Viva Industrial Trust has come to a settlement agreement with Jackson International, which provides rental income support for Viva's Jackson Square property and last month went into liquidation.

As part of the settlement with Jackson and its director and shareholder Tan Phong Guan, Jackson will be fully discharged from its obligations to Viva as facilities manager, as well as its obligations under a rental support arrangement inked in 2014, the Reit manager said on Sunday night.

In exchange, Jackson International will pay Viva a compromise amount of $1 million and another $1.73 million in security deposits in relation to the existing leases of three of its subsidiaries that occupy 24 per cent of the net lettable area of Jackson Square in Toa Payoh.

On top of these sums, Viva can call upon a $3.87 million bank guarantee that had been set aside by Jackson International earlier on. Once the full $3.87 million is paid, Jackson will be fully released from all its obligations under the rental support arrangement.

RHB Research analyst Vijay Natarajan said the settlement was positive as it raises Viva's rent guarantee buffer from $3.87 million to $4.87 million. "Recall that the rental top-up for Jackson Square was only $1.56 million in 2016. Thus the available rent guarantee buffer covers for about 3.14 years, assuming a similar rental top-up," he said.

Better occupancy levels can also be expected, given the Jackson subsidiaries' commitment to continue their operations in the property.

This would at least maintain the current occupancy of 74 per cent, versus 50 per cent had the Jackson subsidiaries' leases been terminated, Mr Natarajan noted.

"We believe Viva would be able to bring the property's occupancy closer to 85 to 90 per cent by the end of the year, as the building is (within) walking distance to Braddell MRT," he said. "Viva is in discussions to appoint a new facilities manager for the property, and we do not expect operating expenses to increase significantly from the current $2 million per annum."