Mapletree Industrial Trust

Good morning, everybody. Thanks for joining us for MIT's 4Q Financial Year 31-32 Financial Results. We are having the virtual analyst call right now, and this is also a live webcast where investors can log in to listen and submit their questions online. If I can invite Guo Wei to give a quick update of the results. We will take questions later.

Yeah, thank you. Morning, everybody. Good that you can join us, even if it's virtually. Actually, I was half expecting a video session. I can't get to see them. And they were offering to show me. OK. We have the presentation tag, which was uploaded last evening. I think we're sharing this on this platform as well. I think we can go on to the first relevant page on our highlights. Essentially what you see us delivering a fairly credible set of results from the distributable income perspective 18.8%, just a little above $350 million Singapore dollars. Of course, DPU is a little more exciting, 10% year-on-year increase to 13.8 cents. And the distributable income for the fourth quarter, you can see a more significant increase, about 28% for the distributable income $90 million. This mainly due to, of course, the full effect of the US data center portfolio which we acquired. And on a DPO basis, 3.49 cents, same as what we have done in the previous quarter, 5.8% increase year-on-year basis. Certainly on the full year basis, we don't have the full financial years worth of contributions from the acquisition because it was done only in the earlier part of the financial year, but it has been very material in terms of the contributions. Of course, the next part we talk about our portfolio status. The valuation increase, of course, driven by the acquisition, about 29%. But now we are at 8.7 billion Singapore dollars. The valuation gain in aggregate, we are talking about 87 million dollars. Of course, a big part driven by the increases we see in the US data center portfolio. I think driven quite materially by capitalization rate compressions. in quite a few of the locations we have. And of course you would have seen, if you look at the details that we have outlined, the valuation losses for the Singapore portfolio, especially the shorter land tenure ones, those are, I think, quite structural in nature as we go forward. As the tenure gets shorter, as we raise towards the expiration of the leases when we return sites to the government, the valuations gradually moved down. So it's certainly helpful to have the cushioning effect from the US data center portfolio. Now on an operating basis, I think we are happy to note that we have found a good level of support and in fact we have managed to move the occupancy up. by 0.4 percentage point. So we are now at 94% for the entire portfolio. And I think as some of you would have read in our announcement, the divestment of our 19 Changi South Street 1 property was completed just after the end of a financial year. But I think we reported it down here for completeness. So $30 million in the pocket. And on the capital management front, we had our first distribution reinvestment plan for this series. The take-up was fairly healthy, 42.5%. That, I think if you recall in our announcement, the issue of the units was at a 1% discount to the weighted average unit price prior to us closing the books. And the take-up was very... nice because we have good support from our sponsor which took up, Mayberry Investments which took up is a proportionate state. And of course the balance sheet remains strong. We have sufficient committed facilities. I think the only key thing to look out for is interest rate movements. Okay, maybe the correct way to put it is how much you will move up. I can tell you for sure it's moving up. At least for the next year or so. Quite unlikely for it to move down for whatever reason. So it's just how much more that upward shift will be depending on the posture taken by the Fed. Okay, now going on to the next slide, I think this is our usual reporting chart. On the right, the most recent set of figures which I've outlined earlier, 3.49 cents and $90.3 million. So we certainly hope to continue building on this upward growth trajectory. Certainly there's a lot of headwinds we will discuss. Going on to the next slide, we have included this to provide a broad overview of our take on what we are doing to be a good corporate citizen. And certainly the push is to build a climate resilient portfolio. I don't know whether we have copyrighted this part. Okay. We have set the long-term targets. You might have seen the financial year 29-30 number. That I think was taken from the base of financial year 1920, a 10-year target. Why 1920? Because that was before COVID. The kind of consumption patterns and operating figures we have for the COVID years, a little less representative of what a normal situation is, and it's very difficult to take reference from there. So anyway, we just look back. financial year, 19-20, plus 10 years. So we are looking at these three key targets, which we have outlined at the top. Building, electricity intensity, we would reduce it by 15%, greenhouse gas by 17%, and we are working at generating solar energy of 10,000 kilowatt peak. So this is a nice round number. I think at one time I was discussing with our team, and they were with me over this single digit kind of adjustment. So anyway, I rounded it up 10,000. So it's a nice number to work towards. So as of what we have done so far, we have, of course, completed two set of installations at our Serangoon North cluster and Kolek and Sofa corporate headquarters cluster also in Serangoon. So that gave us 849 kilowatt peak. You can see at the bottom right, nice pictures on a sunny day especially for these two clusters. So we are looking at progressively installing more. We have actually just awarded a contract for some of our clusters for this current financial year. So we will be working, you know, and working very hard in delivering that 10,000 kilowatt peak. And hopefully a little sooner instead of, you know, waiting till the last minute. At the end of the 10 years, like you're all studying for an exam like that, the last day before the exam, try to, you know, get as much done as possible. So we're working hard on that. We are motivated as well because this is financially meaningful. It helps us mitigate the impact on the