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Soilbuild Business Space REIT Financial Statements And Distribution Announcement For The Third Quarter And Financial Period From 1 January To 30 September 2017

Financials Archive

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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, structuring and prepayment fees and tax roll-over adjustments. (YTD FY2016 and 3QFY2016: 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 YTD FY2017 and 3QFY2017.)

    Assuming the YTD FY2017 property management fees and lease management fees were payable in Units, non-tax deductible items would have been S$7,185k and income available for distribution to Unitholders would have been S$46,873k.

    Assuming the 3Q FY2017 property management fees and lease management fees were payable in Units, non-tax deductible items would have been S$2,445k and income available for distribution to Unitholders would have been S$14,908k.

Balance Sheet

Balance Sheet

Review of the Performance on YTD FY2017 compared to YTD FY2016

Gross revenue was S$64.1 million in YTD FY2017, S$4.6 million or 7.8% higher than the gross revenue in YTD FY2016 mainly due to the increase in revenue from Bukit Batok Connection, Solaris, Tuas Connection and Tellus Marine amounting to S$5.9 million, S$0.4 million, S$0.3 million and S$0.2 million respectively. The revenue growth was partially offset by a reduction in revenue from 72 Loyang Way amounting to S$2.3 million. Bukit Batok Connection was acquired in September 2016.

Property operating expenses were S$8.3 million in YTD FY2017, S$0.7 million higher than YTD FY2016 mainly due to S$0.3 million, $0.2 million and S$0.2 million higher property expenses incurred for 72 Loyang Way, West Park BizCentral and Bukit Batok Connection respectively. The conversion from master lease to a multi-tenanted property resulted in higher property expenses for 72 Loyang Way. The increase in 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 7.6% higher at S$55.7 million in YTD FY2017 compared with S$51.8 million in YTD 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$1.2 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$0.1 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$2.8 million higher than YTD FY2016 mainly due to higher net property income amounting to S$3.9 million and partially offset by higher finance expense of S$1.2 million.

The reduction of non-tax deductible items amounting to S$1.3 million was largely due to the payment of property management and lease management fees in cash instead of units for YTD FY2017.

Income available for distribution was S$45.4 million in YTD FY2017, 3.4% higher than YTD 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$20.5 million in 3Q FY2017, S$0.8 million or 4.1% higher than the gross revenue in 3Q 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$1.9 million, S$0.2 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$1.7 million.

Property operating expenses were S$2.7 million in 3Q FY2017, S$0.3 million higher than 3Q FY2016 mainly due to higher property expenses incurred for 72 Loyang Way and Bukit Batok Connection amounting to S$0.2 million and S$0.1 million respectively.

Net property income was 3.0% higher at S$17.8 million in 3Q FY2017 from S$17.3 million in 3Q FY2016 mainly due to the abovementioned reasons.

The decrease in Manager’s management fees of S$12k was due to lower distributable income which resulted in lower base fee. The increase in finance expenses amounting to S$0.2 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$12.5 million was S$0.4 million higher than 3Q FY2016 mainly due to higher net property income amounting to S$0.5 million and was partially offset by higher finance expense amounting to S$0.2 million respectively.

Income available for distribution was S$14.4 million in 3Q FY2017, 0.8% lower than 3Q FY2016 due to lower non-tax deductible items and partially offset by higher total return before distribution. 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 based on advanced estimates, the Singapore economy grew by 4.6% year-on-year ("y-o-y") in 3Q 2017. On a quarter-on-quarter ("q-o-q") seasonally-adjusted annualised basis, the economy expanded by 6.3%. Manufacturing remained the largest contributor of growth at 15.5% y-o-y and 23.1% q-o-q. Growth was supported mainly by robust expansions in the electronics, biomedical manufacturing and precision engineering clusters.1

Singapore’s factory activity rose for the 13th consecutive month with the Purchasing Managers’ Index ("PMI") for September 2017 rising to 52.0. In particular, PMI for electronics sector rose to a sevenyear high reading of 53.6.2

Rentals of all industrial properties fell by 4.1% and 0.8% in 2Q 2017 y-o-y and quarter-on-quarter respectively. The multi-user factories, single-user factories and warehouse rental indices have receded 3.7%, 3.8% and 7.2% y-o-y respectively, whilst business park rentals expanded 2.0% y-oy.3

  1. Source: Ministry of Trade and Industry’s press release dated 13 October 2017.
  2. Source: Singapore Institute of Purchasing & Materials Management publication.
  3. Source: JTC quarterly rental index of industrial space.