Sabana Shari'ah REIT

Take notice that some of their properties have less than 30 years lease to go . Most of their tenants are small capitalised companies with paid up of few hundreds thousand .

Do other S Reits have property portfolio affected by short leases ?

Most industrial leases are 30yrs. So this is likely is not a concern. This is also one of the reasons why higher dividend payout is expected from industrial REITs. When directly investing in industrial properties, the expected annual return is also higher compare with other kind of properties.

More of the concern will be the kind of tenants they are able to bring in. That's why most REITs' presentations will list their main tenants, and the distribution of sectors. Big companies that rent a big space will tend to stay longer as it is quite hard for them to find another place with similar size. Smaller companies will be more mobile, and more likely to move if another place is able to offer a better rate.

Above is just my view.

The DPUs are on the sliding scale , industry properties are having a tough time.

The income seems similar, DPU is sliding because of more units issued.

Overall seems to have 38 years lease left.

This counter has been a remarkably poor performer, and is selling at a significant discount to current NAV.

There have been some recent moves in REITs that hold mainly or wholly overseas property - Saizen REIT and now a possible nibble at Ascendas h-Trust.

However, the outlook for property in Singapore, whether residential, factory or commercial does not look good at the moment. So, how low does this counter have to go before someone puts it out of its misery?

(Divested a long time ago)

Just look at the quality of the properties they own , like a karang guni reit !

Selling a poor performing asset at below NAV is DPU positive, so I don't see it as a negative move.

The property that they are selling is only delivering an NPI of 1.5% with low occupancy rate of around 52%. Since they could not increase the NPI of the property in a meaningful way and also no potential for asset enhancement, then it is better to sell and retire some debt which they are paying at a higher interest costs of around 3.7%pa. It will also reduce the REIT's gearing ratio and also recycle some capital into better assets.

As for selling at a discount from NAV, the REIT is already trading at 30% below NTA and the sale is only slightly NTA negative, reducing it from $1.06 to $1.05.

Overall, I think the market is positive on this move and the discount from NTA for this REIT will be narrowed.

That's a valid point, however what really does it mean for sabana's NAV?

They sold an asset at below market value according to their latest valuations, so have they really done the best for their investors or are the valuers incorrect on the valuation of this particular asset?

And is it more widespread in terms of over valuation across the entire portfolio?

I think investors should be asking the question of whether they sold the asset too cheap or in fact the valuations are wrong - either way it's a reflection of poor management & that more pain is to come for this Reit

Hi Singapore_guru,

The market had already given the REIT a 30% discount from NTA to reflect the risk that you have mentioned. Whether the discount is good enough is up to the market to decide and what the management's actions will be going forward.

In terms of valuations, the property in question had already been valued at S$36.8 million in 23 November 2015 and sold for S$38.0 million. The loss is based on its book value of S$44.9 million as at 31 December 2014.

Therefore, I do think that if you are taking the valuations based on 31 December 2014 as compared to now, then of course the value of the entire portfolio might be lower.