dbs pulse of asia conference - listed...
TRANSCRIPT
DBS Pulse of Asia Conference
5 January 2015
2
This presentation should be read in conjunction with the financial statements of Soilbuild Business Space REIT (“Soilbuild REIT”) for the
period from 1 January 2014 to 30 September 2014 as detailed in the 3Q 2014 SGX announcement.
This presentation is for information only and does not constitute an offer or solicitation of an offer to subscribe for, acquire, purchase,
dispose of or sell any units in Soilbuild REIT (“Units”) or any other securities or investment.
Nothing in this presentation should be construed as financial, investment, business, legal or tax advice and you should consult your own
independent professional advisors.
This presentation may contain forward-looking statements that involve risks, uncertainties and assumptions. Future performance, outcomes
and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and
assumptions. You are cautioned not to place undue reliance on these forward-looking statements, which are based on the current view of
management of future events.
The value of Units and the income derived from them, if any, may fall or rise. Units are not obligations of, deposits in, or guaranteed by, the
Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount
invested.
Investors should note that they will have no right to request the Manager to redeem or purchase their Units for so long as the Units are
listed on Singapore Exchange Securities Trading Limited (the “SGX-ST”). It is intended that holders of Units may only deal in their Units
through trading on the SGX-ST. The listing of the Units on the SGX-ST does not guarantee a liquid market for the Units.
The past performance of Soilbuild REIT is not indicative of the future performance of Soilbuild REIT. Similarly, the past performance of SB
REIT Management Pte. Ltd. (“Manager”) is not indicative of the future performance of the Manager.
Disclaimer
Citigroup Global Markets Singapore Pte. Ltd., DBS Bank Ltd. and Oversea-Chinese Banking Corporation Limited were the joint global
coordinators, issue managers, bookrunners & underwriters of the initial public offering of Soilbuild REIT
Content
3
Overview and Key Highlights 4
Portfolio Details 7
Market Update 16
Financial Highlights / Capital Management 19
Growth Strategies 23
Sponsor / Fee Structure 28
Conclusion 31
Overview
5
5
Integrated Platform
of SponsorLocation, Quality and
Specification of Assets
To deliver stable and growing returns to Unitholders by
actively managing our assets and expanding our portfolio
Soilbuild Business Space REIT aims to be a successful
business space real estate investment trust with a
quality portfolio of assets to deliver stability and growth
Vision
Mission
Our Competitive Advantage
Overview
6
Key Highlights
Continuing to deliver on key investment merits
1. Best-in-class portfolio
– Strategically
located portfolio
5. Committed Sponsor / Mgmt
2. Favourable tenancy / lease profile 3. Well-defined growth plans 4. Robust financial performance
– Longest remaining land lease
tenure of 49 years(1)
– Acquisition of 3 properties
since IPO taking portfolio
size in excess of S$1 bn
– Quality building specifications and
designs with established tenant base
– Well-staggered lease expiry profile with
WALE of 4.0 years(1) by Gross Rental
Income
– Portfolio occupancy of
99.9%(2)
– Good balance between multi-
tenanted and master lease
properties
– Stable and growing cashflow
from master lease properties
– Upside potential from multi-
tenanted properties
– Active acquisition strategy
from ROFR pipeline and third
party opportunities
– DPU of SGD1.546 cents for 3Q 2014
exceeding IPO Forecast(3) by 2.0%
