Soilbuild Business Space REIT (Soilbuild REIT) is a REIT that invests in a portfolio of the business park and industrial properties located in Singapore. It was listed on 16 August 2013 with an initial portfolio of 7 properties valued at S$ 905.3 million. Since then, it has enlarged its portfolio to 12 properties valued at S$ 1.24 billion as at 31 December 2016. In this article, I’ll list down 10 things that you need to know about Soilbuild REIT before you invest.
#1: Stock Symbol
Ticker Symbol: SGX: SV3U
Market Capitalization: S$ 693.0 Million (25 December 2017)
Share Price: S$ 0.66 (25 December 2017)
#2: The Business
Soilbuild REIT derives income from the following 5 main properties:
- Eightrium @ Changi Business Park
Eightrium is a business park development located within the Changi Business Park. In 2016, it was valued at S$ 101.0 million, accounting for 8.1% of the value of its portfolio. It enjoys a 100% occupancy rate with 14 tenants. In 2016, the Eightrium has brought in S$ 9.2 million in gross rental revenue to Soilbuild REIT.
Solaris is a business park development located in One-North. In 2016, it was valued at S$ 360.0 million, accounting for 28.9% of the value of its portfolio. It enjoys a 100% occupancy rate with 23 tenants. For the financial year 2016, Solaris has contributed S$ 18.1 million in gross rental revenue to Soilbuild REIT.
- West Park Bizcentral
West Park Bizcentral is a high-tech ramp-up industrial development located at Pioneer. In 2016, it was valued at S$ 306.0 million, making up 24.6% of the value of its portfolio. West Park Bizcentral enjoys a 90.7% occupancy rate with 51 tenants. In 2016, it has contributed S$ 20.4 million in gross rental revenue to Soilbuild REIT.
- NK Ingredients
NK Ingredients consists of 7 blocks of offices, laboratory, warehouse and production facilities located at Pioneer. In 2016, it was valued at S$ 62.0 million, accounting for 5.0% of the value of its portfolio. NK Ingredients is leased to KN Ingredients Pte Ltd for a term of 15 years from 15 February 2013. In 2016, it has contributed S$ 4.9 million in gross rental revenue to Soilbuild REIT.
- KTL Offshore
KTL Offshore consists of 2 adjacent detached purpose-built factories located along Tuas Bay Drive. In 2016, KTL Offshore was valued at S$ 56.0 million, accounting for 4.5% of the value of its portfolio. The property is leased to KTL Offshore Pte Ltd for a term of 7 years. In 2016, it has contributed S$ 3.7 million in gross rental revenue to Soilbuild REIT.
In total, the 5 main properties have contributed S$ 56.3 million in revenue, accounting for 69.4% of total revenue of Soilbuild in 2016.
#3: The Financials
Over the last 3 years, Soilbuild has reported growth in revenue, net property income, and distributable income. It has also maintained its distributions per unit (DPU) at 6.0 – 6.5 cents per annum.
Source: Annual Reports of Soilbuild REIT
Source: Annual Reports of Soilbuild REIT
#4: Major Acquisitions
There is no major acquisition or disposal announced by Starhill
#5: Sponsor Strength
Soilbuild Group Holdings Ltd is the sponsor of Soilbuild REIT. Listed on the SGX, Soilbuild Group Holdings Ltd is involved in the construction of residential and business park properties in Singapore. Presently, it has granted Soilbuild REIT right of first refusal (ROFR) to acquire three additional properties. The properties include:
- 1020, 1022, 1024 & 1026 Tai Seng Avenue
- 164 & 164A Kallang Way
- 171 Kallang Way
#6: Lease Profile
As at 30 September 2017, Soilbuild REIT enjoys a 94.1% occupancy rate with a pool of 97 tenants. 49% of its leases would expire starting in the financial year 2020 and beyond.
Source: Investors’ Presentation of Q3 2017 of Soilbuild REIT
Soilbuild REIT has 8 long-term master lease agreements. Their details are as followed:
|Property||Lease Term||Expiry Date|
|Solaris||5 Years||15 August 2018|
|Beng Kuang Marine||7 Years||9 May 2020|
|KTL Offshore||7 Years||25 August 2021|
|COS Printers||10 Years||18 March 2023|
|Bukit Batok Connection||7 Years||26 September 2023|
|Speedy-Tech||10 Years||22 December 2024|
|Tellus Marine||11.7 Years||16 February 2026|
|NK Ingredients||15 Years||14 February 2028|
Collectively, the fixed annual rental escalation of these 8 master leases would be from S$ 22.4 million in 2017 to S$ 22.7 million in 2018 and S$ 23.3 million in 2019 respectively.
As I write, Soilbuild REIT is trading at S$ 0.66 a unit.
As at 30 September 2017, Soilbuild REIT has reported having S$ 0.71 in net asset value a unit. Thus, its current P/NAV works out to be 0.93.
Soilbuild REIT adopts a distribution policy to declare and pays out at least 90% of its distributable income on a quarterly basis. In Q3 2017, Soilbuild REIT has paid out 1.374 cents in DPU. If Soilbuild REIT is able to maintain its DPU at 1.374 sen for the next 4 quarters, it would pay out 5.496 cents in DPU. As such, its gross dividend yield is expected to be 8.33%.
Soilbuild REIT has recorded 3 consecutive declines in quarterly DPU, down from 1.570 cents in Q4 2016 to 1.374 cents in Q3 2017. This is due to the absence of income from its property at 72 Loyang Way as its lease agreement to Technics Offshore Engineering Pte Ltd has ended. Presently, the property at 72 Loyang Way is 27% occupied.
#8: Debt Profile
As at 30 September 2017, Soilbuild REIT has S$ 480 million in borrowings. Its gearing ratio is 38.6%. The weighted average cost of debt is 3.32% a year. The weighted average debt maturity stands at 2.1 years.
#9: Investor Relations
For further enquiries or to request for additional investment information on Soilbuild REIT’s Investors Relation matters, you may contact:
Ms. Denise Ng
Telephone: +65 6415 4560
#10: Major Shareholders
As at 28 February 2017, the substantial shareholders of Soilbuild REIT are:
– Lim Chap Huat: 25.71%
– Tong Jinquan: 6.8%
Lim Chap Huat is the co-founder of Soilbuild Group Holdings Ltd. He has accumulated more than 38 years of experiences in the construction and property development industry in Singapore. Lim sits in the board as a non-executive director of Soilbuild REIT.