Commentary: SIAS reminds unitholders of Soilbuild Reit to take action

Date: March 5, 2021

First published in Business Times on 5 March 2021

In less than a week, unitholders of Soilbuild Business Space Reit will have to vote on a proposed privatisation offer from Blackstone Real Estate and the executive chairman of the Reit’s sponsor, Soilbuild Group, Lim Chap Huat.

The offer is via a trust scheme of arrangement, which means its outcome will be determined by minorities. Mr Lim and his concert parties will abstain from voting.

Here is a brief summary of the relevant issues.

The rationale

The offerors have said the Reit’s high yield has hampered its ability to grow via yield-accretive acquisitions. The Reit’s asset base has grown 1.5 times since its 2013 listing even as the average industrial S-Reit is 1.8 times larger.

When Soilbuild Reit last raised money, for an acquisition in Australia, its preferential issue of units was only 82 per cent subscribed despite being priced at an 8.4 per cent discount.

The offer price

If the trust scheme is approved, unitholders will receive S$0.53806 per unit. This is based on the offer price adjusted for a distribution announced in January.

This price represents a premium of 49.9 per cent to the 6-month volume weighted average price of Soilbuild Reit up to and including Aug 31, 2020, being the last full trading day before the initial holding announcement on Sept 4.

The offer price is almost 0.99 time the Reit’s net asset value (NAV).

Some unitholders have objected that the offer price is much lower than the Reit’s IPO price of S$0.78.

Since its listing, Soilbuild Reit has paid a total of S$0.40 per unit in distributions.

The IFA’s recommendation

The advice from the independent financial advisor, KPMG, is that the offer is both fair and reasonable.

Unitholders will need to submit their votes via proxy at least 48 hours before the Extraordinary General Meetings and Scheme Meeting, both of which are to be convened and held on Thursday, March 11.

As is the case with all privatisations, the Securities Investors Association (Singapore) urges minority Soilbuild Reit unitholders to familiarise themselves with the features of the offer and to make up their own minds when casting their votes. But vote they must, in order to make their preference known.

  • The author is David Gerald, founder, president and CEO of the Securities Investors Association (Singapore)