THE manager of Sabana Industrial Real Estate Investment Trust (Sabana Reit) is on a hiring spree as it faces a high attrition rate of more than 30 per cent ahead of a proposed internalisation of the Reit&rsquo s management function.

 

There are currently six openings from Sabana Real Estate Investment Management (SREIM) advertised on the MyCareersFuture job portal, all posted earlier this month. The roles advertised include positions in investor relations, finance, human resources, compliance and asset management.

 

Meanwhile, Sabana Property Management (SPM), the property manager for Sabana Reit, has five job openings that were advertised this month, including roles for admin executives, a leasing executive/manager and a property management executive.

 

The multiple job openings at SREIM and SPM come after Sabana Reit unitholders voted to remove SREIM as the manager in favour of internalisation at an extraordinary general meeting (EGM) last August.

 

Speaking to The Business Times on Tuesday (Jan 23), Donald Han, chief executive of SREIM, noted that it had disclosed prior to the EGM that high attrition for existing staff was a key concern. Previous estimates had been for an attrition rate of about 30 per cent, but it has crossed that level, Han said.

 

&ldquo The key point is really to find replacement for our headcount, and more importantly, to be able to keep our existing staff currently,&rdquo he said. While the manager has found some replacements, not all vacancies are filled.

 

The manager noted on Tuesday that there is no assurance that existing staff would continue to stay, given the uncertainties during the interim period. The uncertainty has also impacted the manager&rsquo s ability to retain and recruit staff.

 

&ldquo Staff want to work for a permanent manager not an interim manager,&rdquo Han said.

 

The jobs currently advertised are mostly junior roles, but the manager has faced departures at all levels. However, most of the senior management team, including Han, the chief financial officer and head of real estate remain.

 

&ldquo We are working doubly hard to ensure that we keep the manager a tight and steady ship, but at the same time, making sure we continue to progress the Reit&rsquo s performance,&rdquo he said.

 

Last June, activist investor Quarz Capital requisitioned an EGM to pass two resolutions: to remove SREIM as the manager and direct the trustee to internalise the Reit&rsquo s management function.

 

It said that the cost savings to be reaped from the removal of the external manager would benefit unitholders. Its letter also highlighted its concerns over matters of corporate governance.

 

However, Sabana&rsquo s manager, the trustee and sponsor ESR Group, had warned that the process was not so straightforward, as there were risks and uncertainty for unitholders.

 

SREIM had warned previously that there was &ldquo no assurance or certainty&rdquo that existing staff of the manager would be willing to stay on due to the uncertainties. Han also noted at the time that staff with work experience in a capital markets services (CMS) licensee are &ldquo well sought after&rdquo by other Reits, funds and family offices.

 

Based on the EGM circular, if SREIM and/or the property manager are unable to retain their staff and lose their capability to serve as the manager or property manager of the Reit during the interim period, the responsibility of managing Sabana Reit and its properties would potentially fall onto the trustee, or professional advisers that the trustee appoints.

 

The trustee had previously warned that the internalisation process would take a considerable amount of time &ndash at least 12 months &ndash and cost. It is currently working with advisers to implement the resolutions for internalisation.

 

SABANA Industrial Real Estate Investment Trust (Sabana Reit) : M1GU 0% posted a distribution per unit (DPU) of 1.15 Singapore cents for the half-year ended Dec 31, 2023, down 21.2 per cent from the year-ago period.

 

In a bourse filing on Tuesday (Jan 23), the trust manager said the decline was the result of 10 per cent of the total available for distribution being retained for &ldquo prudent capital management, in view of additional costs incurred and to be incurred in connection with the internalisation (of the Reit&rsquo s manager)&rdquo .

 

Gross revenue for H2 2023 rose 13.1 per cent year on year (yoy) to S$56.6 million from S$50.1 million, uplifted by positive rental reversions across the portfolio as overall occupancy rate remained stable.

 

Net property income (NPI) improved slightly to S$27.8 million in H2 2023 from S$26.3 million in the corresponding period a year ago.

 

The H2 results bring Sabana Reit&rsquo s FY2023 DPU to 2.76 Singapore cents, down 9.5 per cent from 3.05 cents in FY2022.

 

For the full year, gross revenue was up 17.9 per cent to S$111.9 million from S$94.9 million in FY2022 NPI rose 3.2 per cent to S$55 million on the back of three consecutive years of positive double-digit rental reversions and stable overall occupancy rate, said the manager.

 

As at end-December 2023, the Reit&rsquo s portfolio occupancy rate remained at 91.2 per cent, unchanged from the previous year. The manager said this data excludes 1 Tuas Avenue 4, which is undergoing asset-enhancement works. 

