Sabana Reit ends dispute with Changi South tenant; no impact to DPU expected

SINGAPORE - Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) should not take a material hit to its distribution per unit (DPU) over a property in Changi, after receiving a payment that will go towards outstanding rental arrears and late payment charges, the manager said on Monday (Sept 24).

It added that the Reit trustee and the tenant of 10, Changi South Street 2 entered into an agreement on Sept 21 to vary the terms of the lease agreement, which will allow the trustee to mitigate occupancy risks by bringing in direct sub-tenants, subject to statutory board JTC Corp's approval.

Sabana Reit has received a cashier's order from the tenant, Adviva Distribution, for some $2.15 million, said the manager. It had previously issued a notice of termination on Aug 31, citing a failure to pay rent on the property, which contributed 6.5 per cent of the Reit's gross revenue for the quarter to June 30.

The manager warned at the time that the Reit's DPU could suffer by as much as 0.05 cent for the fourth quarter of 2018, should the lease be terminated without a replacement tenant.

But it has now said that it does not expect any material adverse financial impact on the DPU for this financial year, in relation to the property, once the payment is applied to the rental arrears.

Under the variation of lease agreement, there will be no reduction in the fixed rent payable by Adviva Distribution. The tenant also agreed to continue to perform all of its obligations under the amended lease agreement, if these obligations are not carried out by the direct sub-tenants.

The manager said that it believes that the variation of lease will give flexibility to Sabana Reit and will be in the interest of the Reit and its unitholders.

It added that it will make relevant announcements "as and when there are material developments" in the matter, with unit olders meanwhile advised to exercise caution when dealing in the units of Sabana Reit.

Join ST's Telegram channel and get the latest breaking news delivered to you.