SINGAPORE (June 15): Religare is keeping Soilbuild Business Space REIT (Soilbuild REIT) at “buy” with a target price of 88 cents in view of its “positive move” to acquire Bukit Batok Connection from SB (Westview) Investment for a total of $100.5 million.
The valuation of Soilbuild REIT's portfolio is estimated to increase to $1.29 billion from $1.19 billion at end 2015.
(See: “Soilbuild REIT in buy and leaseback deal with Bukit Batok Connection”)
“At acquisition price of $96.3 million and an initial annual rental of $8 million per year under the double-net master lease, this property NPI yield is estimated at close to 7.9%,” says Religare’s Tata Goeyardi in a sales commentary on Wednesday.
On completion of the acquisition, Soilbuild REIT’s trustee, DBS Trustee, will also enter into a master lease agreement with SB Westview in relation to the lease-back of the property to SB Westview.
“With the master lease to last for seven years, coupled with an annual escalation of up to 2% per annum, this transaction will offer Soilbuild REIT stable income while further diversifying its sources of income,” Goeyardi says.
According to Religare’s estimates, Soilbuild REIT could see its DPU boosted by close to 2.5% if the acquisition is fully funded by debt, assuming an interest cost of 3.5%.
Should the purchase be funded by a combination of debt and equity financing, with 60% equity and the remainder by debt, DPU could increase by close to 0.5%, Religare says.
As at 2.43pm, Soilbuild REIT is trading 0.72% lower at 68.5 cents.
