Mapletree Industrial Trust (MIT) today held its Annual General Meeting where it responded to questions from its unitholders, with a particular focus on its data center operations in the United States and Singapore, as well as the future expansion plans for its data center portfolio.
United States – Acquisition Strategy
Sila Realty Acquisition
In May 2021, Mapletree Industrial Trust announced the acquisition of 29 data centers located in 18 states across the United States from Sila Realty Trust for $1.3bn USD. In today’s Annual General Meeting disclosures, MIT noted that the net property income yield for the acquisition is about 5.1%.
Mapletree Investments Pte Ltd (MIPL), the investment manager for Mapletree Industrial Trust (MIT), has previously granted MIT a right of first refusal (ROFR) to acquire its 50% interest in Mapletree Rosewood Data Centre Trust (MRODCT). Notably, MRODCT is a 50%/50% joint venture between MIPL and MIT. The vehicle holds 10 powered shells and an 80% interest in three hyperscale data centers in the U.S. and Canada.
MIT notes that an acquisition for the 50% interest in the MRODCT portfolio “will be a significant pipeline for growth” for its data center portfolio.
Singapore – Build-to-Suit (BTS) Strategy
Mapletree Industrial states that it remains unclear when the moratorium on new data center developments in Singapore will be lifted. However, the company will continue to explore build-to-suit (BTS) opportunities in Singapore for established companies in growth industries.
Hong Kong – Land for Data Center Development
In February 2021, Mapletree Investments Pte Ltd (MIPL), the investment manager for Mapletree Industrial Trust, won a ~$105m U.S. dollars (HK$813m) land tender to develop a data center in Fanling, New Territories, Hong Kong. Specifically, the site is located at Fanling Sheung Shui Town Lot No. 268 at the junction of On Lok Mun Street, On Chuen Street, and On Kui Street.
While Mapletree Industrial Trust does not have a right of first refusal (ROFR) in-place for this particular data center development, the firm notes it will engage with Mapletree Investments, should it decide to divest the property in the future. This implies that MIT may purchase this property on a stabilized basis – once it has been developed and leased to a tenant. Notably, Mapletree Investments anticipates completing the data center build-out in 2023.
Geographic Expansion – Mapletree Industrial’s Data Centers
Beyond the United States, MIT’s interest extends to investment opportunities in Europe’s FLAP-D data center markets. Specifically, these include the cities of Frankfurt, London, Amsterdam, Paris, and Dublin. Additionally, in Asia-Pacific, the firm is targeting the markets of Singapore, Hong Kong, Japan, and Australia.
Mapletree Industrial – Data Center Strategy
Mapletree Industrial Trust’s strategy centers on the real estate ownership of data centers. Indeed, this is different from other data center investors who focus on ownership and operation of data centers. Under this scenario, data center operators are responsible for service level agreements (SLAs).
Mapletree Industrial Trust’s U.S. data centers are primarily leased on a triple-net basis, with 50%+ comprising powered shell data centers. Therefore, the firm’s value-add is relatively minor and instead it focuses on asset enhancements. For example, MIT will improve building specifications or reconfigure unusable or underutilized space into leasable space for tenants.
Mapletree Industrial Trust notes that data centers may comprise up to 2/3rds of its portfolio by assets under management (AUM) in the medium-term (i.e., over the next three to five years). Indeed, MIT views the scalability and growth of the data center asset class as rationale for a higher portfolio weighting. As of March 31, 2021, data centers comprised 41.2% of the firm’s assets under management (AUM).