Sabana Shari'ah REIT

I always ask one question, if the management is so confident of what they claimed , why is the sponsor only maintain a 10% stake in this reit , which is one of the highest yield reit ?
After IPO , they keep buying properties and earn more acquisition fees and management fees and forget their promise of the below 40% gearing to unitholders.

(25-08-2013, 11:35 PM)cfa Wrote: I always ask one question, if the management is so confident of what they claimed , why is the sponsor only maintain a 10% stake in this reit , which is one of the highest yield reit ?
After IPO , they keep buying properties and earn more acquisition fees and management fees and forget their promise of the below 40% gearing to unitholders.

A few comments,

1. At point of IPO, I don't think the sponsor (Freight Links or the controlling Kua brothers) is financially that strong. IIRC, this IPO helped to strengthen Freight Links balance sheet...

2. You mentioned "they keep buying properties". I did a quick comparison with for a few REITs which IPOed before / after Sabana,

MINT (1 mth before) : 40%+
Sabana : 30%+
MCT (5mths after) : 35%+
A-HTrust (20mths after) : 29%+

I won't be very surprised if many of the other REITs has the same problem you highlighted. Their earnings grows with AUM...

3. You mentioned "forget their promise of the below 40% gearing to unitholders". Till date, I don't believe they'd gone above 40% gearing. Let's see how they're going to finance the latest proposed acquisitions.

(25-08-2013, 11:35 PM)cfa Wrote: I always ask one question, if the management is so confident of what they claimed , why is the sponsor only maintain a 10% stake in this reit , which is one of the highest yield reit ?
After IPO , they keep buying properties and earn more acquisition fees and management fees and forget their promise of the below 40% gearing to unitholders.

Acquisition fees is 1%, performance fees will only be given when DPU improve be 10% compared to preceding year. So acquisition fees will be 670k. Performance fees, they are not getting it this year even with this acquisition.

Loans wise, its all fixed, so the impact will come only when they need to refinance them. It will be be at fixed rate too, with their MTN on standby

I do have to admit that the risk of placement or rights has increased with the acquisition, if they do a right, I am ready.

I have rather good confidence with the management, if the management is after performance fees,he should lump the Serangoon purchase and Chai Chee purchase together, such that the base in 2012 will be lower and the 10% DPU improvement attained. Do note that soilbuild reit allow a higher quatum of performance fees with improvement of DPU (regardless of extent). This is one of the strongest reason why I choose Sabana over other high yielding reits. Also, if you look at the yield of acquisitions since IPO, there range from 6-7%, and the chai chee purchase should at least yield 5%, I consider this prudent compared to recent Cambridge AEI that produce yields in the range of 4+%

Sponsor factor really only comes into play in a crisis, and I think it has been priced in, Sabana is the highest yield reit. Anyway the Kua family that owned freight links has been increasing Sabana stake from 6% of IPO days to current 10%. Of course, crisis can strike anytime, so I think this is a calculated risk one has to take according to one risk preference.

Kopikat has already share an announcement from MAS, that if loan limit is breached due to revaluation of properties, it should not be an issue, thus, the risk of lower rent leading to lower valuation is reduced.

Industry rent might get lower, but they have risen by about 20% for the past 2 years (IIRC), and only about 50% of sabana properties (those since IPO period)have rental reversion clause of 1.5-2% increase. And the biggest contributor, Lor Chuan Tech Park has no such clause, even if they negotiate a lower rent come November to keep the Master Lease, net net it should still be higher that what is negotiated 3 years ago.

Hence, I find the risk-reward profile rewarding enough.

Vested, my tainted view

(26-08-2013, 12:08 AM)Greenrookie Wrote: ..... if the management is after performance fees,he should lump the Serangoon purchase and Chai Chee purchase together, such that the base in 2012 will be lower and the 10% DPU improvement attained. Do note that soilbuild reit allow a higher quatum of performance fees with improvement of DPU (regardless of extent).....

You made a good point.

Vested too.

With the 6.9 plan, it should have limit downside and good upside rental upgrade. Garment will not flood the market w cheap land and depress land price. Vested too.

(26-08-2013, 02:30 PM)countonme Wrote: With the 6.9 plan, it should have limit downside and good upside rental upgrade. Garment will not flood the market w cheap land and depress land price. Vested too.

you have to question whether the government's job is to ensure a conducive industrial environment. if that is the case, shouldn't they do more to keep rentals down so that more can start business?

could you elaborate how the 6.9 plan ties in with an industrial environment.

the government have noted the increase in rental and have taken steps to reduce cost of owning industrial property thus capping the land lease to 30 years.

isnt all these working against the REITs?

When the Government capped the industrial property lease to 30 years, those who had bought longer lease property earlier enjoyed capital appreciation as the Government will not release industrial property lease above 30 years.

The recent National Day rally where the Paya Lebar Airbase will be moved may result in revised plot ratios for Sabana's industrial properties in future.

The management mentioned that the Lorong Chuan property is in the midst of changing from single tenure to multiple tenure list which should result in higher revenue and rental reversions.

I will be receiving my distribution this Thursday. Attractive yield. If the price goes down further, I am prepared to buy more units. Are you?

(26-08-2013, 10:37 PM)a74henry Wrote: When the Government capped the industrial property lease to 30 years, those who had bought longer lease property earlier enjoyed capital appreciation as the Government will not release industrial property lease above 30 years.

The recent National Day rally where the Paya Lebar Airbase will be moved may result in revised plot ratios for Sabana's industrial properties in future.

The management mentioned that the Lorong Chuan property is in the midst of changing from single tenure to multiple tenure list which should result in higher revenue and rental reversions.

I will be receiving my distribution this Thursday. Attractive yield. If the price goes down further, I am prepared to buy more units. Are you?

How will the net income increase from converting Lorong Chuan from single tenant to multi tenancy?

(26-08-2013, 11:23 PM)Singapore_guru Wrote:

(26-08-2013, 10:37 PM)a74henry Wrote: When the Government capped the industrial property lease to 30 years, those who had bought longer lease property earlier enjoyed capital appreciation as the Government will not release industrial property lease above 30 years.

The recent National Day rally where the Paya Lebar Airbase will be moved may result in revised plot ratios for Sabana's industrial properties in future.

The management mentioned that the Lorong Chuan property is in the midst of changing from single tenure to multiple tenure list which should result in higher revenue and rental reversions.

I will be receiving my distribution this Thursday. Attractive yield. If the price goes down further, I am prepared to buy more units. Are you?

How will the net income increase from converting Lorong Chuan from single tenant to multi tenancy?

The expenses will also increase because Sabana will have to bear for all the maintenance, etc etc.

I think moving from single tenant to multi tenancy might not be a good thing
if rentals were favorable they would had renewed already and Sabana management would not have dragged it out so late... only 2 more months to expiry of master lease and they still have not provided any updates.
so i think its more likely that the new agreement being signed are not so good terms, just my guess