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Soilbuild Reit posts 26% drop in Q3 DPU to 0.918 S cent

SOILBUILD Business Space Reit on Wednesday posted third-quarter distribution per unit (DPU) of 0.918 Singapore cent, down 26.3 per cent from 1.245 cents in the same period a year earlier.

The decline was due mainly to the enlarged unit base after the industrial Reit's recent preferential offering, as well as the cessation of revenue recognition from tenant NK Ingredients (NKI), which defaulted on its lease in July.

Removing the effects of dilution from the preferential offering, DPU would have declined 12.9 per cent to 1.0841 cents instead. 

Total income available for distribution in the three months ended Sept 30 was S$11.6 million, down 12.2 per cent.

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Net property income rose 4.5 per cent to S$17 million, while gross revenue rose 7 per cent to S$21.2 million. But these gains were offset by the higher income payable to perpetual holders, which rose to S$983,000 from S$43,000 in the same period a year earlier.

Portfolio occupancy dipped slightly from 88.6 per cent in the second quarter to 88.4 per cent in the third quarter. Weighted average lease expiry by net lettable area and gross rental income stood at 3.4 and 3.7 years respectively.

The Reit manager said it successfully completed more than 76,600 sq ft of renewals in the third quarter and secured approximately 87,800 sq ft of new leases.  

During the quarter, positive rental reversion of 8.5 per cent was recorded for renewals and negative rental reversion of 9.3 per cent was recorded for new leases.  

On NKI, the Reit manager has indicated that it is prepared to defer payment of NKI's rent for a period of two months from Sept 1 to Oct 31, subject to certain conditions being met to assist the judicial manager's management of NKI's cash flow.

The Reit manager is exploring options which include a potential asset enhancement to maximise the gross floor area, among other possibilities, it said.

Soilbuild Business Reit's aggregate leverage stood at 36.5 per cent as at Sept 30.

Net asset value per unit was S$0.60 as at Sept 30, down from S$0.63 as at Dec 31, 2018.

Roy Teo, chief executive of the Reit manager, said: "We are grateful to our unitholders for supporting the preferential offering and are pleased to add 25 Grenfell Street to our portfolio in the fourth quarter of 2019. The proposed acquisition improves portfolio metrics and is in line with our investment strategy of building a sustainable portfolio. We are also pleased that our proactive leasing efforts have translated into positive rental reversion for renewals and we will continue to work towards achieving higher organic growth."

The distribution of 0.918 Singapore cent per share is payable on Nov 21.

Soilbuild Business Reit units fell half a Singapore cent or 0.94 per cent to S$0.53 on Wednesday before the results were announced.