20, the only meaningful change was The increase in the representation by Equinix because of the commencement of the lease, it has gone up. So now it's 4.1%. The rest, I think, fairly similar to what you see in the previous quarter. So still very, very diversified portfolio of more than 2,200 tenants. Top 10 tenants, just a little above a quarter, 26.3%. And on page 21, of course, that outlines the spread we have in the portfolio across all the different industry segments. And over time, you see higher and higher representation in the blue part, which is InfoComm. That's where we account for data center tenants as well. So you probably see this profile having larger changes in the next two quarters as we complete the transaction for the US data center acquisition. On page 22, that's the picture we have for the Singapore portfolio. Occupancy has drifted down at 0.3% as I've outlined earlier, and the rent level remains very stable at $210 per square foot per month. And the details you'll be able to see on page 23, the Light industrial building part towards the right, that's where you see the effect of the exit of Automex from our 2A Changi North facility. That of course was done in the previous quarter but you see the full quarter effect this round. So it has come down from 91.3% for this property type to 81% but as an impact to the portfolio it's not that large because it's only about 1.6% of our portfolio. The other thing I would highlight, of course, is business park buildings. It has gone above 80% from 79.3% to 81.9% for occupancy level. But as far as committed occupancy is concerned, we are already 85%. And as at end of the quarter, it is at 85%. Of course, this is an average number that we are reporting for the quarter. So we think the business park space is probably getting reasonable traction in terms of demand crystallization. And we think that is positive for us. So if you look at page 24, you see that the before-after renewal comparisons a little bit more stable, though you still see that lower kind of renewal numbers for business park buildings. That's mainly because of some of the initiatives that we have taken on to retain some of the tenants, to keep the occupancy reasonably high, and For new rents, you will also observe a fairly low number compared to our passing rent for business park buildings as well, aggregate $3.22. That's because we have secured a fairly large tenant, about 10% of the space at our strategy business park building registered for that quarter. The rent that is slightly above $3, that is the reason why you see this low aggregate number. but I think it is a considered decision that we have made to boost the occupancy. So that is probably the kind of effect we will see only this quarter or so, as what I have outlined earlier in our discussions and briefings. We think we probably would have turned the corner this quarter or next, and we will try to gradually move forward rents up now that we have gotten the occupancy more or less under control. And on page 25, our retention profile, about two-thirds of our tenants stay on with us for very long periods of time as consistent in what we have outlined earlier. That's a pie chart on the left. Retention rate is still fairly healthy this quarter, about 84.3% for the entire portfolio And going on to the next segment we talk about in the investments that we have outlined, that's on page 27. So this is a 50-50 joint venture we have with our sponsor, Mable Tree Investments, for 13 data centers. The three fully fitted hyperscale facilities, what we refer to as turnkey facilities, would be done together with digital reality. And the 10-powered shell, we acquired outright 100%. Of course, that's 50-50 between us and maybe two investments. So in aggregate, we are looking at $1.9 billion Singapore dollars total. So our part, the 50%, is about $950 million in terms of purchase consideration. So that's the reason why we have done the $400 million investment equity fund raise exercise in preparation for this portfolio acquisition. On page 28, we show the locations of the assets and attributes. This one I think we have outlined briefly as well when we made the acquisition announcement. We are very confident about the quality of the tenants we have in our portfolio. As you can see in the table at the top, more than 50% of the revenue contribution will come from some of the largest tech companies in the US. 100% occupied, of course, for all the facilities and very long will. This is very helpful, 9.1 years. And with rent escalations more than 2% per year for more than 92% of the leases. And, of course, the attractive attribute for us. 94% of the facility are on freehold land. The only one that is not on freehold land is the one at the Phoenix, about 64 years. On page 29, of course, we show the picture of how our portfolio will look like after the transaction. The chart on the left will be before assets presently. After the transaction, the portfolio will be about $5.8 billion Singapore dollars. And in terms of high-tech facilities, we will cross the 50% level, about 53%. And for data center representation, 31.5%. And out of which, U.S. will be 24.3%. So if we look at a split, it becomes a 1 is to 3 kind of ratio. Singapore, about 75%. U.S., and Canada because there's one facility in Canada in the new portfolio. Then we get the 24.3% non-Singapore and mainly US exposure. On page 30, the recent completion that I have mentioned earlier as well, 7 Thaising Drive that's leased on a 25-year basis to Equinix and fully completed. within budget and within schedule. So this will start to contribute to the portfolio fully from the next quarter onwards. And the other initiative that we have outlined in the quarter, that's on page 31, the redevelopment of column IA2. Of course, at the table you can see before, after, we're increasing the plot ratio from at least 1.5 times to now 2.5 times, giving us The largest ever redevelopment project we have, 865,000 square feet. This is a little larger than our build-a-suit project for Hewlett Packard, about 5% larger. So we can claim that it is the largest we have so far. And the pictures that you see at the bottom on the left is the before picture, a little drab, partly because of the cloudy conditions. On the right is how it will look like and of course the facility that we have already secured the build to suit the commitment, this one on the building on the left is about 25% of the entire precinct. So we have already commenced the decanment process as you know we have existing tenants in the facilities of two buildings, two factory buildings. We had 108 tenants presently or rather when we did the announcement. So right now we have about 59 other tenants who have committed to move to our other facilities within the Maple Tree Industrial Trust portfolio. So that has been very helpful and that is Very similar to our experience managing the first decampment exercise for the Hewlett Packard build-a-suit project at Telok Blangah. So that certainly has helped to mitigate any kind of the drag on occupancy levels and revenue contribution to the portfolio when tenants move out. And of course, finally, Outlook, that's on page 33, still very uncertain. The Singapore economy, I think, based on the last set of data, released only 0.1% growth, similar to the previous quarter. So we think we are still not out of woods yet. There's still a lot of challenges, not just down here, everywhere else. Our friend Johnson is also having his set of... problems down there and he will solve his problem. We have things to do down here too. But as far as rents for industrial space is concerned, you would have seen a positive uptake, positive 1.7% for multi-user space and positive 5% for business park space. That looks good, but that is only confined to this current period compared to the previous quarter but if you look further back actually there was a dip in the previous quarter so we're just going back up to near where we were even for business park space is lower than the previous previous quarter so at the end of the day it's still a little uncertain we're still seeing some up down shift in terms of rent levels so the market still remains challenging as far as industrial space is concerned But for U.S., we remain very confident about the demand. It's a very large market for us, and we continue to see, you know, good take-ups for data center and good demand for data center. And based on 451 research information, we are looking at compound growth continue to be fairly strong in terms of, you know, the supply and demand, 4.6%. and 6.5% respectively. And certainly with this strong kind of figures, we are confident that the data center space will continue to be an important and relevant segment for us. We don't think, of course, there will be any short-term kind of issues anyway. All our leases are locked in for long periods of time. And for our first portfolio, we are already engaging in initial discussions on forward renewals with some of our existing tenants. So I think that continues to be very encouraging. So as far as we are concerned, we remain focused on managing our portfolio well and will be disciplined in looking at the investment opportunities while keeping an eye on what else is happening around the world. So finally, our strategy is the same. That's what you see on page 34. We're keeping the portfolio stable and resilient. We certainly would want to make sure our balance sheet is strong and flexible. And as what we have seen, we have raised equity successfully to help us take on new initiatives and growth opportunities And that's of course coming from redevelopment developments and also acquisitions. That's what we have outlined on the right. And that should continue our trajectory over time. So I think that ends what we have in the presentation. I'll be happy to take questions.

May I request for the analyst to state your firm and your name and online participants to submit your questions via the webcast. Mervyn?