 

The Reit, which has 18 properties under its management, achieved a higher portfolio valuation of S$903.9 million as at end-2023, up 2.1 per cent yoy. This was attributed to ongoing asset enhancement initiatives, asset rejuvenation and higher signing rents for both new and renewed leases across the portfolio, said the manager.

 

With an aggregate leverage of 34.3 per cent as at end-2023, the Reit has a debt headroom of S$145.7 million. The manager added that the portfolio&rsquo s weighted average lease expiry has remained consistent at three years, underpinned by proactive leasing efforts.

 

The manager expects interest rates to stay elevated and operating costs to remain high. The manager will continue to aim to convert all financing facilities into sustainability-linked or green loans by 2025.

A GROUP of unitholders looking to convene another extraordinary general meeting (EGM) related to the internalisation of &rsquo s (Sabana Reit) manager has resubmitted the requisition notice.

 

The notice, which came from several unitholders with an aggregate unitholding of more than 10 per cent, was deposited at the manager&rsquo s office on Thursday (Jan 11).

 

The Reit&rsquo s manager said on Friday that it is seeking legal advice.

 

The committee of requisitioning unitholders, who call themselves the Sabana Growth Internalisation Committee (SGIC), is led by activist investor Quarz Capital. They are looking to pass 12 resolutions at the EGM to direct the trustee on the internalisation of the Reit manager.

 

These resolutions include setting out a timeline for the Reit&rsquo s trustee to consider and adopt, and for the trustee to provide written updates on the internalisation process every two weeks.

 

SGIC is also suggesting a maximum price of S$10 million to acquire the existing external manager within a month of the EGM, and is seeking to notify the trustee that &ldquo unitholders reject any proposal to acquire the existing Reit manager directly or indirectly for a maximum all-in offer price exceeding S$10 million&rdquo .

 

Furthermore, it wants the trustee to form a committee comprising at least five individuals to oversee the internalisation process, of which at least two should be proposed by SGIC.

 

On Jan 8, the manager said it would not convene the EGM as the previous notice, submitted on Dec 21, did not comply with the requirements of the trust deed constituting Sabana Reit and the Companies Act 1967. But the manager said it would consider any requisition notice that is properly submitted.

 

The manager said it was unable to verify &ldquo Sabana Growth Internalisation Committee&rdquo as a unitholder, and that it does not have records of the notice being deposited at its registered office.

SABANA Industrial Real Estate Investment Trust (Sabana Reit) will not be convening an extraordinary general meeting (EGM), pursuant to a requisition notice from the Sabana Growth Internalization Committee, its manager announced on Monday (Jan 8).

 

The committee, led by activist investor Quarz Capital, had requisitioned the EGM in a letter dated Dec 21, 2023, with 12 resolutions tabled to direct the trustee on the internalisation of the Reit manager.

 

The manager noted that it has not been able to verify &ldquo Sabana Growth Internalization Committee&rdquo as a unitholder, adding that it does not have records of the notice being deposited at its registered office.

 

Thus, the requisition notice does not comply with the requirements of the trust deed constituting Sabana Reit and the Companies Act 1967, the manager said.

 

However, it said that it would consider any requisition notice that is properly submitted &ndash which, among others, is duly signed by the relevant unitholder and deposited at the manager&rsquo s registered office &ndash in accordance with the applicable laws, listing rules, regulations and/or guidelines.

 

&ldquo The manager has also informed the Sabana Growth Internalization Committee of the above,&rdquo it added.

The manager of Sabana Industrial Real Estate Investment Trust (Sabana REIT) M1GU -2.5% has filed its defence against Kleio One-Solution&rsquo s counterclaim in response to the originating claim the REIT filed against its tenant on Nov 17.

 

On Dec 28, Sabana REIT sought to clarify the allegations made in Kleio One-Solution&rsquo s counterclaim, which the manager says it views as &ldquo mischaracterisations&rdquo of the REIT&rsquo s obligations under lease.

 

The manager of Sabana REIT has denied the counterclaim in its entirety and has left the suit to the Singapore High Court for determination.

A COMMITTEE led by activist investor Quarz Capital is requisitioning another extraordinary general meeting (EGM) at Sabana Industrial Real Estate Investment Trust : M1GU 0% (Sabana Reit), with 12 resolutions tabled to direct the trustee on the internalisation of the Reit manager.

 

In a letter dated Thursday (Dec 21), the Sabana Growth Internalisation Committee (SGIC) said unitholders are &ldquo highly dissatisfied and concerned about the trustee&rsquo s lack of progress on the internalisation, which was voted in almost five months ago&rdquo .

 

It added that it &ldquo completely disagree with the trustee&rsquo s interpretation of the trust deed, which potentially jeopardises the internalisation process&rdquo .

