SoilBuild Business Space REIT

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Soilbuild Business Space Reit Unaudited Financial Statements And Distribution Announcement For The First Quarter ("1Q Fy2017") And Financial Period From 1 January 2017 To 31 March 2017 ("Ytd Fy2017")

Financials Archive

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Statement of Total Return and Distribution Statement

Balance Sheet

Footnotes:

  1. Non-tax deductible items comprise the Manager's management fees payable in Units, rent free amortisation, the Trustee's fees, amortisation of debt arrangement and prepayment fees. (1QFY2016: Includes property management and lease management fees payable in Units and bank commitment fees as well.)

    Assuming the 1Q FY2017 property management fees and lease management fees were payable in Units, non-tax deductible items would have been S$2,241k (consistent with 1Q FY2016) and income available for distribution to Unitholders would have been S$16,097k.

Balance Sheet

Balance Sheet

Review of the Performance on 1Q FY2017 compared to 1Q FY2016

Gross revenue was S$22.0 million in 1Q FY2017, S$1.8 million or 9.2% higher than the gross revenue in 1Q FY2016 mainly due to the increase in revenue from Bukit Batok Connection amounting to S$2.0 million. In addition, Solaris, Tellus Marine and Tuas Connection each contributed S$0.1 million higher revenue. The revenue growth was partially offset by a reduction in revenue from West Park amounting to S$0.5 million.

Property operating expenses were S$2.8 million in 1Q FY2017 which was S$0.2 million lower than 1Q FY2016 mainly due to a reduction in property tax for West Park.

Net property income was 11.7% higher at S$19.2 million in 1Q FY2017 from S$17.2 million in 1Q FY2016 mainly due to the abovementioned reasons.

Higher interest income was largely attributable to notional interest income on the second tranche of the S$55 million interest-free loan.

The increase in finance expenses amounting to S$0.6 million was mainly due to S$40 million unsecured loan drawn down in 2H FY2016, higher notional interest expense on the S$55 million interest-free loan and increase in weighted average borrowing cost.

The increase in Manager's management fees of S$0.1 million was due to higher distributable income. Other trust expenses comprised mainly professional fees and on-going listing expenses.

Total return before distribution was S$1.5 million higher than 1Q FY2016 mainly due to higher net property income amounting to S$2.0 million and partially offset by higher net finance expense and Manager's management fees of S$0.4 million and S$0.1 million respectively.

The reduction of non-tax deductible items amounting to S$0.5 million was largely attributable to the absence of property and lease management fees payable in units as the Manager has elected to pay the property management fee to the property manager and to receive its lease management fee in cash for 1Q FY2017.

Income available for distribution was S$15.6 million in 1Q FY2017, 6.6% higher than 1Q FY2016 largely due to higher total return before distribution and partially offset by lower non-tax deductible items.

Commentary

Ministry of Trade and Industry (“MTI”) announced that the Singapore economy grew by 2.0% in 2016 and maintained its GDP growth estimates of 1.0% to 3.0% for 2017. The overall performance in 2016 was largely driven by growth in the manufacturing sector. Particularly in 4Q 2016, manufacturing activity grew 11.5% y-o-y and 39.8% q-o-q. The improvement was primarily supported by the electronics and biomedical manufacturing clusters, while the transport engineering and general manufacturing clusters remained weak.

MTI projected global growth to recover slightly in 2017, especially in the US and key ASEAN economies. MTI cautioned the uncertainties from political risks in the Eurozone economies and tightening monetary policies in China. Barring the downside risks, the manufacturing and transportation & storage sectors will likely provide growth to the Singapore economy in 2017, riding on the improvement in global trade flows. However, outlook for the construction sector, marine & offshore and retail and food services sectors is likely to remain subdued.

Rentals of all industrial properties softened by 0.5% in 4Q 2016 over the preceding quarter, partially offset by an improvement in business park rentals of 1.2%. Rental indices for single-user factories, multi-user factories and warehouses contracted marginally by 0.9%, 0.5% and 0.2% respectively.

In 1Q FY2017, close to 160,000 sq ft of new leases were signed and 100,000 sq ft of renewals and forward renewals were completed. The portfolio renewals registered a positive rental uplift of 3.6% in 1Q FY2017 while portfolio rental reversions remained flat with the inclusion of the forward renewals. With 12.6% of the portfolio NLA expiring in the rest of 2017, the key challenge remains to retain existing tenants and to improve occupancy in the multi-tenanted buildings and 72 Loyang Way.