OCBC Investment Research has maintained a ‘Buy’ rating on Viva Industrial Trust but upgraded its fair value estimate on the counter after it was announced that the trust has reached a settlement agreement with Jackson International.
Viva Industrial Trust first disclosed in April 2017 that it may be encountering difficulties with a rental income support provision for the property located at 11 Lorong 3 Toa Payoh, Jackson Square.
When the trust first acquired the property in November 2014 from Jackson International, the latter agreed to provide rental income support to Viva Industrial Trust’s REIT component for a guaranteed amount of SGD58 million (USD 41 million) over five years, commencing from the date when the acquisition completes.
Under this rental support agreement between both parties, if the actual gross rental collection falls below the guaranteed gross rental collection, Jackson International will have to pay the REIT a sum equivalent to the shortfall during the five-year period that will end on 20 November 2019.
However Jackson International notified Viva Industrial Trust in April 2017 that it was going into liquidation.