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Soilbuild Business Space REIT (Soilbuild REIT) has entered into a put and call option agreement with SB (Pioneer) Investment Pte. Ltd to divest its property at 61 and 71 Tuas Bay Drive for $55 million.
SB (Pioneer) Investment is a fully-owned subsidiary of Soilbuild Group Holdings Limited, which in turn is the sponsor of Soilbuild REIT.
Commonly known as KTL Offshore, the property is currently leased to KTL Offshore Pte Ltd under a lease agreement that is set to expire in August 2021.
Soilbuild REIT’s trade receivable due from KTL Offshore as at 28 December 2017 comprised around six months of rent and other charges, including a sum of $1.5 million.
Located within the Jurong Industrial Estate, the property comprises two adjacent detached purpose-built factories, with a total combined gross floor area of 208,057 sq ft. It has a 60-year leasehold tenure, which commenced from July 2006. This means that it has a remaining term of around 48.6 years.
The REIT’s manager believes the divestment will help unlock and release capital back to Soilbuild REIT as well as minimise its exposure to credit risks in the form of non-payment of sums due from KTL Offshore.
It is also expected to reduce Soilbuild REIT’s “exposure to the marine offshore and oil & gas industry from 12.7 percent to 8.9 percent, creating an opportunity for Soilbuild REIT to diversify its tenant base”.
“In light of the current weakness in the marine sector, the manager believes that greater trade sector diversification will allow Soilbuild REIT to ride through the economic and industry cycles.”
With the net proceeds at around $54.7 million, the divestment is expected to result to a net gain of around $1.7 million.
Soilbuild REIT plans to use the net proceeds to “fund new acquisitions, repay debt, finance any capital expenditure and asset enhancement works, capital distribution, and/or to finance general corporate and working capital requirements”.
This article was edited by Keshia Faculin.
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