Soilbuild Business Space REIT (Soilbuild REIT) reported 4Q16 gross revenue of S$21.7m, which was an increase of 6.1% on a YoY basis. NPI rose 8.0% to S$18.9m, but DPU fell 2.7% to 1.57 S cents, and this can be attributed mainly to higher finance expenses and an enlarged unit base as a result of its preferential offering exercise.

For FY16, Soilbuild REIT’s gross revenue rose 2.3% to S$81.1m and formed 99.6% of our full-year forecast. DPU of 6.091 S cents represented a decline of 6.1% but was 0.9% above our FY16 projection.

Portfolio occupancy for Soilbuild REIT fell 5.2 ppt to 89.6%, as at 31 Dec 2016, primarily due to the termination of lease with Technics Offshore Engineering Pte Ltd. Soilbuild REIT suffered fair value losses of S$50.9m for its investment properties in FY16 due largely to lower valuation at 72 Loyang Way, West Park BizCentral and Tuas Connection.

Looking ahead, 13.7% of Soilbuild REIT’s portfolio NLA (~540,000 sq ft of leases) is expiring in FY17. Management believes the challenge remains to retain its tenants, improve occupancy rates in the multi-tenanted buildings and leasing of its 72 Loyang Way facility. We will provide more updates after the analyst conference call.

For now, we put our Buy rating and S$0.77 fair value estimate under review.

Source: OCBC Research - 24 Jan 2017