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Soilbuild Business Space REIT’s Distribution Falls 11% In The First Quarter Of 2018

Soilbuild Business Space REIT (SGX: SV3U) is a Singapore-listed REIT that owns a total of 11 business park and industrial properties in Singapore. Its portfolio includes Solaris, West Park BizCentral, and Eightrium @ Changi Business Park among others.

On Monday, the REIT released its results for the first quarter of 2018. Here are 10 key points:

1. Gross revenue plummeted 11.5% from the previous year to S$19.4 million, while net property income declined 11.6% to S$17.0 million.

2. Consequently, distributable income dipped 10.4% to S$14.0 million from S$15.6 million. Distribution per unit (DPU) for the quarter, likewise, fell 11.1% to 1.324 cents from 1.489 cents the previous year.

3. The REIT’s lower gross revenue was due to loss of income following the sale of KTL Offshore on February 2018, lower revenue from 72 Loyang, and lower occupancies at West Park BizCentral and Eightrium.

4. As of 31 March 2018, Soilbuild Business Space REIT had a gearing ratio of 40.2%, which is fairly close to the regulatory gearing ceiling of 45%. Investors should also note that 39.4% of the REIT’s total debt is due either this year or next. The REIT has an average all-in cost of debt of 3.21% per annum, and an interest coverage ratio of 5.2.

5. As of 31 March 2018, the REIT had net assets of S$669 million, and a net asset value per unit of S$0.64, unchanged from the previous quarter.

6. Its portfolio occupancy rate for the reporting quarter stood at 87.5%, a decline from the rate of 92.7% recorded on 31 December 2017. The weighted average lease expiry by gross rental income was 3 years.

7. The REIT secured 13 renewals and 5 new leases during the reporting quarter at an overall negative rental reversion rate of 7.8%.

8. In the first quarter of 2018, Soilbuild Business Space REIT completed the aforementioned sale of KTL Offshore for S$55 million, a slight premium to the asset’s book value of S$53 million.

9. Based on Soilbuild Business Space REIT’s closing unit price of S$0.66 on 17 April 2018, it has an annualised distribution yield of 8.0% and trades at 0.96 times its latest book value.

10. On the outlook for the rest of the year, the REIT’s Manager said that around 10.2% of the net lettable area of the REIT’s portfolio is due for renewal over the rest of 2018. The challenge for the REIT will be to secure tenants at competitive rates and to lease the remaining untenanted space in its portfolio.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.