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Singapore-listed REITs arguable offer better value for dividend investors than Hong Kong’s narrow and over-reliance on Asia’s largest REIT, Link REIT (SEHK: 823).
The latest acquisition from one Singapore-listed industrial REIT illustrates the point well. Mapletree Industrial Trust (SGX: ME8U), which has over 100 industrial properties including stakes in data centre JVs, recently purchased the remaining 60% stake (it didn’t already own) in a data centre portfolio in the US.
Its parent sponsor, Mapletree Investments Pte Ltd, owns the 60% stake being purchased by Mapletree Industrial Trust (MIT). MIT and Mapletree Investments originally purchased the portfolio of 14 data centres in the US in December 2017.
The timing of the acquisition, announced last week, actually surprised many in the market. It was assumed that the purchase of the remaining 60% stake by MIT would eventually happen but that it would come later this year.
MIT will pay Mapletree Investments US$210.9 million (S$300 million) for the remaining 60% stake in the data centre portfolio.
The data centre JV (known as Mapletree Redwood Data Centre Trust, or MRDCT) consists of 14 data centres and is 97.4% leased to 15 established tenants, including top technology players.
Positives for MIT
Overall, for investors, this has to be seen as a positive move by MIT as it increases its exposure to the fast-growing and in-demand data centre sector of real estate.
Post-the-acquisition, MIT will increase its exposure to data centres from 31.6% to 39%, as a percentage of assets under management (AUM).
Global revenue for the cloud computing sector is expected to grow at a compound annual growth rate (CAGR) of 14% from 2018 to 2024.
The acquisition came on the back of good news for MIT as a stock. The company was added to the benchmark Straits Times Index (STI) – the Singapore equivalent to Hong Kong’s Hang Seng Index.
As with any company being added to an index, this will boost its prospects over the medium to long term if it can stay within the STI.
Data centre assets and experience
MIT will clearly be able to better tap into this trend following its latest acquisition. Even better, for MIT unit holders, there are additional data centre assets that Mapletree Investments can sell to MIT at a later date.
In September of last year, MIT announced a 50:50 JV with Mapletree Investments that acquired 13 data centres in the US and Canada. The two also entered into a JV with data centre REIT giant Digital Realty Trust (NYSE: DLR) within that agreement.
Working closely with such an experienced operator in the sector should hopefully provide useful insights for both MIT and Mapletree Investments.
For longer-term dividend investors, this latest acquisition is great news. It shows MIT’s commitment to building out the data centre exposure of its overall portfolio. It is also a DPU-accretive acquisition, which means shareholders will likely benefit from higher payouts in future.
As companies and whole economies start to accelerate the digitsation process amid Covid-19, MIT is set to be one of the winners in the real estate sector.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Tim Phillips owns shares in Mapletree Industrial Trust.