Strategic review may placate Sabana Reit unitholders

The sponsor and manager of Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) will do a strategic review of the Reit, giving its market value a much needed fillip that could go some way to placate dissatisfied unitholders.

News of the review, which was announced late last Thursday, lifted Sabana Reit units by 10.4 per cent to close at 42.5 cents last Friday. But they remain well below their initial price when the Reit listed in 2010.

In a joint statement, Reit sponsor Vibrant Group and manager Sabana Real Estate Investment Management announced that the review includes examining the shareholding structure and management of the manager.

This is seen as an important step as a small group of investors has come together, campaigning to have the trust's manager sacked. The group wants to replace it with an in-house team better aligned with unitholders. The review will also look at Sabana Reit's strategic direction and business.

"The sponsor and the manager are considering all options to further the sustainable growth of Sabana Reit and the interest of its unitholders," the statement noted. "In the meantime, the manager remains fully committed to executing its duties to proactively manage the trust and deliver value to unitholders."

The statement also listed the sponsor's commitment to the Reit, noting that Vibrant and its related parties are the largest unitholder of Sabana Reit, with about a 12 per cent holding. They hold a 51 per cent indirect stake in the manager.

Vibrant is also the largest tenant of the Reit, contributing some 17 per cent of the net property income of Sabana Reit's portfolio as at Dec 31. It leases about 665,446 sq ft gross floor area, equivalent to 15.1 per cent of Sabana Reit's portfolio.

Working with the manager, Vibrant remains supportive of Sabana Reit and intends to renew the three master leases at the Reit properties it occupies at prevailing market rents, the statement said.

As a sponsor, Vibrant had injected five of its properties, under a sale and leaseback arrangement for a term of five years, into the initial portfolio of Sabana Reit at its initial public offering. The master leases of these properties expired on Nov 25, 2015.

Following this, Vibrant had continued its support through the renewal of three master leases until Nov 25, 2016 and a further term until Nov 25 this year.

The fourth property master lease was continued by a replacement tenant while the fifth property was being divested at $14.8 million - which is higher than the $13.5 million it had paid to buy it.

A version of this article appeared in the print edition of The Straits Times on February 06, 2017, with the headline 'Strategic review may placate Sabana Reit unitholders'. Print Edition | Subscribe