SoilBuild Reit's DPU dips 3.1% to 1.565¢ in Q2

Some properties report lower revenue; property tax of $300,000 refunded to tenants in West Park BizCentral

SoilBuild Business Space Reit (SoilBuild Reit) reported lower revenue from some properties and refunded property tax to tenants in the second quarter.

The Reit's distribution per unit (DPU) dipped 3.1 per cent to 1.565 cents, said SoilBuild Reit Management yesterday. Gross revenue inched down only 0.1 per cent to $19.6 million in the three months to June 30.

A drop in turnover from West Park BizCentral and Tuas Connection was partly offset by additional revenue from properties Technics and Solaris at one-north.

The manager said the fall in revenue by West Park BizCentral was partly owing to property tax of $300,000 being refunded to tenants.

Net property income increased 3.7 per cent to $17.3 million on the back of lower property tax expenses. Those expenses were $2.2 million in the second quarter, $600,000 less than the same period a year ago, mainly owing to less property tax expenses for West Park BizCentral.

SoilBuild Reit's gross revenue was $19.6 million in the second quarter. A drop in turnover from West Park BizCentral and Tuas Connection was partly offset by additional revenue from Technics and Solaris at one-north (above).
SoilBuild Reit's gross revenue was $19.6 million in the second quarter. A drop in turnover from West Park BizCentral and Tuas Connection was partly offset by additional revenue from Technics and Solaris at one-north (above). PHOTO: DTZ

  • AT A GLANCE

  • NET PROPERTY INCOME: $17.3 million (+3.7%)

  • DISTRIBUTABLE INCOME: $14.7 million (+3%)

  • DISTRIBUTION PER UNIT: 1.565 cents (-3.1%)

The manager said the increase in its management fees of $42,000 was owing to higher distributable income, leading to a higher base fee.

The occupancy rate was 92 per cent as at June 30. Despite the soft industrial outlook, said the Reit manager, more than 100,000 sq ft of renewals and new leases were signed in the second quarter.

"The increase in finance expenses was mainly owing to notional interest expense on the $55 million interest-free loan," the manager added.

It said in April, the Reit issued $100 million in fixed-rate notes which are due in 2021 at a coupon rate of 3.6 per cent.

As at June 30, the Reit's weighted average borrowing cost is 3.44 per cent, debt expiry stands at 3.4 years and interest rate exposure is 100 per cent, fixed for a weighted average term of 2.3 years.

"SoilBuild Reit's unencumbered investment properties are in excess of $830 million, representing approximately 70 per cent of investment properties by value," said the manager.

A slowdown in the manufacturing sector meant that rentals of all industrial properties softened by 2.7 per cent in the first quarter over the preceding quarter.

Mr Roy Teo, the manager's chief executive, said with the slowdown in the manufacturing sector leading to a soft leasing environment, the portfolio occupancy has dipped to 92 per cent at the end of the second quarter, down from 94.8 per cent at the end of the first quarter.

He was comparing with the industrial average of 90.1 per cent in the first quarter. Also, 86 per cent of the lease expiries for the year were due for renewal in the first six months of this year.

Mr Teo added: "The challenge remains to re-let the vacant space and to renew the multi-tenanted leases that are expiring for the rest of the year, which make up 2 per cent of the portfolio's net lettable area.

"We will continue to focus on active asset management while maintaining our prudent approach in capital management."

Units in the Reit closed up half a cent at 70 cents before the announcement.

A version of this article appeared in the print edition of The Straits Times on July 14, 2016, with the headline 'SoilBuild Reit's DPU dips 3.1% to 1.565¢ in Q2'. Print Edition | Subscribe