The manager of Soilbuild REIT announced on Dec 14 that it intends to privatise and subsequently delist Soilbuild REIT.
This will be done via a trust scheme of arrangement with Clay Holdings III.
Clay Holdings III is a newly-incorporated entity owned by Clay Holdings II, which is in turn owned by Lim Chap Huat, the executive chairman and co-founder of Soilbuild Group Holdings, and Clay Holdings I, an entity established by funds managed by affiliates of Blackstone Real Estate.”
Under the trust scheme, Clay Holdings III has proposed to acquire all units at 55 cents in cash per unit, which represents a premium of about 34.5% over the volume-weighted average price (VWAP) of 40.9 cents per unit for the one-month period up to Aug 31.
It also represents a 29.1% premium over the VWAP of 42.6 cents for the 12-month period up to Aug 31.
The scheme consideration also implies a price to adjusted net asset value (NAV) multiple of 0.98 times to 1 times, which exceeds the REIT’s historical 1-year, 3-year and 5-year average NAV multiple of 0.78, 0.91 and 0.92 times respectively, as well as the average NAV multiple since the REIT’s IPO of 0.94 times.
The trust scheme follows the initial holding announcement on Sept 4 which stated that Lim had entered into a non-binding term sheet in relation to a possible transaction involving his and his family’s direct and deemed interests in Soilbuild REIT.
As at Dec 14, Lim and his three sons, Lim Han Feng, Lim Han Qin and Lim Han Ren own a total of 385,566,761 units in Soilbuild REIT in total, representing a 30.28% interest.
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Transaction rationale
On the rationale of the transaction, Chong Kie Cheong, chairman and independent non-executive director of the manager of the REIT says, “Notwithstanding the board and management team’s efforts to maximise value for Soilbuild unitholders over the years, the Soilbuild unit price has implied a high yield and was further impacted by the Covid-19 pandemic.”
“After considering the uncertainty of a global recovery and the merits of this proposed trust scheme, we believe it represents a credible offer in the face of challenging market conditions and would like to present it to Soilbuild unitholders for their consideration,” Chong adds.
For Clay Holdings III, the REIT’s ability to undertake distribution per unit (DPU) accretive acquisitions has been limited partly due to its high DPU yield, which has hindered its ability to competitively bid for third-party assets.
Since its IPO in August 2013, the REIT’s sponsor, Soilbuild Group Holdings has only injected one asset into the REIT and has not been able to maximise the REIT’s potential.
Due to these constraints, the REIT has seen its total assets value grow by 1.5 times, compared to the average of 1.8 times for industrial Singapore REITs.
The REIT also still has a long way to go towards being included into the EPRA Nareit Index, a key REIT index.
“Given the various challenges and constraints faced by Soilbuild REIT, we have considered many options and discussed potential strategic transactions, including a privatisation of Soilbuild REIT, with various parties, comprising private equity firms, real estate funds, and real estate developers across Hong Kong / China, Australia and the United States over the past few years,” says Lim.
“We believe that this proposal by Blackstone presents the best option for minority Soilbuild REIT unitholders based on the offers received, representing the highest price received. We believe Blackstone’s proposal is also the most credible and offers the greatest deal certainty in terms of timing and execution, and is backed by Blackstone’s strong track record of successful privatisations, as well as the opportunity to place the assets under the stewardship of one of the most experienced real estate investors and operators in the world,” he adds.
In conjunction with the trust scheme, Soilbuild REIT, through its trustee and wholly-owned subsidiary, Soilbuild Business Space Holdings, have entered into a unit sale agreement with the related entities of Blackstone for the disposal of all the issued and paid-up units of Soilbuild Australia Trust.
The disposal of its Australian properties is inter-conditional with the trust scheme and is intended to facilitate the overall trust scheme transaction to allow greater certainty on timing for regulatory approvals and for the REIT’s unitholders to receive the scheme consideration in a “time-efficient manner”.
The scheme will require the approval of the REIT’s unitholders at an extraordinary general meeting (EGM) as well as the order of the Singapore court.
The Lim family, Lim Cheng Hwa, the REIT’s sponsor and manager will not vote on the scheme and on the disposal of the REIT’s Australian assets.
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The scheme is expected to take effect by the end of 1Q2021.
Citigroup Global Markets Singapore is the financial adviser to Clay Holdings III, while DBS Bank is the financial adviser to the REIT manager with respect to the trust scheme.
United Overseas Bank Limited is the adviser to Lim Chap Huat and Clay Holdings I.
KPMG Corporate Finance Pte Ltd has been appointed as the independent financial adviser to advise the REIT’s independent directors for the purposes of making a recommendation to the REIT’s unitholders.
As at 9.05am, units in Soilbuild REIT are trading flat at 51 cents.
