Soilbuild Reit sells Tuas property for S$55 million

THE trustee of Soilbuild Business Space Reit has on Thursday signed a put and call option agreement to divest to SB (Pioneer) Investment its Tuas property, commonly known as KTL Offshore after its tenant, for S$55 million.

The buyer is a wholly owned subsidiary of Soilbuild Group Holdings, which is the sponsor of Soilbuild Reit.

The property is currently leased to KTL Offshore under a lease agreement which expires in August 2021. As at Dec 28, 2017, Soilbuild Reit's trade receivable due from KTL Offshore comprised about six months of rent and other charges, including a sum of S$1.5 million.

The trust said that with the divestment, it will minimise its exposure to credit risk in the form of non-payment of sums due from KTL Offshore. The sale will also allow it to reduce its exposure to the marine offshore and oil & gas industry in light of the sector's current weakness. The trust can diversify its tenant base instead.

The property has a 60-year leasehold starting from July 2006, meaning that it has a remaining term of about 48.6 years.

"Given the relatively short remaining lease term under the lease agreement and the increasing credit risk arising from the lease agreement, the proposed divestment is timely and in line with manager's strategy of proactively evaluating and rejuvenating its portfolio. The proposed divestment will also unlock and release capital back to Soilbuild Reit," it said.

The property comprises two adjacent detached purpose-built factories. It is situated within the Jurong Industrial Estate, and has a total combined gross floor area of 208,057 sq ft.

The trust plans to use the net proceeds from the divestment of S$54.7 million to fund new acquisitions, repay debt, finance capital expenditure and asset enhancement works, capital distribution, and finance general corporate and working capital requirements.

It will also enjoy an estimated net gain from the divestment of about S$1.7 million, it said.