<Alert!> Mapletree Industrial Trust: Optimising investors’ capital through recycling
- Sale of Tanglin halt cluster to optimise capital (8.4% premium to book) for S$50.4m
- Property’s plot ratio is fully maximised and provide opportunity to redeploy proceeds to reduce debt or pay unitholders
- Actively recycling of capital to be well supported by investors
- BUY call, TP S$2.60 maintained.
What has happened
Mapletree Industrial Trust (“MINT”) announced the divestment of 115A & 115B Commonwealth Drive, Singapore, a flatted factory cluster for S$50.6m to a 3rd party. The property gloss floor area of 254,443 sqft (2.55x built-up) on a land site of 99,765sqft. The site has a land lease tenure remaining of 40 years. The sale price is 8.4% premium to the last reported book value and contribute c.0.7% to MINT portfolio. Proceeds will be utilised to repay debt or fund committed commitments (AEI, developments) or pay distributions.
Our view
We like management’s pro-active stance towards capital management and believe that investors will see this news positively. While the overall impact is small, the property is fully built-up and returns likely maximised in the medium term. Looking ahead, the funds from the sale (estimated exit yield of 6.0%-6.25%) could be utilised in a myriad of ways to reduce its indebtedness and/or pay unitholders (est. gains of S$2.0m) could help in filling the expected income vacuum from the AT&T vacating 2 properties in the US. Overall, we see minimal changes to our estimates and TP.