Broker's take: OCBC Investment Research downgrades Mapletree Logistics Trust to 'hold'

Some 30 per cent of MLT’s gross rental income from CWT is contributed by third-party end users who have sub-lease agreements with CWT. In the event of a default, the Reit will be able to go directly to"the end users to negotiate fresh leases and mitigate any downtime".

Mr Wong said:"While this would mean a conversion from a master lease structure on a double-net basis to a multi-tenanted building structure, we believe MLT will be able to ‘gross up’ the rentals to take into account the property taxes and maintenance expenses, such that the overall net property income margin will remain similar."

However, the more complex undertaking would be finding a replacement for CWT, which acts is a third-party lease provider to end users under service agreements. The remaining 70 per cent of gross rental income from CWT is contributed through such arrangements. "If there is a rental default, MLT would have to find a replacement 3PL provider that matches the requirements and pricing of the end users," Mr Wong said.However, he added that there is likely to be limited near-term impact as CWT has not defaulted on its rental payments and there are no arrears due. MLT also holds security deposits of six months of rental in relation to the leases with CWT.

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