Sabana Reit posts 5.7% drop in Q4 DPU as it picks old hand as CEO, cuts directors' fees

SINGAPORE - Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) has appointed real estate veteran Donald Han as the new chief executive officer of its manager, following a strategic review that emerged after howls from disgruntled shareholders over the Reit's underperformance.

As a result of that review, the board has also decided to take a 20 per cent cut to director fees for fiscal 2017 to reduce costs of the manager in support of its partial fee waiver to unitholders.

Mr Han has nearly 30 years of experience in the property industry, and was formerly vice chairman of Cushman & Wakefield Singapore. He takes over from Aw Wei Been, who has been acting CEO following the departure of former CEO Kevin Xayaraj at the end of 2017.

In a media statement on Thursday night (Jan 25), Mr Han said he has three immediate priorities. He aims to drive revenue by ramping up marketing efforts to improve occupancy and retaining tenants. He is also open to selective divestments of underperforming assets, enhancing the portfolio to focus on high specs assets and business parks. He will then look to "rationalise costs".

"There is no doubt that 2017 was a challenging period in the organisation's history and we have our work cut out for us in 2018. But I am confident of the longer-term prospects of Sabana Reit and the wider industrial sector and I ask unitholders to continue to take this journey with us." Sabana Reit added that Tan Cheong Hin has joined also the board as a new independent director. Mr Tan was formerly director (Europe) of Mapletree Investments.

Sabana Reit also reported its fourth-quarter results on Thursday night that showed a 5.7 per cent fall in its distribution per unit (DPU) for the period.

It said as part of its results that it has six master leases that are due to expire, three of which are sponsor-related properties. Sabana Reit said the manager is looking to renew master leases for five of them, while the remaining property may be divested or converted into a multi-tenanted arrangement.

The manager is also in advanced discussions with a prospective buyer for 6 Woodlands Loop, and targets to complete the sale by the first half of this year.

DPU for the three months ended Dec 31, 2017, stood at 0.83 Singapore cents per unit, down from 0.88 Singapore cents.

In the fourth quarter, the Reit manager received its fees fully in cash, as the ordinary resolution to authorise the manager to issue units was not passed at the most recent annual general meeting. The DPU would have instead been approximately 0.92 Singapore cents had the manager been able to continue receiving 80 per cent of its base fee in units.

Gross revenue fell 9.5 per cent year-on-year to S$22.5 million, mainly on non-contribution from 1 Tuas Avenue 4 and 6 Woodlands Loop, as well as lower revenue contribution from some of the other properties in the trust's portfolio.

Net property income was down 1.3 per cent to S$13.9 million, as the lower gross revenue was partially offset by a 22.7 per cent reduction in property expenses from proactive lease and property management by the manager.

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