SoilBuild Business Space REIT

Font A A

Investor Relations

Email This Print This Financials

Soilbuild Business Space Reit Unaudited Financial Statements And Distribution Announcement For The Second Quarter ("2Q FY2017") And Half Year ("1H FY2017") Ended 30 June 2017 ("YTD FY2017")

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Statement of Total Return and Distribution Statement

Balance Sheet

Footnotes:

  1. Non-tax deductible items comprise mainly the Manager's management fees payable in Units, rent-free amortisation, the Trustee's fees, amortisation of debt arrangement and prepayment fees. (1HFY2016 and 2QFY2016: Included property management and lease management fees paid in Units. Property management and lease management fees were not included in non-tax deductible items in 1HFY2017 and 2QFY2017.)

    Assuming the 1H FY2017 property management fees and lease management fees were payable in Units, non-tax deductible items would have been S$4,740k and income available for distribution to Unitholders would have been S$31,965k.

    Assuming the 2Q FY2017 property management fees and lease management fees were payable in Units, non-tax deductible items would have been S$2,499k and income available for distribution to Unitholders would have been S$15,868k.

Balance Sheet

Balance Sheet

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

Gross revenue was S$43.5 million in 1H FY2017, S$3.8 million or 9.6% higher than the gross revenue in 1H FY2016 mainly due to the increase in revenue from Bukit Batok Connection, Solaris, Tuas Connection and Tellus Marine amounting to S$4.0 million, S$0.3 million, S$0.2 million and S$0.2 million respectively. The revenue growth was partially offset by a reduction in revenue from 72 Loyang Way, West Park BizCentral and Eightrium amounting to S$0.6 million, S$0.2 million and S$0.1 million respectively.

Property operating expenses were S$5.6 million in 1H FY2017, S$0.4 million higher than 1H FY2016 mainly due to S$0.2 million, $0.1 million and S$0.1 million higher property expenses incurred for West Park BizCentral, 72 Loyang Way and Bukit Batok Connection respectively. The higher property expenses for West Park BizCentral was due to a one-off property tax reversal adjustment made in 2Q FY2016 arising from the revision of FY2015 and FY2016 annual values by the tax authority.

Net property income was 9.9% higher at S$37.9 million in 1H FY2017 compared with S$34.5 million in 1H FY2016 mainly due to the above 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$1.0 million was mainly due to S$40 million unsecured loan drawn down in 2H FY2016 and higher notional interest expense on the S$55 million interest-free loan.

The increase in Manager's management fees of S$0.2 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$2.4 million higher than 1H FY2016 mainly due to higher net property income amounting to S$3.4 million and partially offset by higher finance expense of S$1.0 million.

The reduction of non-tax deductible items amounting to S$0.8 million was largely due to the payment of property management and lease management fees in cash instead of units for 1H FY2017.

Income available for distribution was S$30.9 million in 1H FY2017, 5.5% higher than 1H FY2016 largely due to higher total return before distribution and partially offset by lower non-tax deductible items.

Review of the Performance on 2Q FY2017 compared to 2Q FY2016

Gross revenue was S$21.6 million in 2Q FY2017, S$2.0 million or 10.1% higher than the gross revenue in 2Q FY2016. The increase in revenue was largely attributed to higher contribution from Bukit Batok Connection, West Park BizCentral, Solaris, Tuas Connection and Tellus Marine amounting to S$2.0 million, S$0.3 million, S$0.1 million, S$0.1 million and S$0.1 million respectively. The revenue growth was partially offset by reduction in revenue from 72 Loyang Way amounting to S$0.6 million.

Property operating expenses were S$2.8 million in 2Q FY2017, S$0.6 million higher than 2Q FY2016 mainly due to higher property expenses incurred for West Park BizCentral, 72 Loyang Way and Bukit Batok Connection amounting to S$0.4 million, S$0.1 million and S$0.1 million each. The higher property expenses for West Park BizCentral was due to a one-off property tax reversal adjustment made in 1H FY2016 arising from the revision of FY2015 and FY2016 annual values by the tax authority.

Net property income was 8.1% higher at S$18.7 million in 2Q FY2017 from S$17.3 million in 2Q FY2016 mainly due to the abovementioned reasons.

The increase in Manager's management fees of S$64k was due to higher distributable income which resulted in higher base fee. The increase in finance expenses amounting to S$0.4 million was mainly due to S$40 million unsecured loan drawn down in 2H FY2016 and higher notional interest expense on the S$55 million interest-free loan. Other trust expenses comprised mainly professional fees and on-going listing expenses.

Total return before distribution amounting to S$13.4 million was S$0.9 million higher than 2Q FY2016 mainly due to higher net property income amounting to S$1.4 million and was partially offset by higher finance expense and Manager's management fee amounting to S$0.4 million and S$0.1 million respectively.

Income available for distribution was S$15.4 million in 2Q FY2017, 4.3% higher than 2Q FY2016 mainly due to higher total return before distribution and partially offset by lower non-tax deductible items. The decrease in non-tax deductible items was mainly attributed to the absence of property and lease management fees payable in units.

Commentary

The Ministry of Trade and Industry ("MTI") announced that the Singapore economy grew by 2.7% in 1Q 2017, largely contributed by the continued strength in the manufacturing sector. The manufacturing sector's growth was primarily driven by the electronics and precision engineering clusters, which expanded on the back of global demand for semiconductors. While information and communications sector remained resilient, the construction sector on the other hand, continued to contract.1

MTI expects growth for 2017 to be above 2%, maintaining its GDP growth estimates of 1.0% to 3.0%. MTI projects trade-related sectors such as manufacturing, transportation and storage to sustain the growth of the Singapore economy in 2017.

The Purchasing Managers' Index for June 2017 was 50.9. The manufacturing sector has recorded its 10th consecutive month of expansion despite headwinds in the global market environment.2

Rentals of all industrial properties had fallen since 1Q 2015, with a 5.0% decline in 1Q 2017 over the preceding year. The multi-user factories, single-user factories and warehouse rental indices have receded 5.2% to 6.1% year-on-year, whilst business park rentals remained relatively resilient.3

In 2Q FY2017, the Manager secured more than 110,000 sq ft of new leases and completed more than 200,000 sq ft of renewals and forward renewals, raising portfolio occupancy to 92.6%. With 7.6% of the portfolio NLA expiring in the second half of 2017, the key asset management focus remains to retain existing tenants and improve occupancy in the multi-tenanted buildings and 72 Loyang Way. With the full utilisation of the security deposit received for 72 Loyang Way, the distributable income will be negatively impacted until the Manager finds a suitable replacement anchor tenant.

  1. Source: Ministry of Trade and Industry's press release dated 25 May 2017.
  2. Source: Singapore Institute of Purchasing & Materials Management publication.
  3. Source: JTC quarterly rental index of industrial space.