MapletreeLog Defers Its Proposed Rights Issue

Source : The Business Times, January 24, 2008

GLOBAL capital market volatility has forced Mapletree Logistics Trust (MapletreeLog) to defer its proposed rights issue aimed at raising up to $500 million to fund acquisitions.

The rights issue was announced late last month, but this was swiftly followed earlier this month by Moody's Investors Service placing the 'Baa1' rated real estate investment trust (Reit) on review for a possible downgrade because of its high gearing of over 50 per cent and the market conditions.

Speaking at a press conference yesterday, Chua Tiow Chye, CEO of Mapletree Logistics Trust Management (MLTM), the Reit's manager, said candidly that MapletreeLog's share price had been 'beaten down' since the rights issue was proposed. He added that it would not 'raise funds at any price'.

'We will revisit our fund-raising exercise when market conditions are more conducive,' MLTM said in a statement yesterday.

MapletreeLog yesterday reported distributable income of $19.7 million, a 68 per cent year-on-year rise, for the fourth quarter ended Dec 31, 2007.

MapletreeLog started FY2007 with 41 properties and ended the year with 70, a rise of 29. 'Of these 29 properties, nine were acquired during the fourth quarter, bringing the trust's portfolio size to 70, valued at about $2.4 billion,' said Mr Chua. The asset value as at Dec 31, 2006, was about $1.43 billion.

MapletreeLog's full-year 2007 distributable income came to $71.8 million, 78 per cent up year-on-year.

Available distribution per unit (DPU) for Q4 2007 was 1.78 cents, a 23 per cent year-on-year increase. On a full-year basis, DPU was 6.57 cents, 16 per cent higher than its forecast and 30 per cent up year-on-year.

As at Dec 31, 2007, five of its acquisitions pending completion amounted to $183 million, while gearing stood at 53.4 per cent, representing a total debt of about $1.3 billion.

MapletreeLog said that it is comfortable with a 40-45 per cent leverage in the long run, but its current leverage leaves it with an available debt capacity of $405 million to fund future acquisitions.

While this leaves MapletreeLog with 'enough headroom' to fund these acquisitions, Richard Lai, deputy CEO of MLTM said that one of the options (for raising funds) open to MapletreeLog would be to sell some of its assets. While there were no plans to sell any buildings, Mr Lai said: 'We have people knocking on our doors.'

Looking forward, Mr Chua cited the 'internal logistics' sector in China and India as showing most potential.

But apart from those acquisitions already announced in Q4 - including three in China, four in Malaysia and two in Japan - Mr Chua was careful to add that given market conditions, MapletreeLog would be more 'selective' with respect to new acquisitions.

Instead, he said that 'yield optimisation', with a possible upside from rental reversions from 180,000 sq m, would be its driving strategy for 2008. Making reference to the volatile global market conditions, he added: 'It would be foolish to go for aggressive acquisitions.'