– FY2014 DPU yield of c.7.8%(4)
– Sponsor provides
access to
integrated real
estate platform
– Management team has
delivered DPU outperformance
for five consecutive quarters
– Management fee structure pegged to
DPU, providing alignment with unitholders
Notes:
(1) As at 31 Dec 2014 (2) As at 30 Sep 2014 (3) The IPO Forecast is derived from the Forecast Year 2014 figures disclosed in the Prospectus dated 7 August 2013 (the “Prospectus”) (4) Annualised DPU yield based on 31 Dec 2014 closing
price of S$0.79 (5) Based on aggregate leverage of up to 40.0%
– High proportion of
business park properties
– Post-acquisitions gearing of
36.5%(5) provides further debt
headroom of S$59.0 million
– Investment grade rating
of BBB- from S&P
– Well-diversified tenant base
and trade sectors
Portfolio Details
8
Portfolio Overview
Keppel
TerminalSentosa
Jurong Island
Jurong Port
Second Link
(Tuas Checkpoint)
PSA
Terminal
Tuas Port
(2022)
ONE-NORTH
CHANGISIMEI
EXPOJOO KOON
BOON LAY
PIONEER
BUONA VISTA
SolarisNLA: 441,533 sq ft
Valuation: S$300.0 million
Soilbuild REIT portfolio features include optimal locations for the various asset types, above average specifications, young
properties and very long remaining land leases
Eightrium
NLA: 177,286 sq ft
Valuation: S$102.0 million
NLA: 1,240,583 sq ft
Valuation: S$319.0 million
COS PrintersNLA: 58,752 sq ft
Valuation: S$11.0 million
Tuas ConnectionNLA: 651,072 sq ft
Valuation: S$126.0 million
BK Marine
NLA: 73,737 sq ft
Valuation: S$15.0 million
West Park BizCentral
NLA: 312,375 sq ft
Valuation: S$62.0 million
Valuation S$1,033.5 million
Total NLA 3,352,412 sq ft
WALE (by NLA) 4.0 years(1)
Occupancy 99.9%(2)
Portfolio Summary
CBD
Industrial Properties
Business Park Properties
Tellus MarineNLA: 95,250 sq ft
Valuation: S$18.3 million
SEMBAWANG
NLA: 208,057 sq ft
Valuation: S$56.0 million
KTL Offshore
NK Ingredients
NLA: 93,767 sq ft
Valuation: S$24.2 million
Speedy-Tech
Notes:
(1) As at 31 December 2014
(2) As at 30 September 2014
9
Portfolio Summary
Notes:
(1) Age from issue of CSC (as at 31 Dec 2014) (2) Phase 1 of development received CSC in Jul 1991 and Phase 2 of development received CSC in Aug 2007 (3) As at 30 Sep 2014 (4) Valuation assumes the completion of construction of a
new annex to Tellus Marine (5) Occupancy at completion of acquisition
Property TypeLease
Arrangement
Property
Age(1)
(Years)
Remaining
Land Lease
(Years)
Occupancy
Rate(3)
Occupancy
Rate as at
IPO
Valuation
(S$ Million)
SolarisBusiness
Park
Master
Lease3.3 53 100.0% 100.0% 300.0
West Park BizCentralMulti-User
Ramp-up Factory
Multi
Tenanted2.3 54 99.8% 100.0% 319.0
Eightrium @ CBPBusiness
Park
Multi
Tenanted7.3 51 100.0% 95.3% 102.0
Tuas ConnectionMulti-User
Land Based Factory
Multi
Tenanted4.5 36 100.0% 100.0% 126.0
NK IngredientsSingle-User
Factory
Master
Lease
Ph1: 23.5
Ph2: 7.4(2)32 100.0% 100.0% 62.0
COS PrintersSingle-User
Factory
Master
Lease18.0 28 100.0% 100.0% 11.0
Beng Kuang MarineSingle-User
Factory
Master
Lease14.7 42 100.0% 100.0% 15.0
Tellus MarineSingle-User
Factory
Master
Lease16.3 39 100.0% n.a 18.3(4)
KTL OffshoreSingle-User
Factory
Master
Lease
No. 61: 5.4
No. 71: 5.652 100.0%(5) n.a 56.0
Speedy-TechSingle-User
Factory
Master
Lease11.0 35 100.0%(5) n.a 24.2
Total Portfolio 5.4 48.6(3) 99.9% 99.7% 1,033.5
Soilbuild REIT’s portfolio consists of ten properties with long underlying land leases and an average age of 49 years
10
Solaris @ one-north
Iconic award winning development offering plethora of
green innovationsMinutes from one-north / Buona Vista MRT stations and
easy accessibility to AYE and PIE
Established Sub-Tenant Base
Property Information
GFA 551,811 sq ft
NLA 441,533 sq ft
