Just 5 days back, Viva Industrial Trust (SGX: T8B) released its Half Yearly Results. The Trust delivered a 28.8% surge in distributable income, which was accompanied by a 4% jump in share price. Nonetheless, distribution per stapled security was down by 5.4% due to the two large private share placement made last year.
Prior to the announcement, I had the opportunity to meet the management of Viva Industrial Trust and take a site tour around their properties. I’ll be sharing some of the interesting observations from the interaction and site visit.
But before we dive in, here is the presentation for the Half Yearly Results. Viva Industrial Trust owns 8 properties. They have one of the highest distribution yield at 9.2% based on S$0.76 per stapled share. Close to half of this income (43.7%) is derived from tenants in the ICT industry which is experiencing strong growth in recent years. Fortunately for their shareholders, the Trust has minimal exposure to Oil & Gas companies in their tenant portfolio.
The site visit began at Viva Business Park (VBP) where their operations are based. VBP is their iconic centre and the growth driver for the year to come. Currently in Asset Enhancement Initiative (AEI), Viva Industrial Trust has already secured their anchor tenant, Decathlon, a global sporting goods retailer and operates over 900 stores worldwide. The store in Viva Business Park is the first in Singapore
What’s interesting about the Business Park is the property was acquired from CapitaLand Limited (SGX: C31) in 2013 for only S$193 million. It was originally named Technopark@Chai Chee. At the point of acquisition, the Technopark was performing poorly with only around 60% occupancy rate.
Fast forward 3 years, Viva Industrial Trust has successfully bump the occupancy rate up to 70.2%, despite heavy renovations ongoing. Valuation leaped to S$340 million from the initial purchase price of S$193 million. Once completed, the management believes there are firm interest in the tenancy that will push the occupancy rate even higher. It is testimony to the management’s capabilities to acquire and enhance assets.
Our next stop was Home-Fix Building, one of the latest building they have acquired. The acquisition comes with long term master lease-back to Home-Fix where they operate their warehouse.
Home-Fix supplies many household brands that we might be familiar with, including the portable fan Vornado and Roman Fan, commonly sold at NTUC. Growth appears to be stable for the company and a good tenant to have.
Similar to Home-Fix building, most of Viva Industrial Trust properties are secured by anchor tenants. Unlike some REITs that are predominantly multi-tenanted, this makes Viva Industrial Trust more resilient to economic cycles.
The trip eventually ends at UE BizHub East, located in Changi Business Park, the crown jewel of the Trust when it went IPO in 2013. Bustling with business, there was a lively lunch crowd while we walked through the complex. Convenient and connected by Expo MRT, you might want to take a look if you pass by the area next time.
Right before we ended, we were given a tour of Park Avenue Changi Hotels & Suites, one of the only two hotels located in the Changi Business Park.
The rooms are classy and simple. Given their business-centric clientele, the occupancy rate varies less than a conventional hotel. In fact, Standard Chartered Bank, now based in Changi, accounts for a significant number of the hotel bookings. Not that it really matters for Viva Industrial Trust shareholders as Trust charges a fixed rental of S$8.55 million regardless of occupancy.
With that, our visit to Viva Industrial Trust properties came to a meaningful end. We did not have the time to finish touring every properties on the portfolio but if you have any questions, do feel free to contact me here and I will do my best to help.
[Update, 2nd Aug 2016: Viva Ind Tr(T8B) S&P Global Ratings has, in its report dated 2 August 2016, reaffirmed Viva Industrial Real Estate Investment Trust's corporate credit rating of "BB" with a stable outlook and the credit rating of "BB+" on its Medium Term Note programme and S$100 million MTN.]