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Mapletree Industrial Trust proposes to acquire Tokyo freehold mixed-use property for JPY14.5 bil

By Felicia Tan

/ The Edge Singapore |

October 1, 2024 10:23 AM SGT

The proposed acquisition captures opportunities in Japan, which has over 5,000 megawatts of total IT supply and is Asia-Pacific’s (APAC) third-largest data centre market. Photo: Bloomberg

Mapletree Industrial Trust (MINT) is proposing to acquire a multi-storey mixed-use facility in Tokyo, Japan for JPY14.5 billion ($129.8 million).

The proposed acquisition is made under the conditional trust beneficiary interest purchase and share agreement with Nagayama Tokutei Mokuteki Kaisha, an unrelated third-party vendor. Under the structure, MINT will have an effective economic interest of 98.47% in the property with an acquisition outlay of JPY14.9 billion. The balance of the purchase consideration will be funded by MINT’s sponsor, Mapletree Investments.

Constructed in October 1992, the building sits on freehold land measuring approximately 91,200 sq ft. The property has a gross floor area of around 319,300 sq ft.

Read also: Mapletree posts net profit of $1.9 bil for FY20/21

The facility includes a data centre, back office, training facilities and an adjacent accommodation wing that has the potential to be redeveloped into a multi-storey data centre.

The property is currently fully leased to a Japanese conglomerate and has a weighted average lease to expiry (WALE) of five years. The current lease is a traditional regular one where the tenant has the option to renew its lease.

According to MINT, the property is in a strategic location, which presents a future redevelopment opportunity that creates added value.

“End-users and data centre operators have expanded into new data centre clusters across Greater Tokyo in view of the constraints of land and power and the need for greater redundancy. These resulted in West Tokyo becoming a larger submarket, which accounted for about 40% of total live IT supply in Greater Tokyo market,” the REIT manager explains in its Sept 30 announcement.

With strong demand and limited supply growth, the data centre space is expected to grow at a compound annual growth rate (CAGR) of 9.3% from 2023 to 2033, says MINT’s manager referring to statistics from DC Byte’s Japan data centre market report for this year. The same report notes that the vacancy rate is expected to tighten to 6% by 2033, from 9% in 2023 and 23% in 2018.

In addition, the proposed acquisition captures opportunities in Japan, which has over 5,000 megawatts of total IT supply and is Asia-Pacific’s (APAC) third-largest data centre market.

Following the proposed acquisition, MINT will have 65.9% of freehold properties in its portfolio, up from the proportion of 65.8% as at June 30. Its portfolio will grow to $9.1 billion by assets under management (AUM) up from $9.0 billion as at the same period.

It will also improve MINT’s geographical diversification with its Japan portfolio up by 1.3 percentage points to 6.4% from 5.1% as at June 30. MINT’s Singaporean and North American properties will represent 47.3% and 46.3% respectively.

On a historical pro forma basis, the proposed acquisition and its proposed method of financing will be accretive to MINT’s distribution per unit (DPU). The manager intends to finance the total cost through Japanese yen (JPY)-denominated borrowings to “provide a natural capital hedge”. MINT’s aggregate leverage ratio is expected to increase to 39.8% from 39.1% as at June 30.

The consideration represents a discount of some 3.3% to the property’s valuation of JPY15.0 billion. The property was independently valued by JLL Morii Valuation & Advisory K.K.

The proposed acquisition is expected to take place by the fourth quarter of 2024.

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Mapletree Industrial Trust