No. of Floors 9-storey in North Tower; 15-storey in
South Tower
Occupancy 100% (underlying basis)
No. of Sub-Tenants 26
Car Park Lots 292
Floor-to-Ceiling Height Up to 6 meters
Building Awards
Eightrium @ Changi Business Park
11
Established Tenant Base
Property Information
GFA 213,835 sq ft
NLA 177,835 sq ft
No. of Floors 8-storey East and 6-storey West
Wings interlinked by a distinctive
5-storey high atrium
Occupancy 100%
No. of Tenants 13
Car Park Lots 132 lots
Floor-to-Ceiling
Height
High ceiling height of up to 3
metres
Located in one of Singapore’s most
sought after business park locations
One of the few multiple-user business
park properties in Changi Business Park
Close proximity to Expo MRT and
major expressways with facilities and
amenities abound
West Park BizCentral
12
Established Tenant Base
Property Information
GFA 1,414,600 sq ft
NLA 1,240,583 sq ft
No. of Floors 6-storey ramp-up factory and 11-
storey air-conditioned hi-tech facility
Occupancy 99.8%
No. of Tenants 47
Car Park Lots 542
Floor-to-Ceiling Height Ramp-up factory: Up to 9.1 meters;
Air-conditioned hi-tech facility: Up to
5.0 meters
Award winning design with safety feature
including traffic segregated system
Flexible configuration allows for
innovative use of space
Individual substations for each stack
providing tenants with stable power sources
Tuas Connection
13
Established Tenant Base
Property Information
GFA 607,994 sq ft
NLA 651,072 sq ft
Occupancy 100.0%
No. of Tenants 15
Car Park Lots Nil
Floor-to-Ceiling Height High ceiling height of up to 12 metres
Features detached and semi-detached business
space, offering exclusivity to tenants
Functional layouts featuring wide production spaces and ceilings as
high as 12m, with well-organised office spaces on the 2nd storey
Strategically located close to Tuas Checkpoint,
Petrochemical, Pharmaceutical and Green Energy Zones
14
% of Total
NLA of 3.05
million sq ft
104
tenants in
portfolio
Notes:
(1) Inclusive of underlying tenants at Solaris
1. Portfolio Income Spread
By Property
Diversified Portfolio (as at 30 September 2014)
2. Well-spread trade sectors(1)
By NLA
3. Diversified Tenant Base(1)
By Gross Rental Income
4. Balanced Portfolio with Growth Upside
By Net Property Income
13%
16%
34%
25%
7%1% 2% 2%
Eightrium @ ChangiBusiness ParkTuas Connection
West Park BizCentral
Solaris
NK Ingredients
COS Printers
Beng Kuang Marine
3Q FY2014
Gross Revenue
S$16.9 million
Multi-Tenanted58%
Master Lease42%
3Q FY2014
NPI
S$14.2 million
19.9%
17.0%
11.3%8.1%4.6%
4.5%
4.2%
3.6%
2.8%
2.5%
21.4%
Precision Engineering, Electrical andMachinery ProductsMarine Offshore, Oil & Gas
Chemicals
Fabricated Metal Products
Electronics
Publishing, Printing & Reproduction ofRecorded MediaSupply Chain Management, 3rd PartyLogistics, Freight ForwardingInformation Technology
Construction
Food Products & Beverages
Others
MNC65%
SME30%
Government Agency
5%
15
Work has began on FY2015 lease expiries…
Lease expiry profile
As % of NLA
Eightrium0.3%
Tuas Conn.8.1%
West Park15.1%
17.6%
11.9%
19.5%
27.4%
2015 2016 2017 2018 >2018
23.6%
Lease Expiry by NLA
• Eightrium: 10,699 sq ft
• Tuas Connection: 261,243 sq ft
• West Park BizCentral: 486,091 sq ft
Market Update
17
Industrial Sector Market Outlook
167
603 590277 400 66
565
1,046
538
111
75
374
613
531
59
113
288
196
2014 2015 2016 2017 2018 >2018
Multiple-user factory Single-user factory
Warehouse Business Park
Limited Supply Pipeline for Business Park Properties
In ‘000 sq m
Improving Occupancies for Business Park
Vacancy rate (%)
9.4
12.7
13.2
5.26.6 6.8
6.4
11.59.6
18.1
15.013.9
3Q2011
4Q2011
1Q2012
2Q2012
3Q2012
4Q2012
1Q2013
2Q2013
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
Multiple-user factory Single-user factory
