SINGAPORE - Mapletree Investments, which recently announced a record net profit of $931.7 million for its latest financial year, is looking to ramp up its overseas business and potentially list a real estate investment trust (Reit) made up of office assets in Japan in two years.
Plans for the Japan Reit are still fluid as the office portfolio is small, but Mapletree's chief executive officer Hiew Yoon Khong shared in a recent interview with The Business Times that it is currently the most likely of Mapletree's property portfolios to go into a Reit.
The group, meanwhile, is gearing up for a bigger presence in China, where it has assets under management (AUM) of about $6.8 billion including its properties in Hong Kong - or about 31.5 per cent of its total AUM of $21.8 billion. And with $4.5 billion in total cash and undrawn facilities as at March 31 and net gearing at almost zero, the group is eyeing new markets such as Australia.
Apart from Singapore, Mapletree already has exposure to real estate markets in Hong Kong, China, Japan, Vietnam, Malaysia, South Korea and India.
Mr Hiew said that Mapletree's growth in China will be the fastest across all the markets, largely because of the economy's sheer size.
The group is currently syndicating its second China fund, likely to be in the range of US$1 billion to US$1.4 billion, which with gearing could bulk up to between $2 billion and $2.8 billion and will be deployed over two to three years.
Mapletree's first fund with exposure to China is the Mapletree India China fund, which is fully invested with a focus on commercial and mixed-use projects in Tier One and Two cities in China, and Tier One cities in India.
Earlier this year, Mapletree kickstarted construction of two large-scale development projects in China.
The first was South Station Enterprise City, a Foshan-located office development within the Guangzhou South Railway Station economic circle.
The second, and its largest single investment in China to date, was the Mapletree Minhang Development Project, a mixed office and retail development in Minhang at the fringe of Shanghai's central business district.
In Japan, the group will grow its presence in a more measured manner, with acquisitions likely over the next 12 months, said Mr Hiew.
Mapletree's office developments in Japan have a value of about $300 million, which, Mr Hiew said, is "a bit too small for a Reit". A very strong IPO (initial public offering) requires a certain scale which by his reckoning should be a minimum of about $1 billion.
Still, Mr Hiew believes that "at this point, the portfolio that might look like a Reit in two years' time would probably be the Japan (office) portfolio".
So "in two years' time when we look at it, we will make an independent decision on what to do with the portfolio. If a Reit is the right thing to do, then we will do a Reit", said Mr Hiew.
In all, Mapletree has about $1.7 billion worth of assets in Japan, the bulk of which are logistics assets held under Mapletree Logistics Trust.
Mapletree has grown exponentially since its formation in 2000 when it held just $2.5 billion in equity, made up of real estate hived off from PSA Corporation. Today, equity is $8.3 billion.
Its AUM is $21.8 billion, or over seven times the $2.3 billion in AUM that Mapletree held when Mr Hiew first took the helm in 2003.
Some 45 per cent of its AUM is located overseas currently, compared with a decade ago when its portfolio held just Singapore assets.
The group has launched three Reits since October 2010, all of which were well-received by the market. The newest to list was Mapletree Greater China Commercial Trust (MGCCT), which made its debut in March through an IPO that raised $1.7 billion.
It now has four Reits: Mapletree Logistic Trust which listed in 2005, and Mapletree Industrial Trust, Mapletree Commercial Trust and Mapletree Greater China Commercial Trust, listed in 2010, 2011 and 2013, respectively.
Excluding MGCCT, fee income earned by Mapletree in its latest financial year that ended in March was $188.1 million, compared with the $30 million in fee income Mapletree earned four years ago.
MGCCT is expected to provide incremental fee income of more than $25 million annually going forward.
Apart from strengthening its presence in its existing markets, Mapletree is also looking to break into new territories, such as the office and industrial property sector in Australia and South Korea.
It is also eyeing markets in South-east Asia. Mapletree has built up a team that is looking at new markets in the region such as Indonesia, Malaysia, Thailand and the Philippines.
There is a reason for Mapletree's constant hunt for opportunities in new markets.
"If you look at our business concentration, the danger is that if you don't try and diversify and broaden it, you are going to have, in our view, quite a concentrated business model, which is essentially Singapore and China.
"We prefer to think that China will continue to grow, not a problem. But if you have a concentrated business model, should something happen to your core business, you are going to have a big impact on your portfolio. So . . . we thought it's sensible to try and develop knowledge and insights into newer markets. And then hopefully if we start investing, we will diversify the risk."
That said, Mapletree plans to continue growing in Singapore, currently home to 55 per cent of its AUM. The group will continue to participate in tenders for office buildings, although it has yet to clinch any developments.
It will also start construction work to redevelop The Comtech in Alexandra Terrace by the end of this year, as part of the second phase of Mapletree Business City (MBC).
Mr Hiew estimated that in three years' time, the fully completed MBC may be ripe for injection into Mapletree Commercial Trust.
"The timing is still sort of up in the air," he said. "The Reit has made a request, but we have said that we are not ready to sell it. We want to get the development going and then, depending on the leasing activity there, we will look at whether to exercise that first right for the Reit to buy."
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