Soilbuild REIT 2Q DPU falls 6.7% to 1.18 cents on higher expenses

Samantha Chiew

SINGAPORE (July 17): SB REIT Management, the manager of Soilbuild Business Space REIT (Soilbuild REIT), reported 2Q19 DPU of 1.179 cents, down 6.7% from 1.264 cents in 2Q18.

This brings 1H19 DPU to 2.377 cents, 8.2% lower than 2.588 cents in 1H18.

The REIT’s current portfolio comprises 11 properties in Singapore – Eightrium, Solaris, Tuas Connection, West Park BizCentral, NK Ingredients, COS Printers, Beng Kuang Marine, 39 Senoko Way, Speedy-Tech, 72 Loyang Way and Bukit Batok Connection – and two Australian properties – 14 Mort Street and Inghams Burton.

During the quarter, the REIT recorded distribution of $12.6 million, 6.0% lower than $13.4 million in the previous year.

This was despite gross revenue increasing by 19.4% to $22.4 million from $18.7 million last year, largely attributed to higher contribution from Solaris, Inghams Burton and 14 Mort Street, but was partially offset by lower revenue from Eightrium and 39 Senoko Way.

Property operating expenses increased by 62.2% y-o-y to $4.0 million, mainly due to higher property expenses incurred for Solaris. This brought net property income for 2Q19 to $18.3 million, 12.8% higher than $16.2 million a year ago.

Finance expenses increased by 14.0% y-o-y to $4.3 million, while other trust expenses increased by 55.2% y-o-y to $0.2 million.

The REIT recorded finance expenses on leases of $0.5 million, which was absent in the previous year, due the adoption of the FRS 116.

As at end June, the REIT’s cash and cash equivalents stood at $15.9 million.

On July 3, the manager said that one of its tenants, NK Ingredients, has defaulted on its July 2019 rent. It is currently in discussion with the creditor who had filed for the appointment of a judicial manager. The REIT is also actively engaging the various stakeholders including prospective end-users to minimise loss of rental.

Roy Teo, CEO of the manager, says, “We are encouraged by the pick-up in leasing activities with 18.9% increase in renewals and new leases transacted q-o-q on a square footage basis. Our leasing team is pro-actively working on the remaining 2.6% of leases (by net lettable area) expiring in the rest of 2019. On the capital management front, we have increased the proportion of fixed rate debt with the entry into interest rate swaps to hedge $85 million of borrowings in 2Q19. The Manager remains committed to creating a sustainable portfolio for Soilbuild REIT’s investors through increasing exposure to freehold assets in Australia.”

Units in Soilbuild REIT closed at 61 cents on Wednesday.