Warehouse Business Park
Source: JTC (3Q 2014) Source: JTC (3Q 2014)
The business park segment has performed relatively well in 2014 YTD, benefitting from the spill-over from higher office
rents, with business park rents growing at an average of 2.2% every quarter this year
While demand for business park space is expected to remain healthy, especially for the newer and centrally located ones,
the higher supply in 2016 is likely to contain rental growth
Rental for prime conventional industrial space expected to ease further in 4Q 2014 on the back of supply pressures
Source: DTZ, Colliers - 3Q 2014 Research Report
18
Located in Business Park Clusters that Command Premium Rents
Soilbuild REIT’s business park properties are located in Fusionopolis within one-north and Changi Business Park, which
commands some of the highest rents among the business parks in Singapore.
Major Business Parks in Singapore(S$ psf per month)
WEST REGION
CENTRAL
REGION
EAST REGION
Cleantech Park
(50 ha)
Market Rent: ~S$3.20 psf pm
International Business Park
(37 ha)
Market Rent: S$4.00 - 4.50 psf pm
Singapore Science Park
(65 ha)
Market Rent: S$3.50 - 4.50 psf pm
Mapletree Business City
(13.5 ha)
Market Rent: ~S$6.00 psf pm
one-north
(200 ha)
Market Rent: S$5.00 – 6.00 psf pm
Changi Business Park
(71.1ha)
Market Rent: S$4.00 – 4.50 psf pm
Location Amenities
Physical
Specs Usage
One-north
+ MBC
CBP
SSP / IBP
Higher rents for one-north
and MBC vs. SSP and IBP
Financial Highlights / Capital Management
20
STI
+5.2%
Financial Performance vs Unit Price
S-REIT
+6.4%
SB REIT
+10.5%
85%
90%
95%
100%
105%
110%
115%
120%
Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Relative Trading Performance
16 Aug 2013 (IPO) – 31 Dec 2014
Actual DPU exceeding IPO Forecast for 5 consecutive quarters
Actual & Forecast DPU for periods ending 30 Sep 2013 – 30 Sep 2014
Source: Bloomberg closing prices
0.738
0.760
Forecast Actual
3Q 2013
Announcement
+3.0%
4Q 2013
Announcement
1.460
1.510
Forecast Actual
+3.4%
1Q 2014
Announcement
1.472
1.562
Forecast Actual
+6.1%
2Q 2014
Announcement
1.481
1.500
Forecast Actual
+1.3%
3Q 2014
Announcement
1.515
1.546
Forecast Actual
+2.0%
21
3Q FY2014 Financial Results – Balance Sheet
All figures S$’000 unless otherwise stated Unaudited Actual
as at
30 September 2014
Audited Actual
as at
31 December 2013
Investment Properties 949,944 935,000
Other Assets 22,412 20,292
Total Assets 972,356 955,292
Bank Borrowings 289,849 275,331
Other Liabilities 33,371 32,663
Net Assets 649,136 647,298
Units in Issue (‘000) 810,933 804,541
Net Asset Value per Unit (S$) 0.80 0.80
22
Prudent Capital Management
1) Modest aggregate leverage allows significant headroom
Total Financing Facilities Available S$385 million
Total Debt Drawn Down(1) S$374 million
Debt headroom(1)(2) S$59 million
95.0 95.0 90.0 94.0
2014 2015 2016 2017 2018
% of Debt Maturing 25.4% 25.4% 24.1% 25.1%
Notes:
(1)Post-acquisition of 61 & 71 Tuas Bay Drive and 20 Kian Teck Lane (2) Based on aggregate leverage of 40% (3) Excluding debt arrangement fees relating to undrawn loans
(4) As at 31 Dec 2014
Aggregate Leverage(1) 36.5%
Average All-in Interest Cost(1)(3) 3.19%
Weighted Average Debt Maturity(4) 2.1 years
2) No more than 26% of debt expires in any 1-year(S$ Million)
To mitigate interest rate risk,
over 80% of total debt hedged
with interest rate swaps
3) Standard & Poor’s has on 31 July 2014, re-affirmed its long term corporate credit rating of BBB- with a stable
outlook for Soilbuild REIT
Growth Strategies
24
Three Pronged Growth Strategy
Soilbuild REIT is well positioned for robust growth through organic rental growth and the acquisition and development of
properties.
