Sabana Shari'ah REIT

[cfa]

Just too many ind properties chasing after too few tenants , many tenants like Armstrong is not renewing its agreement with Ascenda, because Armstrong will be moving its operation to Malaysia.

[Singapore_guru]

i dont see the latest Chai Chee acquisition as 'value for money' - i think its more about buying any available asset to cover the shortfall in Revenue in Q4 and beyond, given the lease expiries of the other assets..

[Nick]

Is it definite that the expiry of the leases will result in a decline on revenue ? Aren't industrial reits reporting positive rental reversions over the past few quarters ? I think the main benefit of this acquisition would be the length of its leasehold compared to the weighted average land tenure of the REIT.

(Not Vested)

[Singapore_guru]

Some REITS are reporting positive reversions, these are more likely head lease deals struck in pre 2010. My view is that the sale and leaseback rents for Sabana are high and given leasing risk, operating expenses now being under their responsiblilty (assuming the head tenant does not renew) I think there is more risk to the downside....

if there was positive news why wouldnt they announce it?

[Nick]

Some REITS are reporting positive reversions, these are more likely head lease deals struck in pre 2010. My view is that the sale and leaseback rents for Sabana are high and given leasing risk, operating expenses now being under their responsiblilty (assuming the head tenant does not renew) I think there is more risk to the downside....

if there was positive news why wouldnt they announce it?

Even if the master lessor doesn't renew, won't it be collecting rent from sub tenants directly ? I think it is very likely that the sub tenants rents are higher or else the master lessor won't be earning from the spread. Well, let's wait and see the next quarter result for its leasing progress.

“We’re pleased with the progress we’ve made in engaging our tenants, negotiating early renewals
for underlying leases, as well as in filling up available space. In the event that the remaining four
master leases are not renewed, we will be well‐prepared to take over the direct management of
these currently master‐tenanted properties and we’re positive that the transition will be smooth. ”
Mr Xayaraj said. Under this scenario, the net balance of the net lettable area (“NLA”) available for
lease on 25 November 2013 is expected to be approximately 7.3% of Sabana REIT’s total NLA.

(Not Vested)

[Singapore_guru]

Some REITS are reporting positive reversions, these are more likely head lease deals struck in pre 2010. My view is that the sale and leaseback rents for Sabana are high and given leasing risk, operating expenses now being under their responsiblilty (assuming the head tenant does not renew) I think there is more risk to the downside....

if there was positive news why wouldnt they announce it?

Even if the master lessor doesn't renew, won't it be collecting rent from sub tenants directly ? I think it is very likely that the sub tenants rents are higher or else the master lessor won't be earning from the spread. Well, let's wait and see the next quarter result for its leasing progress.

“We’re pleased with the progress we’ve made in engaging our tenants, negotiating early renewals
for underlying leases, as well as in filling up available space. In the event that the remaining four
master leases are not renewed, we will be well‐prepared to take over the direct management of
these currently master‐tenanted properties and we’re positive that the transition will be smooth. ”
Mr Xayaraj said. Under this scenario, the net balance of the net lettable area (“NLA”) available for
lease on 25 November 2013 is expected to be approximately 7.3% of Sabana REIT’s total NLA.

(Not Vested)

My belief is that the vendors made serious profits on the sale of the assets to the REIT and have had to top up the difference between sub-tenant income and the head lease rental...could be wrong but time will tell!

[HitandRun]

Is it definite that the expiry of the leases will result in a decline on revenue ? Aren't industrial reits reporting positive rental reversions over the past few quarters ? I think the main benefit of this acquisition would be the length of its leasehold compared to the weighted average land tenure of the REIT.

(Not Vested)

Agree. If I were the REIT manager, I will try to sell properties with leasehold period falling towards 20 years and buy properties with longer tenure (30 years or more)....

Some forumners are saying that due to the fact that Singapore companies are moving out, industrial rents will fall. I think this observation should be taken in context. As far back as 20 years ago or even longer, Singapore companies have been moving to Malaysia. So far, I am not seeing falling occupancy in any of the listed industrial reits yet.....

[gutman]

Just too many ind properties chasing after too few tenants , many tenants like Armstrong is not renewing its agreement with Ascenda, because Armstrong will be moving its operation to Malaysia.

Savills seemed to have a different opinion :

Rents may see a decline on the back of the oversupply situation. However, well-located and -designed industrial buildings that meet manufacturers’ specifications could continue to command premium rents.

On a separate note, we observe that existing small and medium enterprises (SMEs) are generally apprehensive about moving their operations overseas due to the uncertainties about the regulatory framework in a new country.

Owing to their reluctance to move, these SMEs are likely to renew their leases at rents closer to landlords’ expectations.

[Greenrookie]

Even if the master lessor doesn't renew, won't it be collecting rent from sub tenants directly ? I think it is very likely that the sub tenants rents are higher or else the master lessor won't be earning from the spread. Well, let's wait and see the next quarter result for its leasing progress.

(Warning: Just my speculation)
I remember reading somewhere that notice for non-renewal of Master leases should be around 6-9 months. Thus, given there is no announcement of non-renewal of Master leases, we can conclude the following:

1) The 7.2% NLA that will be free up is the existing vacant units that is currently existing, it is not due to anyone moving out.

2) If the master lessee want to move out of the premises, they will not need to negotiate till this eleventh minute, they will give notice of non-renewal. So if the master lessee is staying put, even if they give up the status of master-tenant and become a sub-tenant, the impact on revenue should be very minimium, what I am trying to say is, the 7.2% NLA free up might not cause a proportional/ or any fall in revenue.

3) The reason why it is taking so long is everyone guess, my take is the amount of rental revision that is holding everyone back

Do I make sense? I hope. (vested)

[Singapore_guru]

(Warning: Just my speculation)
I remember reading somewhere that notice for non-renewal of Master leases should be around 6-9 months. Thus, given there is no announcement of non-renewal of Master leases, we can conclude the following:

1) The 7.2% NLA that will be free up is the existing vacant units that is currently existing, it is not due to anyone moving out.

2) If the master lessee want to move out of the premises, they will not need to negotiate till this eleventh minute, they will give notice of non-renewal. So if the master lessee is staying put, even if they give up the status of master-tenant and become a sub-tenant, the impact on revenue should be very minimium, what I am trying to say is, the 7.2% NLA free up might not cause a proportional/ or any fall in revenue.

3) The reason why it is taking so long is everyone guess, my take is the amount of rental revision that is holding everyone back

Do I make sense? I hope. (vested)

So the occupancy rate falls to 92.8%?

has anyone assessed what the Gross rental rates required to at least match the leaseback rents for those properties which will revert to Multi-tenanted? Allowing for Land Rent, Property Tax, Operating Expenses, NLA/GLA effeciencies?