Investors want the Reit to cut losses and accelerate exits in China, but its manager says it will not panic sell
[SINGAPORE] The manager of Mapletree Logistics Trust (MLT) has defended the slow pace of its S$1 billion portfolio divestment ahead of its annual general meeting, blaming a slow property market and low-ball offers.
The Singapore-listed real estate investment trust (Reit) has so far managed to clear just S$300 million of the S$1 billion divestment pipeline it identified during the 2024/2025 financial year.
The remaining pipeline is predominantly tied up in Hong Kong and mainland China – two markets where property valuations have softened, and unitholders are eager to see exposure reduced.
In a bourse filing on Wednesday (Jul 15) ahead of its annual general meeting on Jul 20, MLT’s manager detailed the friction it faces on the ground, citing “subdued investment activity and wide bid-ask spreads” that have blocked transactions at fair valuations.
In practical terms, this means the transaction market is largely illiquid, and a significant gap exists between the low prices buyers are willing to pay and the higher valuations sellers are willing to accept, according to the manager.
Despite unitholder suggestions that MLT should cut its losses to accelerate exits, lower its gearing and redeploy capital elsewhere, the Reit’s manager drew a firm line against panic selling.
“As these assets continue to generate income with healthy occupancy, we do not believe it is in unitholders’ interests to pursue divestments at materially discounted prices solely to accelerate exits,” the manager stated.
Great weight of China
The investor concerns stem from MLT’s outsized footprint in Greater China. The region commands 41 per cent of the Reit’s total assets under management (AUM), but generates only 32 per cent of gross revenue and net property income (NPI).
Unitholders have grown wary of this lower NPI-to-AUM yield, but the manager argued that the metric does not tell the whole story.
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In Hong Kong, the compressed yields are a product of historically high asset prices rather than deteriorating operational health, according to the manager.
Meanwhile, MLT has found a silver lining in mainland China’s macroeconomic shifts.
Local borrowing costs have plummeted from about 4.4 per cent four years ago to about 2.5 per cent now, allowing the Reit to pivot towards cheaper, RMB-denominated debt to insulate its balance sheet.
A “China-for-China” alternative
Rather than rushing into a quiet transaction market with low offers, MLT is placing its bets on an alternative liquidity route.
The manager revealed it is working with its sponsor to develop a new RMB-denominated fund. The “China-for-China” strategy aims to package and shift selected Chinese logistics assets directly to domestic investors, which the Reit notes is an avenue that is gaining visible traction.
While MLT maintains that its exposure to Greater China will moderate over the long term through selective divestments and expansions in other geographies, it insists the transition will be disciplined.
