Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) will no longer be bound by the requirement for its business to be managed in compliance with syariah investment principles, its manager said yesterday.
The change will take effect on or around Oct 21.
"Having said this, we are exploring options to remain a viable investment for syariah investors and to potentially remain on relevant indexes," said the manager.
The Reit's revised investment mandate will be to principally invest in income-producing real estate used for industrial purposes in Asia, as well as real estate-related assets.
It will also be renamed Sabana Industrial Reit from the effective date of change.
Sabana Reit is one of the largest syariah-compliant Reits in the world in terms of total asset size. However, it has over the past few years received "consistent feedback" from unit holders to reconsider its syariah-compliance requirement, according to the manager.
Consequently, it has decided that the change will be beneficial, enabling it to expand the network of available banks and lenders from which to obtain financing and gain access to more competitive loans, it said.
Removing syariah compliance will also enable Sabana Reit to appeal to a wider pool of investors at a time when the total percentage of units held by syariah investors has decreased to just 2 per cent as at March 31 this year from 12.3 per cent as at Dec 31, 2011, the manager said.
The change will also widen the Reit's exposure to a larger pool of "potentially higher-rental paying tenants" such as those in the food and beverage sector, as well as the banking, finance and insurance industries.
Syariah compliance denotes that a financial product, service or activity complies with the principles of Islamic law.
Examples of non-permissible financial activities are those that are interest-based or businesses that are in the alcohol, pork, entertainment and tobacco industries.
To comply with syariah principles, the manager currently has to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities prohibited under syariah guidelines does not exceed 5 per cent a year of Sabana Reit's gross revenue.
As Sabana Reit has been listed for more than three years, unit holders' approval is not required under the listing manual and the trust deed, said the manager.
The manager said it was "grateful to its syariah investors and appreciates their strong support for the Reit".
Separately, Sabana Reit yesterday announced a distribution per unit (DPU) of 1.48 cents for the half year ended June 30, more than three times its DPU of 0.47 cent a year ago.
Gross revenue rose 14.1 per cent to $39.1 million, driven by contributions from higher occupancies at New Tech Park, 23 Serangoon North Avenue 5, and 10 Changi South Street 2, the manager said.
Overall occupancy levels were 83.4 per cent as at June 30, up 6.1 percentage points from 77.3 per cent a year ago.
Net property income rose 23.2 per cent to $25.7 million for the six-month period, from $20.9 million.
Sabana Reit units closed at 44 cents yesterday, up one cent, or 2.3 per cent.