SOILBUILD BUSINESS SPACE REIT (SGX:SV3U)
Soilbuild REIT - Proposed Acquisition Of Grenfell Centre
- Proposed acquisition of Grenfell Centre.
- DPU dilutive acquisition.
- Lower Fair Value at S$0.58.
Non-renounceable preferential offering
- Soilbuild Business Space REIT (SGX:SV3U)'s announced a non-renounceable preferential offering of 192,135,040 new units at an issue price of S$0.530 on the basis of 18 new units for 100 existing units. The offer price represents an 8.6% discount to 21 Aug’s closing price. See Soilbuild REIT's announcement; Soilbuild REIT's share price.
- Soilbuild REIT plans to raise gross proceeds of approximately S$101.8m to fund the proposed acquisition of a property in Adelaide, Australia. Investors on Soilbuild REIT’s books as of 29 August 2019 are eligible for the offering which opens from 3rd to 11th September.
- The acquisition is expected to be DPU dilutive, with pro-forma FY18/1HFY19 DPU falling 3.3% and 2.4%, respectively, assuming 74% equity and 26% debt mix for the preferential offering of S$101.8m. Post-acquisition gearing is expected to fall from 39.4% to 38.3%.
Accept the offer
- The proposed property Grenfell Centre is a 24-storey freehold Grade A multi-tenanted office building located in Adelaide’s core CBD. The purchase price is ~S$127.51m with net lettable area of 24,969 sqm and healthy WALE of 5 years. Valuation is at ~S$127.54m and committed occupancy is at 88.4%.
- Major tenants include the Government of South Australia and law firms. Adelaide is the second most liquid CBD office market in Australia from 2000 to 2010. Management sees the proposed acquisition as an opportunity to acquire a high-quality building in a prime location and also to deepen Soilbuild REIT’s presence in the attractive Australia office market, increasing the number of its properties in Australia to three. With three properties now, this will also help in terms of the diversification of its assets.
- After adjustments, our fair value estimate drops from S$0.60 to S$0.58.
- For existing shareholders, we recommend accepting the offer to avoid shares dilution.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2019-09-03
SGX Stock
Analyst Report
0.58
DOWN
0.600
