Sabana Shari'ah REIT

[CityFarmer]

(moderator, not sure if copying wholesale is a kinda of advertisement, I just lazy to edit anymore la... =p)

Copy your own's article is definitely not an issue

[valuebuddies]

Well I do have a second opinion, when the vacant GFA is high, the chances of increasing DPU in future is higher as well. I wasn't expect it to post good results for Q4 primarily due to the conversion of few building to multi-tenanted, and it doesn't really surprise me with the low occupancy as I believe it takes time to source for good/new tenants. Overall, a little upset with the 10% decrease in DPU, but I am hoping and looking forward for a better quarters.

vested

[valuebuddies]

http://infopub.sgx.com/FileOpen/20140317...eID=288848

Two questions:

i) Is it cheaper comparing to issuing MTN to banks?
ii) Can we buy, what is the minimum amount ?

[Greenrookie]

HI buddies,

Sharing a write-up of Sabana from my blog, and the update of some numbers on my excel sheet. Comments welcomed:

Sabana Reit:

Sabana reit is one investment that I couldn’t appreciate its story. I recently accumulate more when its price hit $1.1 It is a lucky decision since the price improve with the general market. I always believed that the conversion of Master leases to Multi-tenanted leases will not result in an Exodus of tenants as the sub-tenants have been increasing. I also believe the ex-master tenants are still renting. My analysis is correct. From AR:

“The vacant space (by NLA) at the four returned properties totaled 194,634 sq ft (or 5.5% of the total portfolio). That compared positively to 240,635 sq ft (or 7.3% of the total portfolio) of vacant space (by NLA) at the four expiring master-tenanted properties as at 30 June 2013. As at March 2014, the net balance of NLA available for lease was at 184,680 sq ft or 5.2% of the total portfolio.”

However, the rent must increase or occupancy improve to offset the higher cost of managing mult-tenant units. As of March 2014, another 10000 square feet of space found tenants. Slow but progressing.

Then the predictability of story ends. Here are the few surprises/shocks I had:

1) You think the recent acquired AMD building occupancy sucks? Well,

200 Pandan is at 54.1%

123 Genting lane is at 62.8%

8 common wealth is at 68.6%

Lor Chuan is at 93.8%

With the exception of Lor Chuan, I was shocked by the high vacancy rate of the other 3 master leases, no wonder they wanted to return the master lease. So is rental income at 123 Genting, 8 commonwealth and 200 Pandan going to fall badly despite better or constant occupancy rate? We will need the Q1 results to figure that out.

2) Introduction of Units Reinvestment Plan.

Please la, manager cash out on their units very quickly after they get their management fees through units, what then will give investor’s confidence? Also, given the high yield of the Reit now, and the discount on the units to attract people to subscribe to it, it’s dilution to shareholders’ ownership will not be insignificant.

3) Management is still “ continue to take a selective approach in regards to new acquisitions and will continue to invest across asset types for greater diversification and stability” Please la (x2), fill up your stupid space first!

So, in generally, we have a idiot proof business in terms of industrial property reits, and at rather attractive valuation, but we have management whose interest is not aligned with the shareholders.

[starcraft_76]

HI buddies,

Sharing a write-up of Sabana from my blog, and the update of some numbers on my excel sheet. Comments welcomed:

Sabana Reit:

Sabana reit is one investment that I couldn’t appreciate its story. I recently accumulate more when its price hit $1.1 It is a lucky decision since the price improve with the general market. I always believed that the conversion of Master leases to Multi-tenanted leases will not result in an Exodus of tenants as the sub-tenants have been increasing. I also believe the ex-master tenants are still renting. My analysis is correct. From AR:

“The vacant space (by NLA) at the four returned properties totaled 194,634 sq ft (or 5.5% of the total portfolio). That compared positively to 240,635 sq ft (or 7.3% of the total portfolio) of vacant space (by NLA) at the four expiring master-tenanted properties as at 30 June 2013. As at March 2014, the net balance of NLA available for lease was at 184,680 sq ft or 5.2% of the total portfolio.”

However, the rent must increase or occupancy improve to offset the higher cost of managing mult-tenant units. As of March 2014, another 10000 square feet of space found tenants. Slow but progressing.

Then the predictability of story ends. Here are the few surprises/shocks I had:

1) You think the recent acquired AMD building occupancy sucks? Well,

200 Pandan is at 54.1%

123 Genting lane is at 62.8%

8 common wealth is at 68.6%

Lor Chuan is at 93.8%

With the exception of Lor Chuan, I was shocked by the high vacancy rate of the other 3 master leases, no wonder they wanted to return the master lease. So is rental income at 123 Genting, 8 commonwealth and 200 Pandan going to fall badly despite better or constant occupancy rate? We will need the Q1 results to figure that out.

2) Introduction of Units Reinvestment Plan.

Please la, manager cash out on their units very quickly after they get their management fees through units, what then will give investor’s confidence? Also, given the high yield of the Reit now, and the discount on the units to attract people to subscribe to it, it’s dilution to shareholders’ ownership will not be insignificant.

3) Management is still “ continue to take a selective approach in regards to new acquisitions and will continue to invest across asset types for greater diversification and stability” Please la (x2), fill up your stupid space first!

