Soilbuild Business Space REIT

[Greenrookie]

I was looking at the numbers when this really piss me off, I think its even more exorbitant than Cambridge Trust's performance fees:

Manager’s Management Fees
Pursuant to the Trust Deed, the Manager is entitled to a Base Fee of 10.0% per annum of the
Annual Distributable Income and a Performance Fee of 25.0% of the difference in DPU in a
financial year with the DPU in the preceding financial year (calculated before accounting for the
Performance Fee in each financial year) multiplied by the weighted average number of Units in
issue for such financial year.
The Performance Fee is payable if the DPU in any financial year exceeds the DPU in the
preceding financial year, notwithstanding that the DPU in such financial year may be less than the
DPU in any preceding financial year.
No Performance Fee is payable for the Forecast Period 2013. For Projection Year 2014, the
calculation of the Performance Fee is determined using the difference between the projected DPU
in Projection Year 2014 and the annualised forecasted DPU in Forecast Period 2013.
The Manager has agreed to receive 100.0% of its management fees in the form of Units for the
period from the Listing Date to the end of the Forecast Period 2013 and for the Projection Year
2014.
The portion of management fees payable in the form of Units shall be payable quarterly in arrears
and the portion of management fees payable in cash shall be payable quarterly in arrears. Where
the management fees are payable in Units, the Manager has assumed that such Units are issued
at the Offering Price.
(See “The Manager and Corporate Governance – Manager’s Fees” for further details.)

With just 1 yield accretive acquisition, one is almost certain to have an improvement in DPU, and 25% of the improvement will go the manager??

Also, from their projected NPI, They have the highest property expenses ratio to revenue,

I compare cache, Sabana, cambridge and soilbuild
the margin of GPI to NPI for 2012 and 2013 projected for soilbuild
are
0.95, 0.94, 0.85 and 0.83 respectively.

Why are their property expenses so high?

Anyway, I think is look at the management fees, I also sianz liao, will give this a miss unless I think I can get a 10% yield

[cfa]

This reit is almost a certain cash cow to the manager. I will avoid at all cost.

[Dividend Warrior]

This reit is almost a certain cash cow to the manager. I will avoid at all cost.

Agree!!!

[felixleong]

"Pursuant to the Trust Deed, the Manager is entitled to a Base Fee of 10.0% per annum of the
Annual Distributable Income and a Performance Fee of 25.0% of the difference in DPU in a
financial year with the DPU in the preceding financial year "

wow super chop carrot leh

[shanrui_91]

I was looking at the numbers when this really piss me off, I think its even more exorbitant than Cambridge Trust's performance fees:

Manager’s Management Fees
Pursuant to the Trust Deed, the Manager is entitled to a Base Fee of 10.0% per annum of the
Annual Distributable Income and a Performance Fee of 25.0% of the difference in DPU in a
financial year with the DPU in the preceding financial year (calculated before accounting for the
Performance Fee in each financial year) multiplied by the weighted average number of Units in
issue for such financial year.
The Performance Fee is payable if the DPU in any financial year exceeds the DPU in the
preceding financial year, notwithstanding that the DPU in such financial year may be less than the
DPU in any preceding financial year.
No Performance Fee is payable for the Forecast Period 2013. For Projection Year 2014, the
calculation of the Performance Fee is determined using the difference between the projected DPU
in Projection Year 2014 and the annualised forecasted DPU in Forecast Period 2013.
The Manager has agreed to receive 100.0% of its management fees in the form of Units for the
period from the Listing Date to the end of the Forecast Period 2013 and for the Projection Year
2014.
The portion of management fees payable in the form of Units shall be payable quarterly in arrears
and the portion of management fees payable in cash shall be payable quarterly in arrears. Where
the management fees are payable in Units, the Manager has assumed that such Units are issued
at the Offering Price.
(See “The Manager and Corporate Governance – Manager’s Fees” for further details.)

With just 1 yield accretive acquisition, one is almost certain to have an improvement in DPU, and 25% of the improvement will go the manager??

