Sabana Shari'ah REIT

The other thing that struck me as interesting is the Convertible Sukuk. Sukuk holders converted to 6,285,090 Units @ $1.1933 for a total of $7.5M, which resulted in reduced borrowings, thereby reducing the gearing slightly. To recap, $80Mil @ 4.5% of Sukuk was issued on 24-Sep-12 and due on 24-Sep-17. Balance is now $72.5Mil.

A few thoughts came to mind,

1. Sukuk holders got a good deal, as we'd discussed many posts ago when it was issued. Too bad many of us are not HNWIs and didn't even get a chance to subscribe for it, assuming we have the $250k spare cash per pop...

2. The conversion price of $1.1933. Perhaps every time Sabana market price goes above this price, original Sukuk holders will be motivated to convert and sell the converted units for an extra profit? If so, we may see a cap on Sabana market price for a while...

3. Conversion reduces debts and thereby gearing. But, it also means dilution ie. more shares issued, lower DPU.

Another point to take note is SABANA has not beef up their property team to manage these properties, if the master tenants call it a day. Looks like most owners who sold their buildings to Sabana was to cash out , the master tenancy agreement was part of the S & P.

Allow me to add to my clearly biased views:

1. Sabana mgmt said that they are positive despite weak economy. Frankly, most companies are scared like hell to say something so definite (a very kiasu trait, especially for directors). Most of the time they will say that they are cautiously optimistic or some other Sh**. So it's a good sign that they wanna stick their neck out to put across their opinion so clearly.

2. They also showed a graph displaying the rental price index. I take it to mean that they are hinting that rental prices have move up approx 20% since 3 years back and smelly smelly they also expect the same amount of rental increase. This increase must be what is holding the master lessees back.

3. By telling the public that only 7% of rental is exposed, they are also trying to persuade the master lessees that they no scared they don't want to renew.

Let's capture the current fears using data from latest Q2 Results materials provided by their SGX Annc,

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By next quarterly results, we ought to be able to get a clearer picture on whether to continue to be fearful or bullish..

Sabana has one of the highest DPU so i think there is some room to play. Secondly, Convertible Sukuk if i understand correctly is anti-dilutive. Any conversion will also help to reduce gearing.

This seems a Win-Win.

(18-07-2013, 09:38 AM)cfa Wrote: Another point to take note is SABANA has not beef up their property team to manage these properties, if the master tenants call it a day. Looks like most owners who sold their buildings to Sabana was to cash out , the master tenancy agreement was part of the S & P.

Hi,

Just curious why you say they have to beef up their property team when they mentioned that they are well prepared to take over?

Certainly the management must say that. But the fact is their property team will be very short handed if they have to deal with so many sub-tenants whom will be their tenants if master tenant back out. With master tenancy, Sabana need to deal with one party only, the maintenance and etc are also the responsibilities of the master tenant.

(18-07-2013, 02:14 PM)cfa Wrote: Certainly the management must say that. But the fact is their property team will be very short handed if they have to deal with so many sub-tenants whom will be their tenants if master tenant back out. With master tenancy, Sabana need to deal with one party only, the maintenance and etc are also the responsibilities of the master tenant.

Thanks. So it back to KopiKat's statement: "By next quarterly results, we ought to be able to get a clearer picture on whether to continue to be fearful or bullish.. "

Hi NTL

Do you have any idea how many staff is required to manage a property of approx 59k sqm or >600,000 sqft?

Based on what I know from Ascendas, they only need 3 staff or less, 1 Marketing and 2 Maintenance. Some of these staff are shared with other properties as well.

If a property has say 50 tenants and assuming average lease is 2 years (3 years is usually the standard), the marketing staff need only handle 2 tenants a month. Contracts are standard and non negotiable except for rental unit, amount of rent, rental period and rent free period. Property maintenance is normally outsourced and only 1 or 2 point men are needed to answer tenants' concerns or supervise the external contractors.

(19-07-2013, 07:33 AM)HitandRun Wrote: Hi NTL

Do you have any idea how many staff is required to manage a property of approx 59k sqm or >600,000 sqft?

Based on what I know from Ascendas, they only need 3 staff or less, 1 Marketing and 2 Maintenance. Some of these staff are shared with other properties as well.

If a property has say 50 tenants and assuming average lease is 2 years (3 years is usually the standard), the marketing staff need only handle 2 tenants a month. Contracts are standard and non negotiable except for rental unit, amount of rent, rental period and rent free period. Property maintenance is normally outsourced and only 1 or 2 point men are needed to answer tenants' concerns or supervise the external contractors.

More tenants , more things to deal with. Non-payment or delay of rentals, complaints , defaults.. dealing with humans is always more tedious than dealing with hardwares.