Soilbuild Business Space REIT Grows Faster Than Expected in First Quarter of 2014

Soilbuild Business Space REIT (SGX: SV3U) is a unique real estate investment trust for its portfolio consists of a mixture of business parks and industrial properties. It currently owns two business parks, namely Solaris and Eightrium @ Changi, while having five industrial properties under its control. Soilbuild REIT is new to the public markets having being listed only in last August

In January this year, the REIT announced its fourth quarter results and managed to achieve two consecutive quarters of having earnings that bested its own forecasts. With its latest first quarter report card being handed in just yesterday, it’ll be interesting to see if it manages to continue its hot streak.

Operating results

As Soilbuild REIT is newly listed, it had made forecasts for the first quarter of 2014 in its initial public offering prospectus. Those forecasts ended up underestimating its actual performance and the REIT has managed to make it three quarters in a row where it had done better than expected.

For the first quarter of 2014,  gross revenue came in at S$16.8million, some 3.9% better than its forecast. Furthermore, due to lower interest costs, the REIT ended the quarter with a total return that’s 7.8% above expectations at S$10.5million. After adjustments to the total return, the REIT managed to clock distributable income of S$12.6 million, 6.1% higher than its forecast. This translated into a distribution per unit of 1.562 Singapore cents for the quarter, which is again 6.1% again that what its number crunching had predicted.

Despite a slight increase in unit-count from 804.5 million at the end of Dec 2013 to 806.8 million as of 31 March 2014, Soilbuild REIT had still managed to increase its net asset value per unit from S$0.80 to S$0.81. The current gearing ratio for the REIT is around 29.1% with an average interest rate of about 3.12%. Soilbuild REIT has withdrawn almost all of its debt facility. With its first batch of borrowings of some S$95 million maturing in 2015, the REIT might need to think about refinancing options soon.

The total valuation of its portfolio is around S$935million. However, most of it is contributed from West Park BizCentral and Solaris, with both being valued at more than S$300million each.

Going forward

Soildbuild REIT is planning its first acquisition after its listing. The property is located in Senoko Way, Singapore and the REIT is looking to buy it for around S$18million. Soilbuild REIT’s management feels that the Singapore market will continue to grow. About 78% of all leases expiring this year have already been renewed by the manager so that’s good news for the REIT’s unitholders.  All told, the manager had expressed optimism for the REIT’s performance in 2014.

With a price of S$0.78 as of 29 April 2014, the annualised yield for the REIT (based on its DPU of 1.562 cents for the quarter) is around 8%, which can be considered as one of the highest-yielding REITs in Singapore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.