Also, from their projected NPI, They have the highest property expenses ratio to revenue,

I compare cache, Sabana, cambridge and soilbuild
the margin of GPI to NPI for 2012 and 2013 projected for soilbuild
are
0.95, 0.94, 0.85 and 0.83 respectively.

Why are their property expenses so high?

Anyway, I think is look at the management fees, I also sianz liao, will give this a miss unless I think I can get a 10% yield

With regards to the high property expense, this is a result of the different type of tenant agreement signed. For cache, I believe 100% of their rental are on triple-net master lease basis. The figure for sabana is around 95%. Whereas for soilbuild, it is only around 35%.

Triple net rental means that the tenant will pay for the following 3 items
1) Property Tax
2) Insurance, cleaning, utilities and security guards
3) Land Rental

Does that mean that triple net rental is better than normal rental? Yes, since it removes cost inflation from the equation. However, this usually leads to a lower rental revenue since the tenant is responsible for the 3 major costs. For e.g. soilbuild pays rental of $4.75 psf for solaris compared to market rental of $5 to $5.50. Net net it should be around the same whether you are triple net or non triple net.

For the management fee, it is actually that high across the board just that usually they do not openly match it against the distributable income.

For cache, base fee is 0.5% of asset value and 1.5% of npi. This work out to around 10%.

For Cambridge, base fee is 0.5% of asset value and performance fee is calculated in a more complex way. I believe it has been discussed in Cambridge thread.

For sabana, it is base fee of 0.5% of asset value and performance fee is 0.5% per annum if dpu achieve growth of 10%.

Thus, they are about the same throughout the industrial reit. the only problem I have with it is that there is no high water mark involved. if my first year dpu is 100, next year I can tweak it to 80 and the third year I can change it to 100 through manipulating various items. Then I will get to earn a performance fee though I have merely achieved the same dpu in the third year.

so should we then go for the asset manager? however, given that it is such a lucrative asset-light business , who will want to share the pie with you? So we are left with ARA, CWT, GLP and CMA listed on the exchange. CWT, GLP and CMA are developers and the management fee is not a huge proportion of their revenue. For ARA, it does seem like it is harder for them to become the manager for a new reit. Thus, for cache, amfirst and huixian, the reit manager is a jv between ARA and the sponsor.

Looking at the different models around the world, I believe that the best model is still the internally managed reit management model adopted by the link reit in Hong Kong and many reits in USA. It took USA 40-50 years before the internal manager model is widely adopted as the externally managed reit got punished by the market with a discount to peers.

However, if Singapore adopts the internal manager model now, then there will be lesser incentive for the developers to spin off a reit. At the end of the day, reit is still an appropriate investment vehicle that caters to a group of investors who needs regular dividend income to fight inflation. Surprisingly, Singapore is far ahead of Hong Kong when it comes to reit. In the asia market, Singapore and Japan are the 2 most well-established market for reit at the moment.

(no vested interest)

[propertyinvestor]

I was looking at the numbers when this really piss me off, I think its even more exorbitant than Cambridge Trust's performance fees:

Manager’s Management Fees
Pursuant to the Trust Deed, the Manager is entitled to a Base Fee of 10.0% per annum of the
Annual Distributable Income and a Performance Fee of 25.0% of the difference in DPU in a
financial year with the DPU in the preceding financial year (calculated before accounting for the
Performance Fee in each financial year) multiplied by the weighted average number of Units in
issue for such financial year.
The Performance Fee is payable if the DPU in any financial year exceeds the DPU in the
preceding financial year, notwithstanding that the DPU in such financial year may be less than the
DPU in any preceding financial year.
No Performance Fee is payable for the Forecast Period 2013. For Projection Year 2014, the
calculation of the Performance Fee is determined using the difference between the projected DPU
in Projection Year 2014 and the annualised forecasted DPU in Forecast Period 2013.
The Manager has agreed to receive 100.0% of its management fees in the form of Units for the
period from the Listing Date to the end of the Forecast Period 2013 and for the Projection Year
2014.
The portion of management fees payable in the form of Units shall be payable quarterly in arrears
and the portion of management fees payable in cash shall be payable quarterly in arrears. Where
the management fees are payable in Units, the Manager has assumed that such Units are issued
at the Offering Price.
(See “The Manager and Corporate Governance – Manager’s Fees” for further details.)

