Soilbuild Business Space REIT

[Greenrookie]

I read on ST business yesterday that tenants at ipark are protesting against Solbuild's possible 50-60% hike of rentals for which soilbuild bought over from JTC at 2011. Perhaps something for potential investors to watch since some of their industrial portfolio were bought from JTC and tenants might not like that they have to pay more rentals now and decide to move out.

I see this as irrelevant as it applies to all of JTC assets that were divested and not just to Soilbuild REIT. In particular MIT comes to mind. And IMHO at the end of the day, if the tenants could no longer pay the market rental and still make a profit on their business, then perhaps they should move out and make way for businesses that can. That's capitalism at work for you.

I actually think that the following is largely overlooked by investors; in particular REIT investor. (Prospectus ps 49)

Since 1 January 2013, all REITs are to pay land premium upfront in respect of industrial building acquisitions on JTC leased land sites or for land lease extensions.

Under JTC’s current policy (which came into effect on 1 January 2013) governing the sale and assignment of a JTC lease by a lessee to a buyer which is a third party facility provider such as a REIT, if such JTC lease provides for the lessee to pay JTC a yearly rent (the “Existing Rent Payment Scheme”), JTC requires such buyer to pay JTC, prior to the completion of the sale, an upfront land premium for the balance of the JTC lease term in place of the Existing Rent Payment Scheme. Soilbuild REIT may have to pay such upfront land premium in respect of future acquisitions or land lease extensions.

Effectively this means that future acquisitions and land lease extension by industrial REITs would be a more costly affair. Companies that could previously engineered a sale-and-leaseback arrangement may find it harder to do so unless they absorbed part of the upfront premium. And I'm wondering about the implications for acquisitions of sponsor-related assets.

Any idea how to calculate the land premium? Is not in the prospectus. Is there a rule that the cost of land premium cannot be passed to tenants? Even I there is , it will be difficult to separate them, so rent will increase, isn't this contradicting JTC's objective of controlling cost of industrial space?