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Soilbuild Biz REIT: The Overlooked Industrial Player
Corporate Digest, Featured | 18 June 2014
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By: Peter Ng
Articles (81) Profile

Listed on the Singapore Exchange just last year in August 2013, Soilbuild Business Space Real Estate Investment Trust (REIT) operates five industrial and two business park properties in Singapore.

Despite its young operating history after listing, Soilbuild REIT emerged as a well-managed company with its fundamentals solidly built.

Using the framework discussed previously, let us seek to explore whether this REIT is suitable to be included in an income investor’s portfolio.

Occupancy Rate & Lease Expiry Profile

The occupancy rate of Soilbuild REIT stands at 99.7 percent as of 1Q14, crowning it the industrial REIT with the highest occupancy rate among the other five.

Source: Soilbuild REIT’s 1Q14 Financial Results Presentation

Next, its tenant pool appears to be well-diversified, with the marine and oil and gas segments representing the largest proportion at 20.1 percent. A tenant pool that is well diversified reduces concentration risk which could hamper rental revenue in the event of a slowdown in a particular industry.

Source: Soilbuild REIT’s 1Q14 Financial Results Presentation

With a well-planned lease expiry profile which focuses on rental stability, 35 percent of the REIT’s rental expiry falls in 2017 and beyond. Excluding 2015 and 2017, there is not a single year where the proportion of rental expiring within a year exceeds 15 percent. This fairs very well compared to some other industrial REITs.

Source: Soilbuild REIT’s 1Q14 Financial Results Presentation

Debt Profile

Based on Soilbuild REIT’s latest financial results, its gearing level stands at 29.1 percent, which is the lowest in the industrial REITs category.

Historically REITs with higher gearing level would tend to seek alternative financing sources such as a rights issue, diluting an existing investor’s position if the rights are not subscribed.

The REIT’s debt borrowings are registered at $285 million ($280 million drawn down), financed at an all-in financing costs of 3.1 percent, which is fair considering that these rates are fully hedged for another three years.

These debt borrowings are also spread out almost equally across three years.

More importantly,  it means that the REIT’s borrowing cost would be shielded from any interest rates increase for the next three years.

Further to this, Soilbuild REIT’s interest coverage ratio bites firmly at 5.9 times, enabling it to service its borrowings made more than comfortably.

SI Research Takeaway

Having examined Soilbuild REIT’s lease and debt profiles, it is sensible to conclude that this is a REIT investment which offers investors an exposure to the industrial sector as well as one with a large degree of certainty in distribution moving forward.

Putting on the finishing touch, the REIT is currently trading at a market price which is almost equal to its net asset value (NAV) per share.

Although not a screaming bargain, however, considering that most other industrial REITs are trading at a premium or a slight discount to their NAV, its valuations may not be that expensive after all.

In addition, Soilbuild REIT commands a distribution yield of 7.58 percent that places it as one of the highest yielding industrial REITs, should provide investors a reason to place this on their watchlist.

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.

Soilbuild Business Space REIT  0.525 -- --   
Business: S'pore real estate investment trust with a focus on biz space ppties.

Insight: Jan-19, FY18 gross revenue fell marginally by 1.2%... Read More

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