Viva Industrial Trust (VIT)

From Company's Prospectus

1. Business Description

Stapled group comprising of VI-REIT and VI-BT. VIT is a stapled group comprising VI-Reit and VI-BT.

VI-Reit : Singapore based REIT established with the principal investment strategy of investing in portfolio of income producing real estate which is used predominantly for business park and other industrial purposes in Singapore and elsewhere in the APAC region.

VI-BT : At the listing date, VI-BT, a Singapore based business trust, will be dormant. It will, however, become active on some triggering events.

From Company's Prospectus

HLG & KSH are Sponsors of VIT. Ho Lee Group Pte Ltd (HLG) and Kim Seng Holdings Pte Limited (KSH) are the Sponsors of VIT.

UE BizHub East

Brand new property comprising of Business Park component & Hotel component. Located in the Changi Business Park, UE BizHub East is a brand new integrated mixed-use business park development comprising:

Business Park Component – 2 business park buildings with retail space

Hotel Component – A business hotel managed by Park Avenue Hotels & Suites under the “Park Avenue” brand, which features a gym, swimming pool and convention centre with a theatre seating for up to 600 guests.

Rental agreement for UE Bizhub East. UE Bizhub East is under a rental agreement whereby:

Business Park component - VIT will receive S$23.35m per annum at Listing Date, with a step-up by 5% in each of the 3^rd and 5^th year of the term. (30Apr13 – 64.2% occupancy)

Hotel component (retail) - VIT will receive S$0.65m per annum at Listing Date, with a step-up by 5% in each of the 3^rd and 5^th year of the term. (30Apr13 – 100% occupancy)

Hotel component (exclude retail) – Leased to UED for a fixed rental income of S$8.55m per annum renewable at S$9.66m from the 6^th to 10^th of the Hotel Lease.

Mauser Singapore

Ramp-up logistics facility. Located near Tuas Checkpoint and Jurong Port, Mauser Singapore is a ramp-up logistics facility that provides operational and cost advantages in attracting tenants compared to conventional “cargo-lift” logistics facilities.

Mauser Singapore is under the Master Lease at S$1.8m per annum with a 5% rental escalation in the 3^rd and 5^th year built into its lease term.

Technopark@Chai Chee

Business Park located in a mature housing estate. Technopark@Chai Chee is well-maintained and offers attractive building specifications such as large floor plates which offers flexible layout and allows optimal spatial planning and easy configuration of workflow operations by tenants. The property also offers F&B establishments and other lifestyle amenities such as tennis courts and a gymnasium and is well served by amenities located in the mature housing estates in the vicinity.

Rental support agreement for Technopark@Chai Chee. The rental support agreement (RSA) states that if the gross rental income of the property is less than the target rental income of S$2.15m per month, VIT may within the period of 2 years claim the difference in each month. The aggregate liability/claim shall not exceed S$2.3m. The rental for July 13 was S$2.0m and actual occupancy rent is 60.7%. With the RSA, the calculated occupancy is at an average of 87.5%. (Suntec – 85%, JLL – 90%)

Visible acquisition pipeline through Right of First Refusal (ROFR) Properties. VIT has a visible acquisition pipeline through the listed ROFR Properties (see table beside).

From Company's Prospectus

2. Financial Highlights

Pro Forma Balance Sheet

Projected Income Statement

Projected Yield

Peer Comparison

3. Investment Highlights

Strategically located in business parks and established industrial clusters in Singapore with close proximity to MRT stations & major transportation networks. VIT’s properties are strategically located in key business parks and industrial clusters in Singapore with easy access to expressways and MRT stations. The properties are therefore supported by excellent infrastructure and transportation networks that enhance their attractiveness to existing and potential tenants.

From Company's Prospectus

Long weighted average underlying land lease and relatively new properties. The weighted unexpired lease term for underlying land for the portfolio is approximately 45 years. Both Mauser Singapore and UE BizHub East are new properties, TOP in year 2012. As such, this will result in minimum maintenance capex for these 2 properties.

Potential upside given its low tenancy rate at Technopark@Chai Chee. The current tenancy rate at Technopark@Chai Chee stands at a low 60.7%, thus there is a upside potential for them to manage up the tenancy rate.

4. Investment Risk

TOO MUCH FINANCIAL ENGINEERING! Too much financial engineering is involved and the yield is optically higher due to the rental support mechanism.

5. Conclusion

To be honest, I really don't like VIT at its IPO price of S$0.78 as I think that (1) its valuation is fair to expensive & (2) suspected asset quality given low tenancy rate, artificially supported by rental support mechanism.