Mapletree Industrial Trust turns to acquisitions for growth as rental growth slows

Rents now close to market spot rate.

Mapletree Industrial Trust will need to rely on acquisitions and build-to-suit solutions to drive growth in coming quarters, according to analysts.

CIMB analyst Pang Ti Wee noted that the passing rent for MIT’s portfolio is now close to the market spot rate due to the high supply of industrial space.

Given that the passing rent for MIT’s portfolio is now close to the market spot rate due to the high supply of industrial space,

“We believe that there is limited room for positive rental reversions in the coming quarters. As organic growth slows in the future, we expect MIT to achieve DPU growth inorganically via: the S$226m BTS project for HP. The first phase of which is scheduled to be completed in 2HCY16, and further redevelopment/acquisition opportunities,” Pang wrote.

Meanwhile, DBS analyst Derek Tan noted that contribution from The Equinix, its recent development project, will be the main earnings driver in FY16 while underlying portfolio is expected to see more modest organic growth.

“With market rentals remaining flattish/declining slightly, rental reversions are expected to moderate to around 5% and is likely to narrow further as portfolio passing rents reach market levels, which has remained fairly static.Current gearing is conservative at around 30%, implying that the Manager has the capability to take on debt-funded acquisitions when the opportunity arises,” Tan noted.