With just 1 yield accretive acquisition, one is almost certain to have an improvement in DPU, and 25% of the improvement will go the manager??

Also, from their projected NPI, They have the highest property expenses ratio to revenue,

I compare cache, Sabana, cambridge and soilbuild
the margin of GPI to NPI for 2012 and 2013 projected for soilbuild
are
0.95, 0.94, 0.85 and 0.83 respectively.

Why are their property expenses so high?

Anyway, I think is look at the management fees, I also sianz liao, will give this a miss unless I think I can get a 10% yield

With regards to the high property expense, this is a result of the different type of tenant agreement signed. For cache, I believe 100% of their rental are on triple-net master lease basis. The figure for sabana is around 95%. Whereas for soilbuild, it is only around 35%.

Triple net rental means that the tenant will pay for the following 3 items
1) Property Tax
2) Insurance, cleaning, utilities and security guards
3) Land Rental

Does that mean that triple net rental is better than normal rental? Yes, since it removes cost inflation from the equation. However, this usually leads to a lower rental revenue since the tenant is responsible for the 3 major costs. For e.g. soilbuild pays rental of $4.74 psf for solaris compared to market rental of $5 to $5.50. Net net it should be around the same whether you are triple net or non triple net.

For the management, it is actually that high across the board just that usually they do not openly match it against the distributable income.

For cache, base fee is 0.5% of asset value and 1.5% of npi. This work out to around 10%.

For Cambridge, base fee is 0.5% of asset value and performance fee is calculated in a more complex way. I believe it has been discussed in Cambridge thread.

For sabana, it is base fee of 0.5% of asset value and performance fee is 0.5% per annum if dpu achieve growth of 10%.

Thus, they are about the same throughout the industrial reit. the only problem I have with it is that there is no high water mark involved. if my first year dpu is 100, next year I can tweak it to 80 and the third year I can change it to 100 through manipulating various items. Then I will get to earn a performance fee though I have merely achieved the same dpu in the third year.

so should we then go for the asset manager? however, given that it is such a lucrative asset-light business , who will want to share the pie with you? So we are left with ARA, CWT, GLP and CMA listed on the exchange. CWT, GLP and CMA are developers and the management fee is not a huge proportion of their revenue. For ARA, it does seem like it is harder for them to become the manager for a new reit. Thus, for cache, amfirst and huixian, the reit manager is a jv between ARA and the sponsor.

Looking at the different models around the world, I believe that the best model is still the internally managed reit management model adopted by the link reit in Hong Kong and many reits in USA. It took USA 40-50 years before the internal manager model is widely adopted as the externally managed reit got punished by the market with a discount to peers.

However, if Singapore adopts the internal manager model now, then there will be lesser incentive for the developers to spin off a reit. At the end of the day, reit is still an appropriate investment vehicle that caters to a group of investors who needs regular dividend income to fight inflation. Surprisingly, Singapore is far ahead of Hong Kong when it comes to reit. In the asia market, Singapore and Japan are the 2 most well-established market for reit at the moment.

(no vested interest)

CWT is not a developer but a logistic provider and commodity trader. Their revenue earned from Asset management is not that high because it has to split it with ARA.

[KopiKat]

Balloting results are out,

http://infopub.sgx.com/FileOpen/Ballotin...eID=252698

The surprise is,

Schroders plc has also been allocated 58,738,000 Units under the Placement Tranche, representing approximately 7.3% of the total number of outstanding Units immediately after the completion of the Offering.

Enough to make up for the lack of any cornerstones? Free float is still rather high as Sponsor retains only 27% (20% if over-allotment exercised). The show will be interesting tomorrow...

[felixleong]

I think the free float is too big thus weaker demand, little upside I guess?

---

also recently industrial reits look weak, this may be worth looking again if it goes underwater?

[DP28]

To open at par?

[KopiKat]

To open at par?

Look at the Sell Vol.! If real, let's see how long the Stabilising Mgr can hold the onslaught...
Not the best of timing, Mkt weak, 7th mth even (for those who're superstitious)... Good Luck to those vested...