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Sunday, January 24, 2021

Soilbuild Business Space REIT Review @ 24 January 2021

Basic Profile & Key Statistics

Soilbuild Business Space REIT (SBREIT) invests in business parks and industrial properties. SBREIT currently owns 13 properties in Singapore and Australia.


Performance Review

Gross revenue and NPI increased YoY by 5.4% and 10.1% respectively due to contribution from 25 Grenfell Street and higher revenue from West Park BizCentral. 
Distributable income and DPU increased by 30.2% and 29.1% respectively, partly due to the inclusion of withheld distribution from Australia properties.
Rental reversion is at a negative 14.4% for 4Q 2020. However, for FY2020, the rental reversion is at a negative 2%.

Lease Profile

  • Occupancy is moderate at 94.3%.
  • WALE is short at 3.2 years where the highest lease expiry of 22.1 % falls in 2023.
  • Weighted average land lease expiry is short at 45.89 years.


Debt Profile

  • Gearing is moderate at 38.9%.
  • Cost of debt is high at 3.12%.
  • Fixed rate debt % is moderate at 78.7%.
  • Unsecured debt % is low at 59.6%.
  • WADE is short at 1.5 years where the highest debt maturity of 40.4% falls in 2022.
  • Interest coverage ratio is high at 4.2 times.


Diversification Profile

  • Top geographical contribution is high at 79.3%.
  • Top property contribution is high at 29.8%.
  • Top tenant contribution is low at 9%.
  • Top 10 tenants contribution is high at 42.2%.


Key Financial Metrics

  • Property yield is moderate at 5.5%
  • Management fees over distribution is competitive at 10% in which unitholders receive S$ 10 for every dollar paid.
  • Distribution on capital is high at 3.8%
  • Distribution margin is high at 52.9%.


Trends

  • Slight Downtrend - Property Yield
  • Downtrend - DPU, NAV per Unit, Interest Coverage Ratio, Distribution on Capital, Distribution Margin


Relative Valuation

  • Dividend Yield -  Past 4 quarters DPU @ 3.922 cents / average yield @ 8.62% = S$ 0.455
  • Price/NAV - NAV @ S$ 0.546 x average P/NAV @ 0.92 = S$ 0.50


Author's Opinion

 Favorable Less Favorable
Diversified SectorShort WALE
Well Spread Lease ExpiryShort Weighted Average Land Lease Expiry
High Interest Coverage RatioHigh Cost of Debt
Low Top Tenant ContributionLow Unsecured Debt %
Competitive Management FeesShort WADE
High Distribution on CapitalConcentrated Debt Maturity
High Distribution MarginHigh Top Geographical Contribution
 High Top Property Contribution
 High Top 10 Tenants Contribution
 DPU Downtrend
 NAV per Unit Downtrend
 Interest Coverage Ratio Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

This might be the last review on SBREIT due to the proposed buyout and privatization of SBREIT which was announced on 14 December 2020. The offer price is S$0.550 per unit and would reduced if any distribution is made for financial period between 1 October 2020 and 31 March 2021. In the other word, the offer price would be S$ 53806 per unit now. (S$0.55 - S$ 0.01194). EGM is expected to be held on early March to get unitholder approval. This buyout and privatization is expected to complete by end March or early April, subjected to approvals. 


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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