Sabana Shari'ah REIT

[Singapore_guru]

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