They had called for the meeting as they believe &lsquo significant costs&rsquo have been incurred from the manager internalisation

 

[SINGAPORE] A resolution tabled by some unitholders of Sabana Industrial Real Estate Investment Trust (Sabana Reit) : M1GU 0%, aimed at initiating a price discovery process with a view to selling the Reit&rsquo s properties, failed to pass at an extraordinary general meeting (EGM) held by its manager on Tuesday (Apr 22).

 

The resolution, which was tabled by former Sabana Reit director Charlie Chan and other unitholders, garnered 42.84 per cent or 288,170,736 of the total number of votes cast by unitholders. This was less than half the votes required to pass the resolution.

 

Two other related resolutions also failed to pass at the EGM, which was held at New Tech Park in Lorong Chuan.

 

The first asked for trustee HSBC Institutional Trust Services (Singapore) and the manager to commence and undertake a price discovery process, with a view of &ldquo achieving a possible sale of all or (the) majority&rdquo of the Reit&rsquo s assets.

 

The requisitionists also requested that the trustee and/or manager appoint an &ldquo internationally reputable&rdquo firm of property consultants &ldquo with a track record&rdquo of selling Singapore industrial properties to oversee the price discovery process.

 

Lastly, they asked Sabana Reit&rsquo s trustee and manager to complete the price discovery process within three months from the passing of the resolutions.

 

The unitholders called for the EGM as they believed &ldquo significant costs&rdquo have been and continue to be incurred by the Reit in relation to the internalisation process of the manager. Unitholders voted to internalise the management function of Sabana Reit in August 2023.

 

More than S$11 million spent on internalisation

Speaking before the vote, Chan told shareholders that he initiated the requisition as he felt that the trust&rsquo s share price has not grown since the internalisation process kicked in. This was despite S$11.8 million being spent on the internalisation process.

 

He noted that other Reits have been able to sell their assets above valuation and suggested that Sabana Reit&rsquo s manager find out how much the buildings are &ldquo really worth&rdquo .

 

&ldquo If I find that some people are willing to pay us close to book value&hellip we can consider whether we want to sell (the assets), as opposed to going through internalisation,&rdquo he said.

 

He questioned if a change of the Reit manager via the internalisation process would truly help to increase the trust&rsquo s book value, which is currently trading at a discount of around 25 per cent.

 

In response, Havard Chi, who is the research head of activist investor Quarz Capital which initiated the internalisation process at Sabana Reit : M1GU 0%, said the disposal of non-core assets will be &ldquo one of the key strategies&rdquo to unlock value for unitholders once the elected directors of the internalised manager are officially appointed.

 

In its latest Q1 financial results on Apr 15, Sabana Reit posted a distribution per unit of S$0.0086 for the quarter ended Mar 31, up 26.5 per cent from S$0.0068 in the same period the year before.

 

This came on the back of 27 per cent higher distributable income, which stood at S$9.8 million at the end of the period, led by higher net property income and partially offset by higher finance costs.

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Revenue is up 4.6% on year at S$29.1 million, on the back of higher occupancy and rental reversions

 

KEY POINTS Q1 2025

 

NPI: S$16 million (+22%)

 

Distributable income: S$9.8 million (+27%)

 

DPU: S$.0086 (+26.5%)

 

[SINGAPORE] Sabana Industrial Real Estate Investment Trust (Sabana Reit) posted a distribution per unit (DPU) of S$0.0086 for the quarter ended Mar 31, up 26.5 per cent from S$0.0068 in the same period a year ago.

 

This came on the back of 27 per cent higher distributable income, which stood at S$9.8 million at the end of the period, led by higher net property income (NPI) and partially offset by higher finance costs, said the Reit&rsquo s manager on Tuesday (Apr 15).

 

NPI for the period grew 22 per cent on the year to S$16 million, on higher gross revenue and lower property expenses.

 

Revenue stood at S$29.1 million, up 4.6 per cent year on year on the back of higher occupancy and rental reversions.

 

Occupancy rate was up 1.4 percentage points at 86.4 per cent as at Mar 31, from 85 per cent as at end-2024, while rental reversion stood at 15.3 per cent for the first quarter of 2025, following four consecutive years of positive double-digit rental reversions, noted the manager.

