SINGAPORE - Mapletree Industrial Trust (MIT) will acquire the remaining interest held by its sponsor in 14 data centres in the United States for US$210.9 million (S$299.5 million), in line with a strategy to grow its hi-tech buildings segment.
The 60-per cent stake to be acquired is currently held by Mapletree Redwood Data Centre Trust (MRDCT), in which MIT has a 40 per cent interest. Mapletree DC Ventures, a wholly-owned subsidiary of MIT's sponsor Mapletree Investments, holds the remaining 60-per cent stake in MRDCT. Upon completion of the proposed acquisition, MIT will hold a 100 per cent interest in the 14 data centres.
The agreed property value of the MRDCT portfolio on a 60 per cent basis is US$494.0 million (S$701.5 million), MIT's manager said in a media release on Tuesday morning (June 23). On a 100 per cent basis, its agreed property value of US$823.3 million represents a discount of 0.7 per cent to an independent valuation by Newmark Knight Frank Valuation & Advisory, LLC.
MIT announced a proposed private placement to raise gross proceeds of at least $350 million to fully fund the proposed acquisition as it called for a trading halt on Tuesday morning, in separate bourse filings before the stock market opened. The placement of some 128 million new units in MIT to eligible institutional, accredited and other investors will be at an issue price of between $2.732 and $2.800 per unit. There is also an upsize option to issue more new units to raise another $50 million.
The issue price range represents a discount of some 5 per cent and 2.6 per cent respectively to MIT's volume-weighted average price of $2.8745 per unit for trades done on June 22. Shares of MIT, which joined the benchmark Straits Times Index on Monday, closed unchanged at $2.84 that day.
The total cost for the proposed acquisition is about US$218 million. The Reit's manager said that fully financing the acquisition using the proceeds from the private placement (excluding the acquisition fee which is payable in units), will ensure the move will provide overall distribution per unit (DPU) accretion to unitholders while maintaining a well-balanced capital structure.
On a pro forma basis, assuming that the proposed acquisition was completed on March 31, 2020, the DPU of MIT would increase to 12.66 cents from 12.24 cents, while the Reit's net asset value would rise to $1.68 from $1.62.
Mr Tham Kuo Wei, chief executive officer of the Reit's manager, said the proposed acquisition will increase MIT's exposure to the resilient data centre segment and deepen its presence in the United States, the largest and most established data centre market in the world.
He added that: "It offers attractive growth prospects and is well supported by favourable supply and demand dynamics. The proposed acquisition will improve MIT's income stability with the increased freehold land component and long leases with annual rental escalations."
MIT's manager said growth in data creation and storage as well as cloud computing continues to drive the demand for data centre space, with the business demonstrating its resilience as an asset class during the Covid-19 pandemic. The pace of cloud adoption from the increased usage of remote working, video streaming and online gaming is expected to intensify, which will underpin the demand for data centre space, the manager added.
Upon completion of the proposed acquisition, MIT's assets under management will increase to $6.6 billion from $5.9 billion as at end-March 2020. MIT's data centres segment will rise to 39 per cent of assets under management from 31.6 per cent. The hi-tech buildings segment will account for about 59.9 per cent as compared to 55 per cent.
With a net lettable area of 2.3 million square feet, the 14 data centres are sited on freehold land, which are strategically located in established data centre markets across the United States. They are 97.4 per cent leased to 15 established tenants, including Fortune Global 500 corporations and NYSE-listed/Nasdaq-listed companies. The properties have a weighted average lease to expiry of about 4.6 years, with about 20 per cent of the leases expiring within the next three years. About 97.8 per cent have annual rental escalations of 2 per cent and above.
As Mapletree Investments is a controlling unitholder of MIT and a controlling shareholder of the Reit's manager, the proposed acquisition requires the approval of MIT's unitholders at an extraordinary general meeting, which will be held at an appropriate time, said the manager.
If MIT does not proceed with the proposed acquisition, the proceeds from the private placement will be re-deployed to fund ongoing as well as future investments and/or to pare debt, said the manager.
About $302.6 million, or 86.5 per cent, of the gross proceeds from the placement, will be used to fund the proposed acquisition. Some $41.8 million, or 11.9 per cent, will go to repaying MIT's debt, fund future acquisitions, and/or for general corporate and/or working capital purposes. The remainder will be used to pay estimated fees and expenses related to the proposed private placement.