Soilbuild Business Space REIT - MANAGEMENT REPLY: What caused discrepancies in audited 2013 balance sheet?

The Manager's CEO speaks to investors at corporate seminar organised by SIAS.

16/10/2014 – Shane Hagan, the CEO of the Soilbuild Business Space Trust's Manager, said there is no other industrial REIT in Singapore which has a Sponsor with a "fully-integrated real estate platform".

He was addressing the investors at a corporate seminar organised by Securities Investors Association (Singapore).

Mr Hagan clarified that by "fully integrated real estate platform" he meant the Trust's sponsor - Soilbuild Group - is in the business of development of properties, lease management, property management and funds management.

Sharing his experience at former employers Ascendas and Mapletree, Mr Hagan said their industrial trusts had to hire third-party construction companies to perform tasks like asset enhancements.

By contrast, Soilbuild Business Space REIT can fall back on its sponsor which can provide a timely and competitive solution.

Mr Hagan was also quick to highlight the fact that the Manager is paid fees based on the distributable profits of the Trust.

That keeps the interests of the Manager aligned with that of the unitholders, he added.

At just under 50 years of average remaining land lease of its properties, Mr Hagan said the Trust probably has the longest remaining land lease in the industrial REITs space.

The Trust had a portfolio occupancy of about 98.5% on June 30.

The CEO is hopeful of improving the occupancy at the end of Q3.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. What is the NPI-yield of the recently acquired property at 20 Kian Teck Lane?

The Trust announced the acquisition of an industrial building at 20 Kian Teck Lane for S$22.4 mln on August 27.

Curiously, the announcement didn't mention the NPI-yield of the property.

Speaking at the SIAS seminar, CEO Shane Hagan said that the NPI-yield was not disclosed due to confidentiality and competitive reasons.

But he didn’t disagree with the assertion that the NPI-yield of the 20 Kian Teck Lane acquisition was around 7%-8%.

Question

2. How actively is it looking for acquisitions?

Since listing on the SGX in August last year, the Trust has acquired just two properties.

Speaking to the investors, Mr Hagan said that the Trust has an "active acquisition strategy".

He revealed that the Trust has considered more than 50 acquisitions since the IPO last year.

But due to various reasons, like competitive bidding, valuations, and so on, those properties could not be acquired.

The Trust also has right of first refusal (ROFR) over four assets of its sponsor.

One of those assets is a light industrial ramp-up building which is expected to be offered to the Trust during the next year.

The remaining three assets under ROFR would be available after at least four years.

Mr Hagan also highlighted that the Trust had a leverage ratio of about 32% after the recently announced acquisition of 20 Kian Teck Lane.

That allows the Trust headroom of about S$130 mln for debt-funded acquisitions, he added.

Going forward, the Trust would be aiming for acquisitions with a NPI-yield of about 6%-8%.

(Read the full story to get all 7 questions)

We thank Mr Hagan for his reply.

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