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Another Tenant Default for Soilbuild Business Space REIT

Soilbuild REIT Logo

Another bad piece of news for Soilbuild Business Space REIT investors out there. NK Ingredients Pte Ltd, the sole tenant for 2 Pioneer Sector 1 has defaulted on its rent. If you do not know, NK Ingredients Pte Ltd is one of the top ten tenants contributing 5.8% of Soilbuild Business Space REIT monthly gross rental income.

Soilbuild REIT has called upon the insurance guarantee today. The balance of the insurance guarantee of S$1,689,556.67 is equivalent to approximately four months of rent.

The stock price reacted to the bad news and plunged from $0.73 to $0.69 before closing at $0.70. It seems that I am a bit late in running now.

 

Soilbuild Business Space REIT High Yield but Declining DPU

Soilbuild REIT Logo

For 2 consecutive quarters, the distribution per unit has declined for Soilbuild Business Space REIT. Based on the closing price of $0.72 on 30th June 2017, the annualised distribution yield is 8.2%. I have previously wrote about the investment risks of Soilbuild Business Space REIT here, thus I shall be repeating it again in this post.

I am writing this post just to re-validate my decision to sell Soilbuild Business Space REIT when opportunity arises. The REIT currently makes up 5% of my stock portfolio.

The following are my observations based on its current financials

Declining Distribution Per Unit quarter on quarter (q-o-q)

Distribution Per Unit has been declining. It has proven that we should not solely purchase a REIT based on its high dividend yield.

2nd Quarter 1st Quarter
Distribution Per Unit (“DPU”) (cents) FY2016 1.565 1.557
Distribution Per Unit (“DPU”) (cents) FY2017 1.514 1.539
Variance (6.3%) (1.2%)

Flat Net Asset Value

Flat or stagnant Net Asset Value at $0.72 for the last two quarters. By right after acquisition of Bukit Batok Connection, distribution or property yield should increase but it didn’t.

The Cursed 72 Loyang Way

72 Loyang Way still plagues Soilbuild Business Space REIT. The challenge remains to lease the entire space at 72 Loyang Way due to the subdued marine offshore and oil and gas sector.

Occupancy

Occupancy still at 92.6% which is slightly above the industrial average of 89.4%.

 

What Happen to Soilbuild REIT 72 Loyang Way

72 Loyang Way is an integrated facility comprising offices, single-storey production facilities, blasting chamber, dormitory and a jetty with 142 metres of sea frontage. It is one of the asset under Soilbuild REIT’s portfolio.

Last year, due to the headwinds in the marine and offshore, oil and gas industry, Technics Offshore Engineering Pte Ltd defaulted on its rent at 72 Loyang Way. Being a shareholder of Soilbuild REIT, I am worried about the prospects of 72 Loyang Way. Have you also been waiting for some updates on 72 Loyang Way? Read More

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