 

The resolutions tabled include setting out a timeline for the trustee &ndash HSBC Institutional Trust Services &ndash to consider and adopt. It also wants the trustee to provide written updates on the internalisation process every two weeks.

 

In addition, SGIC is also suggesting a maximum price of S$10 million to acquire the existing external manager within one month of the EGM, and seeks to notify the trustee that &ldquo unitholders reject any proposal to acquire the existing Reit manager directly or indirectly for a maximum all-in offer price exceeding S$10 million&rdquo .

 

SGIC also wants the trustee to form a committee comprising at least five individuals to oversee the internalisation process, of which at least two should be proposed by SGIC.

 

In June, Quarz requisitioned an EGM to pass two resolutions relating to the internalisation. It said that the cost savings to be reaped from the removal of the external manager would benefit unitholders. Its letter also highlighted its concerns over matters of corporate governance.

 

However, Sabana&rsquo s manager, the trustee and sponsor ESR Group, had warned that the process was not so straightforward, as there were risks and uncertainty for unitholders.

 

The trustee also noted that the process would take a considerable amount of time &ndash at least 12 months &ndash and costs would be incurred for the internalisation.

 

In a draft letter to unitholders in July, ahead of the August EGM requisitioned by Quarz, the trustee had also raised the need for another EGM and extraordinary resolution to amend the trust deed.

 

On Aug 7, unitholders of Sabana Reit voted in favour of internalisation, and both resolutions were carried.

 

The trustee, on Nov 7, provided an update, which reiterated that certain amendments to the trust deed are necessary to effect internalisation and such amendments are subject to an extraordinary resolution of unitholders.

 

SGIC, however, came out earlier this month stating its disagreement.

 

It sent an open letter to regulatory authorities seeking guidance on the internalisation of the Reit&rsquo s manager.

SABANA Industrial Real Estate Investment Trust&rsquo s (Reit) tenant Kleio One-Solution has launched a counterclaim, after the Reit&rsquo s trustee served it an originating claim last month.

 

The originating claim is seeking possession of its premises and payment of some S$2.1 million in outstanding fees.

 

Kleio One-Solution is the master lessee of the premises located at 33 and 35 Penjuru Lane. As at Jun 30, the tenant accounted for about 2.9 per cent of the Reit&rsquo s monthly average gross rental income.

 

In a bourse filing on Tuesday (Dec 19), the Reit&rsquo s manager said Kleio One-Solution has admitted in its defence that it has been in arrears in its rent payment, but the tenant lobbed &ldquo certain allegations&rdquo in response and has proceeded with a counterclaim.

 

The manager did not specify the allegations and the basis of the counterclaim. It only said that it considers the allegations and counterclaim as &ldquo misconceived&rdquo , and is taking legal advice to &ldquo robustly challenge these allegations&rdquo .

 

The advice being sought includes the viability of applying for summary judgement against Kleio, it added.

 

The manager will make relevant announcements as and when material developments emerge, it stated.

On Dec 6, HSBC Institutional Trust Services (HSBC Trustee), Sabana Industrial REIT&rsquo s trustee announced it is copied in a letter to SGX RegCo, the Monetary Authority of Singapore, and the Minister for Finance from the Sabana Growth Internalisation Committee with 93 points. HSBC Trustee says: &ldquo The Trustee assumes no responsibility for any of the contents of the SGIC Letter, including the accuracy, completeness or correctness of any of the information statements or opinions made or reports contained in the SGIC Letter. The views expressed in the SGIC Letter should not be construed in any way as representing the views of the Trustee.&rdquo

 

When asked if SGX RegCo is likely to make a statement on the 93 points in the letter, a spokesperson for SGX Group says: " The matters raised are commercial issues. SGX RegCo notes that the trustee has appointed its own legal advisor. Unitholders should await further updates on this matter by the trustee. SGX RegCo therefore has no comment."

 

Among the 93 points, the SGIC says it &ldquo seeks answers and guidance from MAS and SGX RegCo [that] the Internalisation and the implementation of the Specific Governance Rights do not necessitate any Trust Deed Amendments. That, even if an extraordinary resolution of the unitholders is required for the Trust Deed Amendments, the sponsor and its concert/related parties are prohibited to vote on a resolution concerning any Trust Deed Amendments for the purposes of effecting Internalisation. The clear reason is their inherent conflict of interest as their fee income is directly affected by the outcome.&rdquo

 

On Aug 8, in an EGM, unitholers voted to remove the manager which was duly passed with a simple majority, as was the internalisation resolution. At present, Sabana Industrial REIT has three major unitholders, ESR Group, Volare and Quarz Capital Asia. Some unitholders are wondering if Sabana REIT has a sponsor.  

