Blackstone Makes $524.5M Buyout Offer for Singapore’s Soilbuild REIT

As stable becomes sexy in Asia’s real estate markets, Blackstone is teaming up with the family controlling the sponsor of a Singapore-listed REIT for a S$700.3 million ($524.5 million) offer to buy out the industrial real estate trust.

Funds controlled by Stephen Schwarzman’s private equity giant are making a joint offer with Soilbuild Group executive chairman Lim Chap Huat to purchase the units in Soilbuild Business Space REIT not controlled by Lim and his family, according to an announcement to the Singapore exchange.

Soilbuild REIT owns 10 properties in Singapore and another three in Australia, with the manager of the trust presenting the buyout as a way to achieve value for unit-holders in a trust that has struggled to grow to a scale attractive to traders in the city’s fragmented industrial REIT market.

“Notwithstanding the board and management team’s efforts to maximise value for SB Unitholders over the years, the SB Unit price has implied a high yield and was further impacted by the COVID-19 pandemic,” Chong Kie Cheong, chairman Soilbuild REIT’s manager said in a statement. “After considering the uncertainty of a global recovery and the merits of this proposed Trust Scheme, we believe it represents a credible offer in the face of challenging market conditions and would like to present it to SB Unitholders for their consideration.”

Offering a 35% Premium

Blackstone and the Lim family are offering Soilbuild REIT unitholders S$0.55 in cash per unit of equity in the trust, which holds four suburban office assets and another 9 industrial properties. The offer represents a 34.5 percent premium over the volume-weighted average price of Soilbuild REIT shares traded over the last month and a 29.1 percent premium above its trading level over the last year.

“We believe Blackstone’s proposal is also the most credible and offers the greatest deal certainty in terms of timing and execution, and is backed by Blackstone’s strong track record of successful privatisations, as well as the opportunity to place the assets under the stewardship of one of the most experienced real estate investors and operators in the world,” Lim Chap Huat, executive chairman and co-founder of Soilbuild Group Holdings Ltd, which controls the REIT’s manager said in a statement.

Lim and his family owned a total of 30.28 percent of the shares in Soilbuild REIT as of 14 December. The holding company which Blackstone set up with the Lim family for the purposes of the proposed buyout is 69.72 percent owned by funds managed by the private equity firm, with the remainder belonging to Lim Chap Huat.

The buyout plan, which is subject to approval by Soilbuild REIT unitholders, is expected to be completed by March 2021. Among the significant minority unitholders in Soilbuild REIT are US asset managers BlackRock and Vanguard, as well as Schroders of the UK and Deutsche Asset Management.

The buyout offer represents a multiple of 0.98 to 1.00 times the adjusted net asset value of the trust, which totalled just over S$699.2 billion as of 30 September, according to a set of independent valuations

Splitting Off Aussie Assets

As part of the buyout transaction, Blackstone is offering to take over Soilbuild REIT’s Australian properties, which include office assets 14 Mort Street in Canberra and 25 Grenfell Street in Adelaide. The trust also owns an industrial building in Adelaide, with the entire Aussie segment of the portfolio carrying a book value equivalent to S$102.7 million as of 30 September, according to the statement.

As a condition precedent to the trust buyout, Blackstone has agreed to purchase the Australian assets for around S$25.4 million less than their book value, according to the statement.

In Soilbuild REIT’s Singapore portfolio, the most valuable asset is the 442,755 square foot (41,133 square metre) Solaris business park property in the city’s One North district, which is worth S$377.5 million. The trust also holds the Eightrium, a 177,745 square foot building in Changi Business Park on the east coast, valued at S$95.5 million.

Also adding to the REIT’s appeal is West Park BizCentral, an 11-storey combined workshop and tech park project in western Singapore’s Jurong area, which is valued at S$295.5 million.

By value, 53 percent of Soilbuild REIT’s assets are industrial, with the remainder in business parks.

Buying a Slice of Singapore

Adding to Soilbuild REIT’s appeal is that some 83 percent of its asset value is within Singapore.

With the COVID-19 virus having disrupted property markets around the region this year, a survey of Asia Pacific real estate professionals published by the Urban Land Institute last month identified Singapore as the top city in the region for property investment prospects for the second year in a row.

A report based on the survey by the real estate industry group pointed to Singapore’s ability to attract new investors and corporate occupiers thanks to its neutrality.

The country is also expected to benefit both from Chinese investors setting up regional offices in the region and by potentially receiving “more investment from global financial services and asset management firms that may opt to avoid current uncertainties in Hong Kong.”

Note: this story updates an earlier version to show that Soilbuild REIT owns nine industrial properties. This version also clarifies that Blackstone is offering to purchase the REIT’s Australian assets at a discount.