Mapletree Industrial Trust

Mapletree Industrial Trust: Agreed to develop its fourth built-to-suit project for Hewlett-Packard Singapre at MIT’s Telok Blangah Cluster for $250m. The current cluster has GFA of 437,000 sq ft (1.3 plot ratio) accounting for c.2% of revenues, which will be upgraded to a high-spec 824,500 sq ft (2.5 plot ratio) facility. The development will be conducted in 2 phases, with completion slated for 1H17. The new building will be HP’s new Asia-Pac and Japan HQ, and HP has committed to fully leasing for an initial period of 10.5 years with annual rental escalations and two consecutive options to extend the lease for 5 years. This should help add stability to MIT’s relatively short WALE of 2.5 years. Deutsche reckons this will enhance the MIT’s Hi-Tech portfolio. Assuming the project is fully funded, net gearing is expected to rise from 36%-41% upon completion. Project will be near term dilutive, but should boost medium term DPUs by 5-6%. Deutsche remains Buy with TP $1.48 on attractive 7.3% FY14e yield, upside potential from redevelopment, and potential offshore acquisitions.