SB REIT – AmFraser

Exceeding expectations. For the period from listing date of 16 Aug to 31 Dec 2013, Soilbuild REIT recorded a DPU of 2.27c, exceeding our forecast of 2.1c. This continued strong showing largely stems from positive rent reversions, 100% retention of leases and a low all‐in interest rate of 3.12%.

A showcase of stability. Since listing, Soilbuild REIT has retained 100% of its leases expiring and recorded portfolio occupancy of 99.9% as at Dec 2013. With expiring rents below current market rents, Soilbuild REIT continues to revert positively on its expiring rents, witnessing rent reversions of 7.9% post‐listing.

Mitigating its interest rate exposure. 100% of Soilbuild REIT’s borrowings are currently hedged into fixed rates through interest rate swaps of 1 to 4 years in duration. Thanks to its conservative capital management initiatives, Soilbuild REIT achieved an all‐in interest rate of 3.12%, noticeably lower than its forecasted interest rate of 3.28% in the Prospectus.

A visible acquisition pipeline. Boasting an aggregate leverage of 29.3%, Soilbuild REIT has an additional debt headroom of S$79.9mil. We believe this provides considerable ammunition for Soilbuild REIT to carry out acquisitions. With regards to acquisitions, Soilbuild REIT could potentially tap on its Right of First Refusal (ROFR) pipeline of four properties in Singapore, that could contribute an estimated GFA of 2,335,694 sq ft.

Maintain BUY on FV S$0.87. Soilbuild REIT’s DPU of 2.27c translates into an annualized yield of 7.8%, which is compelling in our view given the quality of its assets, longest weighted average land lease and diversified lease expiry profile.