 

The Reit&rsquo s weighted average lease expiry by gross rental income was 2.7 years as at end-March.

 

Its aggregate leverage stood at 37.8 per cent with a weighted average debt maturity of 2.7 years as at the end of the quarter. Some 72.6 per cent of borrowings were on fixed rates with an average term of 2.1 years.

 

The manager noted that some S$75 million in debts is due for refinancing in March 2026. &ldquo The group is currently in discussions with its bankers to explore options for extending or refinancing the loan facilities.

 

&ldquo The group&rsquo s financial position remains adequate and given the moderate gearing ratio and 100 per cent unencumbered portfolio, the manager believes that the group will be able to meet its funding requirements when the loans become due.&rdquo

 

Donald Han, chief executive officer of Sabana Reit&rsquo s manager, noted that the Reit&rsquo s 2025 performance is expected to be challenged by economic uncertainties from trade disruptions and the potential imposition of US tariffs.

 

&ldquo The manager is closely monitoring these developments and assessing their impact on the broader market and the Reit&rsquo s operations, while constantly engaging the Reit&rsquo s tenants,&rdquo said Han.

 

He added that the manager&rsquo s key focus is to optimise the Reit&rsquo s portfolio occupancy, which has seen a steady rise from 78.8 per cent in the second quarter of 2024.

 

&ldquo Despite inflationary cost pressures, we are committed to mitigating the operational costs of our common areas and stabilising service charges so as to attract and retain cost-conscious tenants,&rdquo he said.

They point out that a fully independent valuation of the Reit&rsquo s property portfolio was already done as recently as Dec 31

 

THE internalisation committee and incoming directors of Sabana Industrial Real Estate Investment Trust : M1GU +1.41% (Sabana Reit) said on Monday (Feb 3) that they intend to vote against all the resolutions in the extraordinary general meeting (EGM) requisitioned on Jan 17.

 

They also urged unitholders to vote against the requisitioned resolutions, which include a proposal for the trustee, HSBC Institutional Trust Services (Singapore), and the Reit&rsquo s manager to undertake a price discovery process, with a view of achieving &ldquo a potential sale of all or the majority&rdquo of the Reit&rsquo s assets.

 

In the Monday statement, the internalisation committee and directors-elect said Sabana Reit already engages &ldquo reputable and independent valuers&rdquo annually to undertake a fully independent valuation of its property portfolio, with the most recent one done on Dec 31, 2024, by Jones Lang LaSalle Property Consultants and CBRE.

 

&ldquo To requisition an EGM to do the same valuation again less than one month later is a complete waste of unitholders&rsquo money, if we assume the (requisitioning unitholders) agree that any potential sale should be done at net asset value or above,&rdquo said the statement.

 

It added that once the new internal manager takes over from the current manager of Sabana Reit, the committee and directors plan to consider several strategic options to &ldquo maximise the value for Sabana unitholders, including the sale of the entire portfolio&rdquo .

 

&ldquo However, it is essential that any future price discovery process be conducted rigorously, and independently, with the sole objective of achieving the highest possible value for Sabana unitholders,&rdquo the statement said.

 

The requisition notice came from unitholders owning over 10 per cent of the trust, including its independent non-executive director, Chan Wai Keong, also known as Charlie Chan.

 

They had called for the EGM as they believed that the Reit&rsquo s internalisation process had incurred &ldquo significant costs&rdquo .

 

Urged to withdraw resolutions

The statement from the committee and directors-elect highlighted that the current external manager of Sabana Reit previously recommended a &ldquo value-destructive proposal&rdquo through a merger with another Reit, which would have resulted in &ldquo a significant loss of value&rdquo .

 

Sabana Industrial Reit' s New Tech Park at 151 Lorong Chuan. The Reit reported positive rental reversion of 27.1 per cent for the fourth quarter of 2024, while its full-year rental reversion rose to 20.6 per cent, its fourth consecutive year of double-digit positive rental reversion.

