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Mon, Dec 14, 2020-9: 37 am
UPDATED Mon, Dec 14, 2020-11: 04 am
SOILBUILD Group Holdings CEO Lim Chap Huat and Blackstone Real Estate proposed to take Soilbuild Business Space Reit (Soilbuild Reit) privately at S $ 0.55 in cash per unit.
Soilbuild Group is the sponsor of Soilbuild Reit. The proposed privatization and delisting will be carried out through a trust agreement scheme, the manager of Soilbuild Reit said on Monday.
Scheme consideration represents a premium of about 34.5 percent, 34.8 percent, 53.2 percent, and 29.1 percent over Soilbuild Reit’s volume-weighted average price per unit, respectively, for a month, three months, six months and 12 months. -period of months until August 31 inclusive.
It also implies a multiple of the price to the adjusted NAV of 0.98 to 1.00 times, which exceeds the historical averages of Soilbuild Reit, the manager said.
The offeror is Clay Holdings III, a newly incorporated entity formed for the purpose of the trust scheme. It is owned by Clay Holdings II, which is owned by Mr. Lim, as well as Clay Holdings I, an entity established by funds managed by subsidiaries of Blackstone Real Estate.
Chong Kie Cheong, chairman and independent non-executive director of the manager, said: “Despite the efforts of the board and management team to maximize shareholder value over the years, Soilbuild Reit’s unit price has High performance was involved and was further affected by the COVID-19 Pandemic.
“After considering the uncertainty of a global recovery and the merits of this proposed trust scheme, we believe that it represents a credible offering in the face of challenging market conditions and would like to present it to participants for their consideration.”
In a press release on Monday, the manager noted that Soilbuild Reit’s ability to make cumulative distribution per unit (DPU) acquisitions has been limited, in part due to its high DPU performance, which has hampered its ability to bid competitively. by assets of third parties. .
“Soilbuild Reit’s growth through cumulative DPU acquisitions requires its DPU performance to trade low enough and is dependent on its ability to effectively raise capital to fund such acquisitions. Support from minority shareholders to underwrite its share prorated in the issuance of shares is also essential “said the manager.
Additionally, the Real Estate Investment Trust (Reit) has a relatively low debt spread of around S $ 70 million, assuming a 40% loan-to-value (LTV) ratio, which is its target leverage level. Raising the LTV above this can raise the cost of debt and the risk profile of the Reit, the manager added.
Given these limitations, the Reit has lagged in growth compared to its peers, its manager said. “Since its initial public offering in August 2013, Soilbuild Reit has seen the total value of its assets grow by just 1.5 times, compared to the 1.8 times average for industrial S-Reits.”
As such, the manager believes that the proposed privatization provides shareholders the opportunity to exit the Reit and reallocate capital to other investments.
Lim, who is also a co-founder of Soilbuild Group, said that given the various challenges and limitations Soilbuild Reit faces, the group has considered many options and discussed potential transactions, including a privatization with parties comprising private equity firms, real estate funds. and real estate developers in Hong Kong / China, Australia and the United States for the past few years.
“We believe this Blackstone proposal presents the best option for minority investors based on the offers received, which represents the highest price received,” he said.
Mr. Lim also believes that Blackstone’s proposal is the “most credible” and offers the “greatest certainty of the deal in terms of time and execution”, backed by its history of privatizations.
The proposed trust scheme is expected to take effect in March 2021.
Along with the trust plan, Soilbuild Reit has also entered into an agreement with related Blackstone entities to sell its Australian assets.
The disposal is interconditional with the trust scheme and is intended to facilitate the overall transaction in an “optimal and efficient manner,” said the manager, adding that this would allow “greater certainty of the moment for regulatory approvals” and for Participants receive consideration of the scheme in a “time efficient manner”. The divestment of Australian assets will not reduce consideration of the scheme, the manager added.
Among other conditions, the trust scheme and the disposal will be subject to the approval of the Soilbuild Reit shareholders.
The latest announcement comes after the manager said on September 4 that Lim had signed a “non-binding term sheet” in connection with a possible transaction involving his and his family’s interests in Soilbuild Reit. As of December 14, Mr. Lim and his three sons own about 385.6 million units, representing a 30.3 percent stake in Soilbuild Reit.
For the third quarter ending in September, Soilbuild Reit reported a DPU of 1.1 Singapore cents, roughly 20% up from 0.918% a year earlier. Property net income grew 16.5 percent to S $ 19.7 million, while gross income increased 8 percent year-on-year to S $ 22.9 million.
The manager has extended its commercial suspension called on December 9, pending this announcement. Operations will resume after the noon break on Monday. The counter last traded at S $ 0.51 on December 8.
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