 

To take a step back, on July 7, before the EGM, HSBC Trustee had written to unitholders that if they voted out the manager, the internalisation process could take at least 12 months. On Aug 2, HSBC Trustee in a letter to unitholders added that &ldquo the Trustee currently expects to have to hold two or more further EGMs to seek Unitholders&rsquo directions on specific matters to carry out the Resolutions, potentially including but not limited to: to approve the necessary and specific amendments to the Trust Deed by way of extraordinary resolution(s) of the Unitholders&rdquo .

 

The requisionist for the EGM to remove the manager and for internalisation was Quarz Capital. In open letters including to the media, Quarz Capital has articulated that the internalisation process should take around four months, as reported by the media. 

 

What do unitholders who are not on the SGIC think about SGIC&rsquo s 93-point letter? &ldquo The Trustee has told us that the change of trust deed involves extraordinary resolutions as investors in Sabana REIT are bound by its trust deed. It is not surprising that we need 75% of unitholders present and voting to modify the trust deed. We should respect the process. The requisionist should have read the trust deed and heeded the trustee&rsquo s cautionary announcements before the EGM,&rdquo says a unitholder with a few million Sabana REIT units.

 

Perhaps what unitholders would like is an estimation of the cost as at end-December. To date, HSBC Trustee has appointed FTI Consulting, Rajah & Tann, KPMG and is planning to appoint a head hunting company to implement the internalisation.  

 

As for the SGIC letter to SGX RegCo and MAS, HSBC Trustee says: &ldquo The Trustee is seeking legal advice with regard to its contents and will respond at an appropriate time. The Trustee is also intending to provide an update as to progress of the various workstreams being undertaken in connection with the internalisation of the REIT management function of Sabana Industrial REIT in a separate announcement expected to be made later in December 2023. In the meantime, the Trustee disagrees with any suggestion of any wrongdoing or delay on its part.&rdquo  

 

A COMMITTEE formed by activist investor Quarz and other unitholders of Sabana Industrial Real Estate Investment Trust : M1GU +2.6% (Sabana Reit) has sent an open letter to the regulatory authorities to seek guidance on the internalisation of the Reit&rsquo s manager.

 

The Sabana Growth Internalisation Committee (SGIC) on Tuesday (Dec 5) said it &ldquo urgently seeks guidance&rdquo from the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGXRegCo) on two legal questions.

 

The first is whether the Sabana Trustee is &ldquo wrong in its interpretation of the trust deed, and its position on how to proceed with internalisation&rdquo .

 

The second question is whether the sponsor and its concert parties should be barred from voting on a resolution to amend the trust deed to effect the internalisation, because they are interested parties in the matter, given that the move would &ldquo directly affect their own fee income&rdquo .

 

The trustee had said on Nov 7 that certain amendments to Sabana Reit&rsquo s trust deed are necessary to effect the internalisation, and that such amendments are subject to an extraordinary resolution of unitholders.

 

But SGIC said on Tuesday that unitholders &ldquo totally disagree and are highly concerned&rdquo with the position.

 

In a draft letter to unitholders in July, ahead of the EGM requisitioned by Quarz, the trustee had earlier raised the need for another EGM and extraordinary resolution to amend the trust deed.

 

Quarz has been in an ongoing battle with Sabana Reit&rsquo s sponsor ESR Group over the internalisation of the Reit&rsquo s management function.

 

In June, Quarz requisitioned an extraordinary general meeting (EGM) to pass two resolutions relating to the internalisation. It said that the cost savings to be reaped from the removal of the external manager would benefit unitholders. Its letter also highlighted its concerns over matters of corporate governance.

 

However, Sabana&rsquo s manager, HSBC Institutional Trust Services and ESR Group, had warned that the process was not so straightforward, as there were risks and uncertainty for unitholders. The trustee also noted that the process would take a considerable amount of time &ndash at least 12 months &ndash and costs would be incurred for the internalisation.

 

Proxy advisors also recommended that unitholders vote against the resolution for internalisation, in view of uncertainties and potential adverse consequences.

 

Nevertheless, Quarz had said in July that there are strong legal and regulatory frameworks in Singapore to safeguard unitholders during the process of setting up an internal manager it also said in the following month that the trustee should take no more than three to four months to do the preparatory work required to set up the internal manager.

 

On Aug 7, unitholders of Sabana Reit voted in favour of internalisation, and both resolutions were carried. The Reit&rsquo s trustee said on Nov 7 that it was working closely with its appointed advisers to carry out the implementation of the resolutions in a &ldquo compliant and prudent manner to protect the interests of all unitholders&rdquo .

 

It added that many of the issues and matters to be considered are interconnected and nuanced, and should not be over-simplified.