Industrial S-Reits&rsquo operating performance remains resilient, with positive rental reversions in 2024

 

&ldquo The internalisation committee and the directors-elect view this past recommendation as an indication that only the new board-elect should be entrusted with a process as critical as a price discovery or a potential sale in the future,&rdquo said the statement.

 

The committee and the directors-elect also believed it was inappropriate to entrust this process to the external manager, given the &ldquo overwhelming vote by unitholders in favour of internalisation&rdquo .

 

As the committee and directors-elect intend to consider all options to unlock value for Sabana Reit&rsquo s unitholders, they urged the requisitioning unitholders to withdraw their resolutions.

 

The statement also cautioned requisitioning unitholders to consider whether they have the votes to pass the resolutions, stating that &ldquo almost all&rdquo key independent unitholders who previously supported the internalisation have indicated their intent to the committee and directors-elect to vote against the requisitioned resolutions.

 

&ldquo As such, the internalisation committee and directors-elect strongly urge the requisitioning unitholders to carefully consider if (they have) sufficient support from Sabana unitholders to pass the resolutions,&rdquo the statement said.

 

&ldquo If the (requisitioning unitholders) do not have sufficient votes to pass the resolutions, the EGM will potentially be a complete waste of unitholders&rsquo money. The failure to pass the resolutions will also be in complete contradiction to (their) claim of trying to reduce costs for Sabana unitholders,&rdquo it added.

Net property income growth is mainly due to higher revenue and lower overall property expenses

 

SABANA Industrial Real Estate Investment Trust (Reit) : M1GU +1.35% posted a distribution per unit (DPU) of S$0.0152 for the half-year ended Dec 31, 2024, up 32.2 per cent from S$0.0115 in the year-ago period.

 

The increase came even as about 10 per cent of total income available for distribution in FY2024 was retained for &ldquo prudent capital management&rdquo , in view of additional costs incurred and to be incurred during the internalisation of the Reit manager, according to a bourse filing on Tuesday (Jan 21).

 

Further retention of distributable income may be required for FY2025, it said.

 

Revenue for H2 2024 rose 2.7 per cent year on year (yoy) to S$58.1 million, from S$56.6 million previously, lifted by strong positive rental reversions across the portfolio.

 

Net property income (NPI) grew 8.9 per cent yoy for the half-year to S$30.3 million, from S$27.8 million, which was mainly attributed to higher revenue and lower overall property expenses.

 

&ldquo The manager achieved a four-year high positive rental reversion in FY2024, while its positive rental reversion in Q4 2024 marks its 16th consecutive quarter of positive rental reversion since Q1 2021,&rdquo the filing said. 

 

Total income available for distribution in H2 2024 came in at S$18.9 million, up 19.2 per cent from S$15.9 million in the corresponding year-ago period.

 

The second half&rsquo s results bring the DPU declared for FY2024 to S$0.0286, a 3.6 per cent increase from S$0.0276 in FY2023.

 

For the full year, income available for distribution was up 5.5 per cent at S$35.6 million.

 

The Reit attained an all-time high revenue of S$113.3 million in FY2024 &ndash an increase of 1.3 per cent yoy &ndash since its initial public offering in November 2010, its manager said.

 

It also achieved a new high in NPI of S$57.5 million since 2016, despite a smaller portfolio, it added. This marked an expansion of 4.5 per cent from the year-ago period.

 

Overall portfolio occupancy rate slipped to 85 per cent as at Dec 31, 2024, from 91.2 per cent the year before, mainly due to the repossessions of 33, 33A and 35 Penjuru Lane in March 2024 and subsequently, 30 and 32 Tuas Avenue 8 in June.

 

Donald Han, CEO of the Reit&rsquo s manager, said: &ldquo Despite the uncertainties that the internalisation process brought along, we pressed on to safeguard the financial prudence of the Reit to maintain the foundation for stability.&rdquo

 

In June 2023, activist investor Quarz Capital requisitioned an extraordinary general meeting to pass two resolutions: to remove Sabana Reit&rsquo s manager, and to direct the trustee to internalise the Reit&rsquo s management function.

 

For FY2024, S$6.8 million of expenses were incurred in respect of the implementation of the resolutions passed on Aug 7, 2023, to effect the internalisation. Cumulatively, internalisation expenses incurred up to the end of FY2024 totalled S$11.4 million. Singapore&rsquo s economic growth is expected at close to its potential rate in 2025, but uncertainty remains, the manager said.

