SB REIT – AmFraser

Soilbuild REIT’s performance exceeding prospectus guidance.

Soilbuild REIT recorded a DPU of 0.76c for the period from Listing Date (16 Aug 2013) to 30 Sep 2013. This represents an increase of 3% over the forecast DPU of 0.738c, and forms 36.2% of our DPU forecast of 2.1c for the period from listing to end‐Dec 2013. The DPU of 0.76c is payable on 4 Dec 2013.

Achieving positive improvements at the operating level.

Soilbuild REIT’s positive variance from its projected DPU in its prospectus is attributable to operational improvements across the board. Expansion by an existing tenant at Eightrium as well as 100% retention of leases expiring allowed Eightrium to improve its occupancy levels from 95.3% at IPO to 97.4% at 30 Sep 2013. As a result, portfolio occupancy is currently at 99.8%, with no remaining leases due for expiry in FY13. Notably, leases that were renewed achieved positive rent reversions of 7.9% over preceding average rental rates, in line with our expectations, which further supported underlying distributable income.

75% of interest rate exposure hedged.

Also, Soilbuild REIT managed to achieve an all‐in interest cost of 3.11% as at 30 Sep 2013, and this compares favourably with its guidance of 3.28% in its Prospectus. Aggregate leverage stood at 29.4%, below the 29.9% forecast in the Prospectus.

Stability and growth at the heart of our investment thesis.

We continue to like Soilbuild REIT for its best‐in‐class business space portfolio, yield sustainability and stronger‐than‐average exposure to the business park market. At current levels, we project Soilbuild REIT’s FY14 yield at 7.9%, which makes it a very compelling yield play among S‐REITs. Maintain BUY at FV S$0.84.