Soilbuild Reit defers capital distributions; Q1 DPU down 26%

SOILBUILD Business Space Reit on Thursday posted a 26.3 per cent drop in distribution per unit (DPU) to 0.883 cent, down from the 1.198 cent it paid out a year ago.

The manager said that in view of the Covid-19 situation, it had excluded some capital distributions to conserve the Reit's capital.

In particular, it had decided to defer capital distributions relating to rental incentives and a rental guarantee provided by the vendors.

"Had the above capital distributions been included, Q1 FY2020 DPU would have been 0.95 cents and DPU from capital would have been 0.177 cents," it said.

Gross revenue for the three months rose 3.6 per cent to S$23.5 million, due to higher contributions from the newly acquired 25 Grenfell Street property in Adelaide and improved occupancy at West Park BizCentral, partially offset by lower contribution from 2 Pioneer Sector 1, which is pending redevelopment. (The last two properties are in Singapore.)

Net property income fell 5.1 per cent to S$17.4 million due to higher property operating expenses, which were nearly 40 per cent higher because of higher costs for 25 Grenfell Street and an allowance for doubtful receivables of S$0.6 million.

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The lower net property income and higher finance costs led to a 12.4 per cent drop in distributable income to S$11.2 million.

The Reit's portfolio occupancy rate rose marginally quarter-on-quarter from 84 per cent in Q4 FY2019 to 84.7 per cent in Q1 FY2020.

For the rest of FY2020, about 11 per cent of the portfolio of leases will be expiring. The Reit recorded negative rental reversion of 14 per cent for renewals, and positive rental reversion of 3.9 per cent for new leases in the quarter.

Roy Teo, CEO of the manager, said that in light of the uncertainty surrounding Covid-19, the Reit has adopted a more cautious approach by choosing to defer certain capital distributions.

"We are aware that the pandemic may have affected tenants' operations and have accordingly recognised an allowance for expected credit losses.

"We foresee more challenging times ahead as leasing activities may be impacted by the Covid-19 pandemic. In these trying times, the manager seeks to balance our commitments towards our unitholders while extending our fullest support to our tenants."

Units of the Reit fell half a cent or 1.3 per cent to S$0.37 on the stock market on Thursday.