high energy costs that we anticipate over the next couple of years. Now on the other element, Greenmark or the green building certifications, of course in Singapore it's Greenmark, we have a couple of facilities that were recertified and we have obtained Greenmark Gold for Synergy, our business park building. So we are working on the next cluster, which is the Serangoon North cluster. So these are some of the initiatives that we are taking on, and we certainly want to get a few more badges to demonstrate the compliance of of our buildings in meeting all these green kind of expectations. Okay, so going forward I think on the financial results, we do not have any kind of exceptional elements to highlight. Essentially that big increase you see on the revenue property income mainly due to the US data center portfolio effect. The valuation effect, of course, you can see in the net fair value gain. For the Singapore portfolio, of course, it's already muted. Rather, Singapore plus our wholly owned data center portfolio are fairly muted, $7.2 million. We have a joint venture with our parent and of course that one has also a stake in three hyperscale facilities in the US, so all data centers. So we have provided a bit more details on that part of our portfolio. So the fair value gain is relatively significant. even on our share, about $79, almost $80 million recorded. So I think moving on, we talked a little about the effect on the full financial year. The amount available for distribution, as what I've outlined earlier, 18.8% increase from just under Now we are about S$351 million. So that gives rise to that 10% increase in DPU year-on-year basis from 1255 to 1380. And of course, please, I would encourage you not to extrapolate using this 10% kind of annual growth any growth rate is not something that we can replicate all the time. It is just fortunate that we are able to get a reasonably large portfolio at a good window. And this kind of growth rate is probably difficult for platforms that are of a certain scale already. If we are maybe five times, eight times smaller. Yeah, maybe there's some avenue for that, but 10% kind of annual growth is certainly not something that can be replicated easily. Okay, going forward, I think we talked about our financial position. The equity fundraise exercise that we did certainly has been helpful. So on the Year-on-year basis, you can see our increase 12%. One year ago, it was 166 NAV per unit. Now we are 186. Very small marginal shift on a quarter-to-quarter basis, 3.3%. Okay, moving on. For the portfolio valuation, as I've outlined earlier, $8.7 billion driven by the new portfolio. So that is a very material increase from the $6.76 billion the last financial year. The valuation gain of the data center portfolio, as we have outlined in the second bullet point, in aggregate $87 million. So that has helped us partly to improve our NAV per unit as well. On the balance sheet side, you might have seen a very slight reduction in the total debt, $2.97 billion to $2.90 billion, because we repaid some of our loans with cash available. And with the recent take-up of borrowings that have a slightly longer tenure, so we have managed to increase the tenure on that weighted average basis 3.5 years to 3.8 years. from a quarter ago. So because of the valuation improvement and also us taking on a little bit less of the debt, aggregate leverage ratio is at a fairly comfortable level of 38.4%. So I think it just means that we have a reasonably robust platform and balance sheet. So the debt maturity profile is what we have outlined on this page 15. That's how we arrived at that 3.8 years. Very well spread, though we do have a little more four years later, financial year 26, 27, but as we work on our refinancing over time, I think we will continue to spread the exposure fairly evenly over the years. So in terms of the coverage ratio, if you look at the bottom three lines down there, still very healthy level. Whichever measure you look at, whether it's trailing 12 months or with adjustment for our perpetuals, so about 5.7 to 6.4 times. Our weighted average oil funding cost has gone up marginally, and we're seeing the interest costs creeping up already from 2.3% to 2.4% this quarter. Tenure, of course, has increased a little, and I think, of course, now we're moving from bottom to the top. The percentage fixed is a little lower at 70.5% instead of 80%. We do have some hedges that have fallen off, so we would be mindful of the situation and look for opportunities with the right windows for us to maybe get more certainty on the rates as far as possible. Portfolio update, this one I think is a refresh picture, and I think our chefs crafting this pie reminded me that we have switched the position. Now US is at a 12 o'clock site. Now we have data center that is 54%, decidedly more than half of our portfolio. the asset under management 8.8 billion is a little higher than the valuation of our portfolio mainly because of the right of use effect because this one is partly accounting. You look at our bullet point number one, the right of use assets for our leasehold assets were aggregated inside this number but the figure is established at $42.5 million, so it's in our books. Okay, we can move on. The portfolio overview, we have in aggregate 143 assets. I think the big increase is of course on the portfolio transaction. occupancy level as I've outlined has moved up and that's contributed mainly by the Singapore portfolio. If you look at the North American portfolio, it's very stable at 93.3%. And you can look at the occupancy levels, there's some so-called small movements across the different property segments data centers being very stable, high-tech buildings are also at the same level. We have some small upshift in the business park building and the federal factories, but some very little downshift for the stack-up ramp-up facilities. So from where we can see, these are just the usual, you know, rather the business-as-usual kind of tenancy movements. So nothing really significant to highlight here. And on the expiration of the leases, if you look at the chart for this financial year, which we have just started, 14.2% less due is nothing exceptional. Some of you have noted we have our AT&T leases that are expiring, but that is only in financial year. So it's in the next bar, under the 