 

Citing research from Savills Research and Cushman & Wakefield, it noted expected surges in industrial space and business park supply will put pressure on occupancy and rents.

 

The manager expects 2025 to be challenging for Sabana Reit. This is amid rising cost pressures, exacerbated by the prospect of interest rates remaining at elevated levels as the US Federal Reserve hold rates for an extended period, and geopolitical conflicts, that in turn are expected to impact both the global and Singapore economy.

They are asking the Reit&rsquo s trustee and manager to undertake a price discovery process

 

THE manager of Sabana Industrial Real Estate Investment Trust (Sabana Reit : M1GU 0%) has received a requisition notice for an extraordinary general meeting (EGM) from unitholders owning over 10 per cent of the trust.

 

In a bourse filing on Friday (Jan 17), the manager said it is considering the requisition notice and consulting with the trustee, as well as seeking legal advice.

 

The letter was submitted by Chan Wai Kheong, better known as Charlie Chan, and sought to pass three resolutions.

 

The first resolution asked for trustee HSBC Institutional Trust Services (Singapore) and the manager to commence and undertake a price discovery process, with a view of &ldquo achieving a possible sale of all or majority&rdquo of the Reit&rsquo s assets.

 

The former independent non-executive director, together with the unitholders, also requested that the trustee and/or the manager appoint an &ldquo internationally reputable&rdquo firm of property consultants &ldquo with a track record&rdquo of selling Singapore industrial properties to oversee the price discovery process.

 

They noted that the fees of the consultants should be based on market rates and be paid to them on a &ldquo success basis&rdquo after the transaction is approved by unitholders.

 

Any reimbursable out-of-pocket expenses incurred by the consultants during the process should be capped at S$8,000, the group added.

 

Lastly, they also asked Sabana Reit&rsquo s trustee and manager to complete the price discovery process within three months from the passing of the resolutions.

 

&ldquo Significant costs&rdquo

The unitholders had called for the EGM as they believe &ldquo significant costs&rdquo have been and continue to be incurred by the Reit in relation to the internalisation process.

 

Citing Sabana Reit&rsquo s third-quarter business update, the unitholders pointed out that the manager and trustee have incurred cumulative expenses of S$10.9 million.

 

&ldquo Given the costs incurred and to be incurred in connection with the internalisation, about 10 per cent of distributable income for H1 2024 was retained for prudent capital management and further retention may be required for subsequent periods, which will result in a reduction in distribution per unit (DPU),&rdquo they noted.

 

The group also cited the poor performance of Sabana Reit&rsquo s unit price and DPU as a reason for requisitioning an EGM.

 

The Reit&rsquo s unit price has fallen by 17.4 per cent with a total return of negative 8.1 per cent from Jun 7, 2024, to Nov 29, said the unitholders.

 

During this period, the Reit&rsquo s DPU also dipped to S$0.0249 as at Jun 30, 2024, down 18.9 per cent from S$0.0307 in the previous year. The decline was mainly attributed to costs incurred during the internalisation process.

 

The unitholders also pointed out the &ldquo poor trading liquidity&rdquo of Sabana Reit, which results in unitholders being &ldquo unable to realise their investments&rdquo in the trust without impact on its unit price.

 

They also noted that refinancing costs will potentially increase amid the trust&rsquo s bond issuance.

 

In June last year, the Reit&rsquo s trustee issued S$100 million in aggregate principal amount of 4.15 per cent sustainability-linked guaranteed bonds due 2029. A guarantee was provided by trust fund Credit Guarantee and Investment Facility.

 

The unitholders expect costs incurred to come in at about 1 per cent per annum and aggregate costs to be about 5.15 per cent per annum.

 

Moreover, refinancing costs and capitalisation rates for valuation are likely to rise amid a higher-for-longer interest rate environment, they noted. This would thus result in a lower DPU and net asset value for the Reit, the group added.

 

Therefore, they believe that a price discovery process would &ldquo allow the true intrinsic value of the Sabana assets to be uncovered&rdquo .