Sabana Shari'ah REIT

With less than 1 month from the lease expiry date, it seems that most likely Sabana is to take over all the master leases. In fact this may not be a bad news.

Let's take a look at 151 Lorong Chuan, which forms approx 30% of the revenues:

- presently yielding S$2M per month which equals to S$2.47 psf
- occupancy is 96% per HSBC research
- NLA = 810,710
- current market rent between S$4.00 - S$4.20, conservatively I consider average S$3.50
- total expected monthly revenue upon cancellation of master lease = 810,710 x 96% x S$3.50 - 10% property management costs (assumption) = S$2.4M

Coming next is 8 Commonwealth Lane which forms 6.8% of total revenues. Currently rent on master lease is S$2.885 psf, market rent is between S$3.00 - S$3.30 psf, occupancy rate unknown. Obviously the master leasee may not want to continue the lease if Sabana is not prepared to reduce the rent.

Next 200 Pandan Loop with 4% contribution. Current rental S$1.48, market rent around S$2.50 - S$3.00 psf, occupancy rate unknown.

Not going to mention the last 2 master leases as the proportion is not significant.

Based on the above information and assumptions, I think overall it is positive for Sabana, regardless of whether the master leases are to be renewed or cancelled.

(vested and to accumulate if price falls below a dollar)

(16-10-2013, 02:56 PM)valuebuddies Wrote: With less than 1 month from the lease expiry date, it seems that most likely Sabana is to take over all the master leases. In fact this may not be a bad news.

Let's take a look at 151 Lorong Chuan, which forms approx 30% of the revenues:

- presently yielding S$2M per month which equals to S$2.47 psf
- occupancy is 96% per HSBC research
- NLA = 810,710
- current market rent between S$4.00 - S$4.20, conservatively I consider average S$3.50
- total expected monthly revenue upon cancellation of master lease = 810,710 x 96% x S$3.50 - 10% property management costs (assumption) = S$2.4M

Coming next is 8 Commonwealth Lane which forms 6.8% of total revenues. Currently rent on master lease is S$2.885 psf, market rent is between S$3.00 - S$3.30 psf, occupancy rate unknown. Obviously the master leasee may not want to continue the lease if Sabana is not prepared to reduce the rent.

Next 200 Pandan Loop with 4% contribution. Current rental S$1.48, market rent around S$2.50 - S$3.00 psf, occupancy rate unknown.

Not going to mention the last 2 master leases as the proportion is not significant.

Based on the above information and assumptions, I think overall it is positive for Sabana, regardless of whether the master leases are to be renewed or cancelled.

(vested and to accumulate if price falls below a dollar)

I think the GFA is 810,710 sqft, assuming 90% effeciency Net Lettable Area is 735,320 sqft.

Assuming 95% occupancy is 700,000 sqft.

Gross Market Rent at $3.50 = $2,450,000

Less Operating expenses R&M, Property Tax = 20%

Net Income is $2,000,000

Therefore a drop of 20% on current passing rent.

Generally speaking the sabana rents are exceptionally high and wouldnt be surprised if they have pressures of maintain occupancy & sustaining leaseback rents

(16-10-2013, 03:39 PM)Singapore_guru Wrote: I think the GFA is 810,710 sqft, assuming 90% effeciency Net Lettable Area is 735,320 sqft.

Assuming 95% occupancy is 700,000 sqft.

Gross Market Rent at $3.50 = $2,450,000

Less Operating expenses R&M, Property Tax = 20%

Net Income is $2,000,000

Therefore a drop of 20% on current passing rent.

Current rent is 2M a month, I am not sure whether Sabana has been paying for the property tax and management fee during the past 3 years, but I think 20% estimation is a bit too high. Anyway with your assumption, there is zero impact on Sabana if the master lease for 151 Lrg Chuan is to be terminated. I have also just noted a potential 200,000 GFA increase as the current 2.5 plot ratio is not being fully utilised, this can be good in long run if the occupancy rate remain high.

(16-10-2013, 03:50 PM)valuebuddies Wrote:

(16-10-2013, 03:39 PM)Singapore_guru Wrote: I think the GFA is 810,710 sqft, assuming 90% effeciency Net Lettable Area is 735,320 sqft.

Assuming 95% occupancy is 700,000 sqft.

Gross Market Rent at $3.50 = $2,450,000

Less Operating expenses R&M, Property Tax = 20%

Net Income is $2,000,000

Therefore a drop of 20% on current passing rent.

Current rent is 2M a month, I am not sure whether Sabana has been paying for the property tax and management fee during the past 3 years, but I think 20% estimation is a bit too high. Anyway with your assumption, there is zero impact on Sabana if the master lease for 151 Lrg Chuan is to be terminated. I have also just noted a potential 200,000 GFA increase as the current 2.5 plot ratio is not being fully utilised, this can be good in long run if the occupancy rate remain high.

Leaseback deals are typically on a Net basis, therefore the tenant pays Repairs & Maintenance, Land Rent & Property Tax...Property Tax is approximately 10% of revenue alone, Repairs & Maintenance might be another 10% of rev...

Therefore, I think there is more downside risk with converting this to multi tenancy...but i guess we will know soon enough on the release of results and over the next few quarters.

That's for sure, with the current yield of (I think) 8%, the market has priced in the uncertainty. But I am not surprise to see further downside when the master leases termination is announced, and by then it will be a good opportunity to accumulate. The private placement was at S$1, so am prepared to fire my bullets when it goes below.

This is one of the more volatile Reits. I am also waiting for it to drop, preferably to below $1.

(16-10-2013, 04:05 PM)valuebuddies Wrote: That's for sure, with the current yield of (I think) 8%, the market has priced in the uncertainty. But I am not surprise to see further downside when the master leases termination is announced, and by then it will be a good opportunity to accumulate. The private placement was at S$1, so am prepared to fire my bullets when it goes below.

Quote:Coming next is 8 Commonwealth Lane which forms 6.8% of total revenues. Currently rent on master lease is S$2.885 psf, market rent is between S$3.00 - S$3.30 psf, occupancy rate unknown. Obviously the master leasee may not want to continue the lease if Sabana is not prepared to reduce the rent.

I did visit someone in that building a few months back. There was only 1 main occupant and overheard that it was the rent paid by this tenant from which Sabana and the developer/owner calculated the selling price of that building.

Also overheard that they are moving out soon. The other units are occupied by SMEs of unknown nature. Saw that people walking in & out but couldn't find their company's name / logo at the front door.

Drop to $1, dun lah. Vested here.

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I also wrote in to express my buay-song over their placement @ $1. It crash my holding prices and left us out for a chance to participate.

The reply was something along the line that S$40m is not a lot of $$$$ and that the lead time for a rights issue will be too long for the building deal sale.

Sure, if there are some deep pocketed funds or BB out there and can soak up this placement. But at such a generous discount to the the market price. OUCH !!!

Vested.

market keep rallying
if wanna get at $1.00 or less seems impossible

yes, those where the days when REITs pays almost 10% yield.

huat ah....

http://infopub.sgx.com/FileOpen/20131017...eID=260079

There we have it.

Only 1 out of 5 master leases to be renewed. The rest will be multi-tenant. Next q we shall know the impact of this in gross rent revenue. Waiting ... Again...