21.5% bar. And out of the three assets that we have with AT&T, the larger one at San Diego, I think some of you might know, that one has original expiration date of December 2023. And we have been notified by AT&T that it wanted to do a one-year extension. So it will be December 2024. So then I think we are pushing it another year forward. What we are doing now is tidying up the documentation for this extension. For the other two properties, this San Diego one is roughly 2.6% of our property. you know, revenue contribution. The other two smaller assets, I think we don't have any indications from AT&T on an extension or renewals yet. From the looks of it, it probably will not be doing renewals or extensions on this. But the expirations of this are also a little later, end September, and then I think the other one is November 2023. So the subsequent financial year. So okay, this is where we are. Top 10 tenants. I can see all blue except one orange. So all data center tenants except for Hewlett Packard, which is of course manufacturing regional headquarters. So the AT&T part I talked about, the 5.4% in aggregate, 2.6 for San Diego, 1.9 for the Tennessee one and 0.9 for the Milwaukee set. So now I think we have some clarity on a big part, about half of the AT&T kind of lease with us. We will see it continuing on with us until end of 2024, so another two years and eight months. So for this tenant diversification, nothing really material to outline. It remains very diversified, okay. And for the Singapore portfolio performance, you can see on chart 23, very stable rent levels, but we continue to work hard to nudge occupancies up, make hay while the sun shines, while the market supply-demand situation is still a little to landlords' advantage before the big supply of stock come on stream. We will try to lock in as many leases as we can. So on the rent revisions, you can see some ups and downs. The high-tech buildings, I think we managed to nudge the rents up. I think this is at our Kalang Place asset. The 190 figure for new rents for the high-tech buildings is a little low. That's because that's one of our, according to how our friends describe it, this one is a half-baked high-tech building because We have the Topayo cluster where we have a mix of a new build plus asset enhancement part of the cluster. So this is from the asset enhancement part. But for statistics purpose, we have aggregated this in this high-tech buildings segment because it's a continuous cluster. So anyway, this is for... that kind of building where we had a newly signed, of course, still relatively competitive for that asset type and quality. For business park buildings, I think we have seen some small dip. Essentially, that's us trying to be more competitive in the market to keep our tenants and also join new tenants as you could have seen. Our business park space in terms of occupancy level is still relatively lower compared to the rest of our property types. So we are working a little harder and trading off rates for occupancy. But I think in aggregate some of you might have calculated or noted we have positive rent revision for the entire portfolio. I think for this quarter is 1.1%, positive 1.1%. Last quarter was positive 1. So this is what we call two consecutive quarters of positive revisions. So I think the light at the end of a tunnel is getting a little brighter. But this, of course, is not a very decisive positive rent revision, but it gives us a a bit of encouragement that the support is there. Tenant retention profile, nothing very significant to highlight. I think it's fairly healthy at 84%. Investment update, our redevelopment at Kolomaya II on track. First block, I think we're looking at completion by end of the calendar year. The other block 2 also by end of calendar year slightly behind the first block because I think the first block we already have the committed anchor tenant so we are prioritizing the completion and handover for that first block and I think the anchor tenant has already commenced fitting out works in the facility so things are progressing well As far as the leasing discussion is concerned, it is ongoing. We have a couple of, say, fairly large interests that we are pursuing, but at this stage we don't have any commitment that is assigned yet, so we are working very hard on that. Of course, the next thing, the divestment, which was, as I mentioned, completed on 21st of April. So we received the $30 million already and I think this one we would keep because the gain is relatively minor relative to the valuation of purchase price so we will keep the funds for working capital or take down on that. Outlook and strategy, I think on the outlook still very uncertain but I think there's a optimism that Singapore's economy might move up a little depending on the next refresh of the economic growth. I suspect we'll probably push closer to 4% if our gradual or now more than gradual opening of the economy works according to plan. But I think the bigger issue that we are facing now as an economy and as a platform is rising costs, especially energy and for us, of course, electricity costs and supply chain disruptions, which is causing a bit of issue on inflation for us. It's an operating part that we need to watch out for, operating costs we need to watch out for. The other thing, of course, is interest rate effect, as I've alluded earlier. For sure, it's on the way up. It's just how fast it is. So we think another 75 to 100 basis points, quite easy for us to see within the next 12 months or so. So in terms of the arrears, I think just to close up, I think this is a little lower already compared to the last 12 months. So this is also a positive indication of that optimism and also less kind of stress that we see in the portfolio of our tenants. So US, I think, continues to be strong, especially in the data center space. Rental rates in segment is relatively stable. challenge for us is always getting the right deals in this market and kind of appropriate capitalization rate because it's still a very competitive market. But we are very positive about this space. Okay.

Thank you, Kuo Wei. I think we will now take questions. If I can encourage you to raise your hands and limit your questions to two per analyst. I think the first one is Mervin. Mervin, please. Mervin, would you like to ask your question?