Sabana Shari'ah REIT

[ghchua]

Hi steadyvalue,

I don't think it is fair to say that the trustee had made a "grave error" in this case. I mean, in the first place, isn't you the one who is saying that internalisation do not even need any trust deed amendment and even if amendments are needed, the trustee can actually use their discretion do away with EGM as long as they provide certifications? I had a few exchanges with you on this, and you can read back on this topic to see if I am misrepresenting you here.

So, now the court is saying is that related ESR entities cannot vote on proposed trust deed amendments. Did it say do away with trust deed amendments or the EGM? No.

Is the trustee wrong to seek advice on every step of the way? I don't think so. Yes, I agree that they could have do it faster to save on some costs but it is certainly a right decision to get the court involved in this. After all, this is the first time we are seeing internalisation for REITs here. The examples that you cited are Business Trusts, which I already highlighted to you the differences last time round.

[weijian]

There was an earlier decision by SGX RegCo that stated that all parties can vote on Trust deed amendments (which needs 75% approval). Therefore if there was no follow-up by the Trustee to seek the court's decision on the same thing, SGIC would have been in a much disadvantageous situation.

As a 3rd party, I also think that Trustee has done a decent job. Since there are warring parties, the best way to reduce future friction is to get the court to make the decision, in which those decisions would then be non-recourse to the Trustee themselves.

And just because someone has not "performed to expectations", doesn't mean that the problem resides with the "someone". It could very well that the problem lies with the "expectations".

SGX RegCo had spoken. All parties can vote on Trust Deed Amendments, if an EGM is needed to implement internalisation.

https://links.sgx.com/1.0.0/corporate-an...92f8a23cfa

[ghchua]

Hi weijian,

The problem is that when the removal of the manager was tabled at an EGM earlier, ESR and related parties can vote on the resolution. There was no objection on it. So now Trust deed amendments the court had ruled that they cannot vote.

The question then on my point earlier in this topic is - Why double standard? Why they could vote on their own removal as the manager of the REIT but could not for Trust deed amendments? Isn't it that they have vested interest in both and should abstain from voting for both? I guess if there was objection on the EGM for their removal, they would not have been able to vote as well. But that is irrelevant now as that resolution had been carried even if they could vote.

[weijian]

Observing as an unvested party from the sidelines, why is it that I feel that the Trustee is been bullied instead?

But I have no sympathies for the Trustee too. As the saying goes, once you take their money, you are their b*tch. The 0.5% trustee fee has been too easily earned.

QUESTIONS / COMMENTS RAISED AT THE EXTRAORDINARY GENERAL MEETING HELD ON 6 AUGUST 2024

Unitholder No. 3 asked if the minority Unitholders are required to pay the bulk of the legal fees for Internalisation process.
He also queried if there was any precedent on how costing was done. He added that speaking from the perspective of a minority shareholder, he felt being bullied.

Unitholder No. 1 asked if all the costs unnecessarily incurred (up to $9,000,000) attributable to the Trustee’s failure to listen to Unitholders could be discounted.

https://links.sgx.com/FileOpen/Sabana%20...eID=817932

[weijian]

A good investment throws up one "good decision" after another. For example, an investor is faced with "good decisions" like reviewing if the investment is overvalued (after a big price increase), to average upwards or not, or even to sell off a portion of the holdings (as part of portfolio risk management) as it has increased multiple folds.

So to invert, a bad investment throws up "bad decisions". And "bad decisions" are probably those like averaging downwards or getting into quarrels/legal battles with partners/regulators etc. For the latter, a lot of energy/resources are expended but business interests have not advanced a bit.

Re: Trustee's Response to the Requisitionists' Letter dated 1 October 2024

At the outset, it is neither constructive nor productive towards implementing the Internalisation for the Requisitionists to make incorrect, unfounded and/or misleading statements. In Section C below, the Trustee wishes to clarify such statements in the interest of clarity for Unitholders. For example, the Requisitionists made certain incorrect allegations on costs and processes, such as the Order 32 Application. These were incurred due to the contrary views held by some Unitholders, which necessitated a resolution in the Courts.

