mapletree logistics trust

Mapletree Logistics Trust: A Comprehensive Guide

Mapletree Logistics Trust is a real estate investment trust. Listed on 28th July 2005, Mapletree Logistics Trust is the first Asia-focused REIT in Singapore. The REIT owns real estate properties in Australia, Hong Kong, China, Singapore, Vietnam, Korea, and Japan.

REITs are a great addition to your portfolio since they provide potentially high returns and greater diversification. Investing in Mapletree Logistics gives you a chance to generate huge divided income coupled with capital appreciation which adds a great balance to bonds, stocks, and cash investments.

Mapletree Logistic Trust has a market value of S$8.9 billion, with most of its assets in Singapore.

What Are REITs?

A REIT or a real estate investment trust is a company that owns, finances, or operates any income-generating real estate. REITs are structured similar to mutual funds, where it pools several investors for their specific investment objectives. Their structure allows an institutional investor and a retail investor to earn dividend income from the real estate investment without buying, financing, or managing any properties themselves.

REITs invest in real estate properties, including cell towers, apartments, data centers, medical facilities, warehouses, retail centers, and offices. They are highly liquid investments since they are publicly traded, similar to stocks, unlike physical real estate investments. REITs offer investors a steady stream of income but offer little capital appreciation.

As it is with any financial product, REITs are also regulated by the Monetary Authority of Singapore.

 

What Are the Pros and Cons of investing in REITs?

Similar to all types of investment, REITs also have their advantages and drawbacks as well. Most investors prefer investing in REITs for their high-dividend yields. Here are some of the pros and cons to expect when investing in REITs.

The Pros

  • Adds diversification to your portfolio
  • REITs are highly liquid
  • High dividend yields

The Cons

  • The dividend yields are taxed as ordinary income
  • There are risks associated with specific properties
  • Sensitivity to interest rates

What Are the Things To Consider in Investing in REITs?

REITs are overall a good investment product to add to your portfolio, but there are things you must consider before you start investing. Here are the most important factors you need to consider:

1. The Type of Industry

Not all REITs are the same. REITs are divided into six main categories in Singapore. They include Healthcare, retail, office, residential, industrial, and hospitality. Every category has its unique characteristic, performance, and risk profile.

Ensure that you understand the nature of your preferred REIT and how it performs in the market. This way, you will be more aware of what to expect in terms of the dividend income.

2. The Dividend Yield

The dividend yield is the first ratio that every investor considers before deciding whether the investment is worth their time. While a high dividend yield is important, it is more important to look at the record of the REITs’ tracks.

It is important to look at the REITs’ distribution per unit yearly. Check if its yields are stable or whether it keeps fluctuating. It is best to go with a REIT that has grown its income steadily than one that keeps fluctuating all the time.

Keep in mind that a higher dividend yield does not mean that it is a better investment. For example, when you compare a retail REIT and an office REIT, the office REIT has a higher dividend yield than the retail REIT, but it is more volatile and less resilient.

3. Property Yield

This is the amount of income a REIT can generate from a property. Every investor wants to invest in a REIT with a high property yield, but it is more important to look at the REITs performance over the years. The property yield of a well-managed REIT will continually improve over time. REITs continually improve their property yield by acquiring yield-accretive properties.

4. Gearing Ratio

The gearing ratio is the ratio between the total assets and the debts. If a REIT has a high ratio, it has more debt. REITs are tightly regulated in Singapore, and they are only allowed to borrow up to 45% of their total assets.

Keep in mind that a REIT with a high ratio does not necessarily mean that it is a poor investment; it only means that it is ready to take up more risk for its growth.

5. The P/B Ratio

The P/B ratio measures the RET’s share price against the net asset value per share. In theory P/B ratio of 1 indicates that the REIT has a fair valuation. A ratio of less than 1 means that the REIT is undervalued and vice versa.

However, it would be best if you didn’t always rely on P/B alone to know whether or not you will invest in a REIT. You need to consider all the factors we have discussed above before making your investment decision.

investment real estate housing vision

What Is Mapletree Logistics Trust?

Listed on the SGX in 2005, Mapletree Logistics Trust is an Asia-focused logistics REIT. The REIT has over 145 logistics assets in different countries, including; China, Singapore, and Japan. All its properties are valued at S$8.9 billion, with most of its investment assets in Singapore.

Mapletree logistic Trust has had steady growth through the financial years. Here is a look at Mapletree Logistics Trust financials from 2015 through 2020.

  FY15/16 FY16/17 FY17/18 FY18/19 FY19/20
Gross revenue

(S$’ million)

349.9 373.1 395.2 454.3 490.8
Net property income

(S$’ million)

290.9 312.2 333.8 389.5 438.5
Amount distributable to unitholders

(S$’ million)

183.3 186.1 212.9 270.0 301.7
Net asset value per unit (S$) 1.02 1.04 1.10 1.17 1.21

 

Mapletree Logistics Trust’s revenue grew from S$349.9 million in the FY15/16 to S$490.8 million. The net property income also grew to S$438.5 from S$349.9 million. The amount distributable to unit holders has also grown over the years.

Here is a look at Mapletree Logistics Distribution per unit:

  FY15/16 FY16/17 FY17/18 FY18/19 FY19/20
Distribution per unit (Singapore cents) 7.380 7.440 7.618 7.941 8.142

 

Mapletree Logistic Trust’s distributable unit increased by 2.5% annually.