Stability and Growing Cashflows from Master Leases1
Acquisition Opportunities3
Upside Potential from Multi-Tenanted Properties 2
25
2015 2016 2017
Solaris NK Ingredients COS Printers BK Marine
Tellus Marine KTL Offshore Speedy-Tech
5 Years
7 Years
7 Years
10 Years
10 Years
10 Years
15 Years
Solaris
KTL Offshore
BK Marine
Speedy-Tech
Tellus Marine
COS Printers
NK Ingredients
Masters lease feature long term leases ranging from 5 to 15 years providing stability as well as growth from the annual or bi-annual
rental step-upsA
Minimal counterparty risk given 12-month rental deposits from the Master Lessees and blue chip sub-tenant baseB
Minimal capital expenditure expected for FY2015 given that the Properties are relatively young and modernD
Expected Stable and Growing Cash Flows from the Master Leases
2.5%3.0%
Master Leases structured on a double and triple net lease basis, minimizing expenses to Soilbuild REITC
Growth Strategy 1 – Cashflow from Master Leases
Long-term Master Leases
Lease Term from start of Master Lease Agreement
Fixed Annual Rental Escalation of Master Leases
Rental Revenue (S$ million)
31.4 32.233.1
26
40%
21%19%
21%
$1.35
$1.08
$1.44
$1.63
2015 2016 2017 2018 >2018
Lease Expiry by NLA Expiring Rents
6%
35%
40%
19%
$4.13$3.91
$3.81
$4.39
2015 2016 2017 2018 >2018
Lease Expiry by NLA Expiring Rents
41%
31%
16%13%
$1.46
$1.58$1.54
$1.35
2015 2016 2017 2018 >2018
Lease Expiry by NLA Expiring Rents
Rental rates for West Park BizCentral, Eightrium and Tuas Connection are below current market rents and are expected to
revert positively as existing leases are renewed
Eightrium(Lease Expiry by NLA)
Tuas Connection(Lease Expiry by NLA)
Current Market Rent:
S$4.00 – 4.50 psf per month
Current Market Rent:
S$1.50 – 1.80 psf per month
West Park BizCentral (Lease Expiry by NLA)
Current Market Rent:
S$1.60 psf per month
Growth Strategy 2 – Upside Potential from Multi-Tenanted Properties
27
Nine-storey ramp-up light
industrial building
Close to Jurong and
Woodlands industrial zones
Close to PIE, BKE, KJE
Growth Strategy 3 – Acquisition growth mechanisms on track
(i) Acquisition of Tellus Marine, 39 Senoko Way
Soilbuild REIT’s maiden acquisition since IPO
GFA Phase 1: 77,162 sq ft and Phase 2: 18,088 sq ft
Land details Business 2, 30 years + 30 years from 16 February 1994
Acquisition
cost
$18.3m (comprising consideration of $18.0m and
acquisition-related costs)
Lease scheme 10 year triple-net lease
Four-storey industrial building with proposed
single storey workshop to be constructed
Accessible via SLE and BKE
Master lease to Tellus Marine Engineering Pte.
Ltd.