3. More importantly, the Trustee urges the Requisitionists to cease making misstatements which require time and effort to correct, and allow the Trustee to focus time and resources on the implementation of the Internalisation as quickly and efficiently as possible.

https://links.sgx.com/FileOpen/Sabana%20...eID=821198

[ghchua]

Hi weijian,

So who is to blame now? The Requisitionists say the trustee delayed the internalisation process which resulted in higher costs, while the trustee said that you are the one who actually disagree with me, which resulted in me having to incur more costs and delay for stuff like Order 32 Application.

The above is not helpful at all to small unitholders. So far, we had a series of EGMs but still, the internalisation process is yet to be completed.

[weijian]

hi ghchua,

As a 3rd party learning from the sidelines, I can only say that blame has to be apportioned to both parties. My point is -This manner of internalization is on uncharted territory. So imagine Columbus sailing his ship westward, and the guys on deck are not working well with those below. It's one of the worst ways to try reaching the New World.

But this process, paid for by Sabana REIT shareholders, has also fully demonstrated the stickyness of the AUM business model.

[weijian]

Would you hold a view that XXX doesn't work, but still work towards proving yourself wrong?

RESPONSES TO SUBSTANTIAL AND RELEVANT QUESTIONS FROM UNITHOLDERS

Question 1 (Dr Chew Tuan Chiong): You have always said and as recent as 8 March 2024 (after Sabana EGM) openly expressed to a group of retail investors (including me) that an external REIT manager is more superior than an internal model. You said the lack of a sponsor will disadvantage the internal manager. You also opined that internalisation of a REIT manager will likely not lead to a reduction of cost. Yet, you now put yourself up for election as a director of Sabana internalised manager, an entity you do not have faith that it will do good. Have you changed your view about the internal model being inferior compared to an external REIT manager?

Ans:
The view is grounded in the understanding of the reality of the marketplace reality. A REIT that sheds a sponsor is abandoning a number of synergies and economies of scale, both tangible and nuanced. The problem is more acute for smaller REITs. One of several consequences is the likely increase in costs of debt refinancing, an issue which I am not sure was discussed in the EGMs. As a REIT practitioner who understands and can help navigate the real business challenges, I hope to contribute to the growth of the Sabana for all unitholders, which includes myself.

https://links.sgx.com/FileOpen/Sabana%20...eID=821833

[weijian]

From the casted votes, it seems that all warring sides do not support the 3 IDs proposed by the Trustee.

On another note, I wholeheartedly agree that NED IDs should have a portion of their fees paid in shares. And there should be an “unwritten acknowledgment" that those shares shall not be sold during their employment period. In other words, in Spore context, NED IDs and EDs and top employees should have this similar remuneration and unwritten acknowledgment.

Sabana Reit’s unitholders vote for requisitionists’ candidates to be on new internal manager’s board

During a question-and-answer segment prior to the voting on resolutions, unitholders also questioned pledges that the requisitionists’ candidates had made.

These included committing to be paid the director’s fees of less than S$45,000 per year, receive at least 25 per cent of those fees in Sabana Reit units, and maintain a meaningful stake by not selling the units they receive as director’s fees for at least a year.

In response to a unitholder’s comment that a year was too short a time to keep the units, as per the pledge, Chi said that the requisitionists’ candidates had informed him that they plan to keep their units for as long as they are directors.

Chi added that if the directors proposed by the requisitionists were to successfully increase the distribution per unit (DPU) and unit price of Sabana Reit, the reward to directors would be “far in excess” of their director fees.

https://www.businesstimes.com.sg/compani...gers-board

[weijian]

Pretty surprising that Quarz Capital just sold down ~2% of Sabana REIT (WAS: 14.3%, IS:12.2%) or close to ~15% of their holdings, after partnering Volare Capital to win a series of corporate maneuvers against ESR. To quote a description of Quarz Capital's PE fund (in italics) below:

Its Quarz Active Value Fund engages with the management of undervalued companies and prompts them to boost shareholder value through measures such as selling unprofitable assets. It invests in firms with upside potential of 30 per cent over two years.

Well, Quarz Capital became a SSH in ~mid 2020 and from the history of the share price, I suspect they haven't made anything close to its fund's professed upside potential. On hindsight, this has been a low return with high brain damage activity. They are footing the (tuition) bill but blazing the trail ahead for others.

NOTIFICATION FORM FOR SUBSTANTIAL SHAREHOLDER(S)/UNITHOLDER(S) IN RESPECT OF INTERESTS

https://links.sgx.com/FileOpen/_Quarz%20...eID=824751