It is important to note that due to its diversified portfolio, the Trust was not affected by the pandemic in FY19/20. This performance contrasts sharply with other REITs, including the Mapletree Commercial Trust, which saw a drastic reduction in its distribution per unit due to the COVID-19 pandemic.

Mapletree Logistics Trust has warned against uncertainties due to the COVID situation, so it is a risk you have to be mindful of before investing.

Should You Invest in Mapletree Logistics Trust?

The simple answer is Yes. Mapletree Logistics Trust owns a diversified portfolio that remained unscathed even with the pandemic. However, if you are ever in doubt, you should always seek advice from an independent financial adviser. It is important to ensure that they are an Exempt Financial Adviser as defined under regulation 32C of the Financial Advisers Regulations.

Remember to make an investment based on your needs and financial situation. Here are some of the reasons you should consider investing in Mapletree Logistics.

  • Mapletree Logistics Distribution Per Unit (DPU) Has Increased

The Trust has seen a 2.5% DPU increase year-on-year to 8.326 cents due to the increase in contributions from the newly acquired properties, existing properties, and distribution of the divestment gains. Since its inception, Mapletree Logistics has had a steady rise in DPU and Unitholders

  • Mapletree Logistics Has a Huge Portfolio

The Trust has an investment portfolio in different countries, including China, Singapore, Hong Kong, Australia, and Japan. Mapletree logistic has 85.4% in these countries.

This means that the Trust does not rely on one country for its income. The network provided by Mapletree Logistics across the Asia-Pacific region offers a great option for tenants who want to expand across the region quickly.

  • Mapletree Logistics continues to improve its logistic facilitation through divestments, acquisitions, and redevelopments.

The Trust has acquired 18 modern logistic facilities in Vietnam, China, South Korea, Australia, Japan, and India. All these acquisitions are designed to increase Mapletree logistics’ footprint in the Asia-Pacific market and improve the quality of its portfolio.

  • Mapletree Logistics’ Achieved a 183.8% Capital Appreciation

Compared to the FTSE ST REIT, which grew by 15.5% during the same period, we’d say Mapletree Logistics is a great investment option. Mapletree Logistics’ achieved a 183.8% capital appreciation from July 2005 to March 2021. The REIT also generated an additional 161.3% in distribution since its IPO, giving a total return of 345.1%. A unitholder who invested in the REIT earlier on has been handsomely compensated.

The demand for e-commerce after the pandemic has increased, which will continue to benefit Mapletree Logistics in the coming years.

  • Mapletree Logistics Will Continue To Acquire Assets

Mapletree Logistics’ management promised to continue acquiring assets in developing markets to provide long-term growth in NAV and DPU. Investing in mature markets such as Australia and Japan offers stability to the Trust while investing in growing markets such as Vietnam and China provides higher growth prospects.

It is also looking for acquisition opportunities in India since it is a fast-growing logistics market with strong demand in logistics space and e-commerce. There is a large consumer market in India. There is also increasing importance of the country as a manufacturing hub.

Related Questions

1. How Do You Make Money in REITs?

REITs must pay out 90% of their taxable income to their shareholders, so REITs’ dividends are much higher than regular stocks. REITs are a high passive income through the compounding of the high-yield dividends.

Check out our guide on Singapore REITs dividend.

2. What REITs Should You Invest In?

There are different types of REITs, and every one of them comes with its risks and advantages depending on the state of the economy. REIT ETFs are a great way for shareholders to engage with the real estate investment industry without dealing with all the complexities.

Here is our guide on Singapore REIT ETFs.

3. Are REITs a Good Investment Idea During a Recession?

Certain types of REITs are not good investments during a recession. For example, investing in hotel properties during a recession is not a great idea during an economic downturn. Investing in other industries such as retail and Healthcare is a great way to have a long-term investment since such industries are less cyclical and are a great way to hedge against recession.

4. What Are the Different Types of REITs Available?

  • Retail REITs

Most of these investments are freestanding retail and shopping malls. Retail REITs make money from the rent they charge tenants.

  • Residential REITs

These REITs own multi-family apartment buildings and manufacture buildings. Before investing in residential REITs, you should consider important factors such as their location and affordability to the residents based on the current economic conditions.

  • Healthcare REITs

The success of healthcare REITs is tied to the health condition of the people in a particular place. These REITs invest in nursing facilities, medical centers, hospitals, and retirement homes.

  • Office REITs

These REITs invest in office buildings. They get their income from the long-term leases signed by their clients.

  • Mortgage REITs

About 10% of REIT investments are in mortgages rather than real estate. These REITs come with their risk, including an increase in mortgage rates. An increase in interest rates decreases mortgage REIT book values, which lowers the REIT’s target price.

Conclusion

Mapletree Logistics Trust has expanded to developing markets, including Vietnam and China, and it has shown great returns since its acquisition. The COVID-19 pandemic accelerated the growth of e-commerce hence the increasing demand for logistic space. It is a significant investment to consider if you are looking for one, but it is essential to remember that every investment comes with risks.

Key Takeaways

  • REITs are real estate investments that help you diversify your portfolio.
  • There are different types of REITs among them; residential, hospitality, and healthcare REITs.
  • Mapletree Logistics Trust has seen steady growth in its dividend and property yield since its IPO.

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