(iv) First ROFR property due for completion
Potential acquisition opportunity in 2015
Location 566 Bukit Batok St 23, Singapore 659566
GFA 403,946 sq ft
Land details Business 1, 30 years from 29 August 2012
Expected TOP 1Q 2015
Expected lease scheme Multi-tenanted
(iii) Acquisition of Speedy-Tech, 20 Kian Teck Lane
3rd acquisition of a light industrial building in Jurong industrial zone
GFA 93,767 sq ft
Land details Business 1, 30 + 20 years from 1 May 2000
Acquisition
cost
$24.3m (comprising consideration of $22.4m, S$1.6m land
premium and acquisition-related costs)
Lease scheme 10 year triple-net lease
Part 3 / part 6-storey light industrial building
Master lease to Speedy-Tech , a subsidiary of
Integrated Micro-Electronics, Inc
Accessible via AYE and PIE
(ii) Acquisition of 61 & 71 Tuas Bay Drive
2nd acquisition located in the upcoming Tuas South area
Two adjacent detached purpose-built factories
with ancillary offices located along Tuas Bay
Drive
Master lease to KTL Offshore Pte. Ltd., a
subsidiary of SGX listed, KTL Global Ltd.
GFA 208,057 sq ft
Land details Business 2, 60 years from 19 July 2006
Acquisition
cost
$55.7m (comprising consideration of $55.0m and
acquisition-related costs)
Lease scheme 6.8 years double-net lease(1)
Note:
(1) Novation Agreement to be entered into between the Trustee, Vendor and the existing tenant, KTL Offshore Pte. Ltd., to transfer the existing lease from the Vendor to the Trustee. Double-net lease with
land premium fully paid up for the balance of the land lease tenure
Sponsor / Fee Structure
29
Sponsor has Integrated Real Estate Platform
Leading
Integrated
Property
Group with
~40 Years of
Experience
A
Only
Industrial
REIT
Sponsor with
End-to-End
Integrated
Capabilities
B Construction
End-to-End Construction
BCA Construction
Grade of ‘A1’
Multi-Discipline Team
Public & Private Sector
Range of Asset Classes
Balance Sheet
Focus on End Users
Innovative Designs
Quality
Location
Tenant Retention
Relationship with Brokers
Dedicated TeamEstablished Relationships
with Govt. Agencies
Asset Enhancements
Income Optimisation
Experienced Management
Team
Capital Management
Relationship with Vendors
Operations cover full spectrum of value chain
DevelopmentLease
Management
Asset / Property
Management
Fund
Management
Integrated
Real Estate
Platform
Singapore integrated property group with a long track record in end-to-end construction and
development expertise
Graded ‘A1’ by BCA which allows tender for public sector projects without any value limitations
Strong expertise in “design, build and lease/sell” through years of close collaboration with JTC
Corporation under the Developer Partnership Programme
Committed to support Soilbuild REIT over the long term with Sponsor stake of more than 26%
30
Strong Alignment with Unitholders
Base Fee
A Calculated on Distributable Income and not AUM
10.0% of Annual Distributable Income
First industrial REIT to adopt such a Unitholder-aligned fee structure
Strongest alignment of interest with Unitholders as it ensures focus on distributions
rather than on asset size
Management will be conscious of all expenses affecting distributable income on the
P&L (e.g. cost of funding)
Performance
Fee
B
Requires growth in DPU
25.0% of the difference in DPU in a financial year with the DPU in the preceding
financial year multiplied by the weighted average number of Units in issue for such
financial year
Compares favourably to other S-REIT performance fees which are based on a
percentage of revenue or net property income
Management aligned with Unitholders to deliver sustainable and quality DPU
growth
Conclusion
32
Conclusion
Strong operational performance from business parks
exposure, favourable locations, stable master leases
and upside from multi-tenanted leases
1
Future growth from ROFR and third party acquisitions3
Robust financial performance and prudent capital
management 2
Thank You
Shane HaganChief Executive OfficerTel: (65) 6415 5980
Email: [email protected]
Roy TeoChief Operating OfficerTel: (65) 6415 5983
Email: [email protected]
Key Contacts: