Soilbuild Business Space REIT (SGX: SV3U)'s Executive Chairman Made $0.55 Privatisation Offer



The manager of Soilbuild Business Space REIT (SGX: SV3U) announced on Dec 14 that it intends to privatise Soilbuild REIT with an offer of $0.55 per unit. This represents a premium of about 7.8% over its last traded of $0.51 on 11 Dec last Friday.


Structure of the proposal


The privatisation proposal will be done via a trust scheme of arrangement with Clay Holdings III, which is a newly-incorporated entity owned by Clay Holdings II, which is owned by Lim Chap Huat, the executive chairman and co-founder of Soilbuild Group Holdings. The proposal follows the initial announcement on 4th Sept which stated that Lim had entered into a non-binding term sheet in relation to a possible transaction involving his and his family’s direct and deemed interests in Soilbuild REIT.


From the NAV perspective, the offer price implies a price-to-book ratio of 1 time, which exceeds the REIT’s historical of 0.94 time.


The proposal will require the approval of the unitholders at an extraordinary general meeting as well as the order of the Singapore court, which is expected to take effect by the end of 1Q2021.


Management rationale


The management believes that this proposal presents the best option for minority Soilbuild unitholders based on the offers price after considering the uncertainty of a global recovery. The management stated that the REIT’s ability to make DPU accretive acquisitions has been limited due to its high yield, which challenged its ability to competitively bid for external assets. Since its IPO in 2013, the REIT’s sponsor, Soilbuild Group Holdings has only injected one asset into the REIT and has not been able to maximise the REIT’s potential.


Summary


Soildbuild REIT's DPU has not been very consistent and the share price has been in the downtrend over the last 5 years, which implies that the REIT does not pass our criteria to be included in the portfolio. Their recent results have shown improvement with a DPU jump of 19% and it is also one of the very few REITs that offer more than 7% yield. We think that the offer price is "fair" but not attractive.


You can refer to this post for their latest update.



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