Soilbuild Business Space REIT

[cfa]

I might as well put my money into many other reits which has better management , better quality of properties. Who bother this ?

[smallcaps]

So based on the above core assets - the vendor of the assets has already reaped S$396.2m just on the intended sale vs delisting valuation alone.

Oh wow. Thanks for the info. I was wondering why Soilbuild sounds so familiar.

I suppose it can be argued that if SBGH was not de-listed, the same valuation would be prevailing in the current market?

I have some friends in construction ind , they know them very very well.

Meaning what exactly? Though somehow I'm thinking 'know' as in not very nice way/??

Don't really like working there... rain no shelter, food court need to walk to fusion. Taxi also no. Ho bee's one much better located imo.

Meaning where exactly? Soilbuild office? or one of the REIT assets?

Solaris loh

[felixleong]

SINGAPORE — Singapore developer Soilbuild Group Holdings launched yesterday a S$457.5 million initial public offering of its business space assets, pricing its units at S$0.78 apiece, the lower end of its indicative range.

The IPO comes two weeks after two real estate investment trusts had somewhat mixed fortunes on their debut, with SPH REIT gaining 9 per cent but OUE Hospitality Trust ending flat.

Soilbuild Business Space REIT (Soilbuild REIT), which owns two business parks and five industrial properties, is offering 586.5 million units. The placement tranche comprises 524 million units and the public offer 62.5 million units. Soilbuild had previously set an indicative price range of S$0.77 to S$0.80 per unit.

At S$0.78, the REIT offers a dividend yield of 7.7 per cent based on projections for fiscal 2014.

Soilbuild and founder Lim Chap Huat will hold an interest of about 27 per cent in the REIT post-IPO, the company said.

According to DTZ Debenham Tie Leung (SEA), the REIT offers the largest exposure to the business park segment compared with other Singapore-listed REITs. It has the highest proportion of business park assets — 42.5 per cent by purchase price compared with 8 per cent to 21 per cent for other listed Singapore industrial REITs.

The IPO portfolio is valued at S$935 million, with an aggregate gross floor area of more than 3.2 million sq ft as of end-June.

The IPO closes on Aug 14, with listing scheduled for Aug 16.

Citigroup, DBS Group and Oversea-Chinese Banking Corp are managing the offering. With Agencies

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lower end of range, total cold turkey

[CY09]

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.

[KopiKat]

IPO Prospectus

[lonewolf]

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.

[pianist]

this soilbuild and its associates are something I will avoid at all cost. We see the source of inflation at work here for business as well as downstream future impact to consumers.

[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?

[Nick]

Interesting to note that it has one of the longest land lease tenure of approximately 50 years as opposed to most industrial reits of 40 years.

Weighted Average Land Lease

Soilbuild: 50.4 years
AIMS: 38.9 years
Sabana: 38.8 years
Cambridge: 38.0 years
Cache: 32.3 years

[shanrui_91]

Interesting to note that it has one of the longest land lease tenure of approximately 50 years as opposed to most industrial reits of 40 years.

Weighted Average Land Lease

Soilbuild: 50.4 years
AIMS: 38.9 years
Sabana: 38.8 years
Cambridge: 38.0 years
Cache: 32.3 years

Agree and yet the ipo seem to be priced it at a yield worse than all industrial reits other than sabana.

the 3 smallest properties are master-leased for period of 7 to 15 years with annualised step up of ~2%.

While Solaris is master-leased to Soilbuild for only 5 years, the rental rate for the triple-net lease is at S$4.75 psf pm, which is below the market rental range of $5.00 to $5.50 according to the prospectus. And nearby metropolis by ho bee is fetching rental of $6 to $6.50 psf. Even if soilbuild ends the master-lease, there will not be much significant drop in rental even after accounting for the cost of non-triple net rental. step-up has been agreed at 3% pa.

These 4 master lease assets will account for 36% of gross rental income, but will likely contribute higher proportion of profit given that they are on double/triple net basis.

Half of Eightrium @ Changi Business Park is occupied by Barclay and Nestle which are definitely strong tenants and counter-parties you will want to deal with. They will account for another 7% of the rental income.

West Park BizCentral will be the most important property to analyse given that it accounts for 1/3 of the gross rental income and it is multi-tenanted. West Park BizCentral is a stack-up factory with ramp up feature. And they have clients like DB Schenker, Hitachi Asia Limited, Gain City Best Electric Pte Ltd, National-Oilwell Pte Ltd and Dyson. DB Schenker and Dyson which account for 5.9% and 2.1% of the gross rental income of Soilbuild Business Space Reit.

The assets and quality of tenants are not that bad. Tuas Connection, NK ingredient and Beng Kuang Marine also have plot ratios that are under-utilised at the moment.

(not a call to buy or sell)