Soilbuild Business Space REIT's Bukit Batok Connection. (Photo: Soilbuild Business Space REIT)Soilbuild Business Space REIT's Bukit Batok Connection. (Photo: Soilbuild Business Space REIT)

Singapore-listed industrial REIT, Soilbuild Business Space REIT (Soilbuild REIT), announced on 14 June that it has entered into a sale and purchase agreement with SB Westview Investment to acquire a nine-storey property located at 2 Bukit Batok Street 23 for SGD96.3 million.

2 Bukit Batok Street 23 is a 'clean and light' industrial property with a leasehold term of 30 years commencing from 26 November 2012. The property has a net lettable area (NLA) of 377,776 square feet and offers a number of sub-tenant units that range in size from 2,000 square feet to 8,000 square feet.

Upon completion of the property’s acquisition, SB Westview Investment, which is a subsidiary of the REIT’s sponsor, will enter into a master lease agreement with Soilbuild REIT to lease-back the entire property for a period of seven years on a double net basis. Rent for the first year under the master lease agreement has been fixed at SGD8.0 million and subject to a rental escalation of up to 2.0% every year.

The acquisition is expected to increase Soilbuild REIT’s portfolio weighted average lease expiry (WALE) from 4.3 years and 4.7 years to 4.5 years and 4.9 years by NLA and gross rental income respectively. The acquisition is expected to be yield accretive to unitholders.

2 Bukit Batok Street 23 has been independently valued by Knight Frank and CBRE at an aggregate price SGD96.3 million as at 12 May 2016. Total acquisition costs including relevant fees and expenses is expected to be some SGD100.4 million.

Soilbuild REIT’s manager has said that it intends to fund the acquisition either through debt financing, the issuance of perpetual securities, or a mix of both, depending on prevailing market conditions. Should the acquisition be funded fully through debt, Soilbuild REIT’s aggregate leverage will increase from 36.0% to 40.8%.

“Post-acquisition, the manager intends to maintain the aggregate leverage within Soilbuild REIT’s long term target range between 35.0% and 40.0%”, said the REIT in a statement on the acquisition.

Soilbuild REIT has scheduled for an extraordinary general meeting in August 2016 to seek unitholders approval for the acquisition.

Units of Soilbuild Business Space REIT slipped by about 0.7% from its previous close on the Singapore Exchange to finish at SGD0.69.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.