So, in generally, we have a idiot proof business in terms of industrial property reits, and at rather attractive valuation, but we have management whose interest is not aligned with the shareholders.

I think you meant that you invested @ 1.01 again?

Btw, i don't think that we could blame Sabana Reit's manager for cashing out the unit paid as management fee, unless the dividend that it received can cover its cost in the first place.

[valuebuddies]

HI buddies,

Sharing a write-up of Sabana from my blog, and the update of some numbers on my excel sheet. Comments welcomed:

Sabana Reit:

Sabana reit is one investment that I couldn’t appreciate its story. I recently accumulate more when its price hit $1.1 It is a lucky decision since the price improve with the general market. I always believed that the conversion of Master leases to Multi-tenanted leases will not result in an Exodus of tenants as the sub-tenants have been increasing. I also believe the ex-master tenants are still renting. My analysis is correct. From AR:

“The vacant space (by NLA) at the four returned properties totaled 194,634 sq ft (or 5.5% of the total portfolio). That compared positively to 240,635 sq ft (or 7.3% of the total portfolio) of vacant space (by NLA) at the four expiring master-tenanted properties as at 30 June 2013. As at March 2014, the net balance of NLA available for lease was at 184,680 sq ft or 5.2% of the total portfolio.”

However, the rent must increase or occupancy improve to offset the higher cost of managing mult-tenant units. As of March 2014, another 10000 square feet of space found tenants. Slow but progressing.

Then the predictability of story ends. Here are the few surprises/shocks I had:

1) You think the recent acquired AMD building occupancy sucks? Well,

200 Pandan is at 54.1%

123 Genting lane is at 62.8%

8 common wealth is at 68.6%

Lor Chuan is at 93.8%

With the exception of Lor Chuan, I was shocked by the high vacancy rate of the other 3 master leases, no wonder they wanted to return the master lease. So is rental income at 123 Genting, 8 commonwealth and 200 Pandan going to fall badly despite better or constant occupancy rate? We will need the Q1 results to figure that out.

2) Introduction of Units Reinvestment Plan.

Please la, manager cash out on their units very quickly after they get their management fees through units, what then will give investor’s confidence? Also, given the high yield of the Reit now, and the discount on the units to attract people to subscribe to it, it’s dilution to shareholders’ ownership will not be insignificant.

3) Management is still “ continue to take a selective approach in regards to new acquisitions and will continue to invest across asset types for greater diversification and stability” Please la (x2), fill up your stupid space first!

So, in generally, we have a idiot proof business in terms of industrial property reits, and at rather attractive valuation, but we have management whose interest is not aligned with the shareholders.

Hi Greenrookie,

1) During the transition period from master lease to multi-tenanted leases, low occupancy rate is expected, it is just the beginning and it takes time for the manager to fill up the empty spaces, at least we have to wait till the 1Q14 presentation to judge the capability of the manager

2) Management do need money to pay the staff and employees, that's nothing very wrong in my opinion

3) I think that statement is mere of a "talk only, no action". If the reit manager said otherwise, unitholders would complain that the manager bo cho kang. But my personal view is that if the manager has problem to fill up the spaces, it might be wiser to divest it and to acquire another asset under sales and lease back to lock in revenue for another 5/10 years.

In short, it is still too early to say all these, will have to wait for at least 1 more quarter to see how the manager could overcome the occupancy problem.

[Nick]

I don't see anything wrong with REIT Manager selling their units. The alternative is for the REIT to pay them in cash but that will lead to slightly lower DPU.

[Greenrookie]

I don't see anything wrong with REIT Manager selling their units. The alternative is for the REIT to pay them in cash but that will lead to slightly lower DPU.

Selling units is not the issue per se here, but the units reinvestment plan. I did mention we need Q1 to know if the conversion of multi- tenancy result in lower gross rents. There are 2 odds stacked against it though.

1) higher costs

2) is the sum of multi- tenants rents lower than the single master rent? Even if occupancy remain constant or slightly better. With the exception of lor Chuan, the 3 other buildings has occupancy ranging from 50% to 68%. If net rent for master tenancy is profitable with potential to sublease the vacancy, why not renew the master lease?

Given the 2 headwinds, and that only 10000 sq FT found new tenants, I expect NPI to fall further. However, even a further 10% fall in NPI would still make current valuation reasonable if that is the darkest moment.

The reinvestment plan is another spanner.

[piggo]

It means they limit their potential tenants to businesses that fulfills the holy holy oh so holy beliefs of shariah.

[runicx]

It means they limit their potential tenants to businesses that fulfills the holy holy oh so holy beliefs of shariah.

This is extracted from Sabana-reit's home page. Click here

"Specifically, Sabana REIT is required to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities which are non-permissible under the Shari'ah Guidelines, which include activities relating to conventional financial and insurance services, gaming, non-halal production, tobacco-related products, non-permitted entertainment activities and stock-broking in non-compliant securities does not exceed 5.0% per annum of the gross revenue of Sabana REIT's portfolio of properties."

I was browsing their portfolios and it seems that being an industrial reit, it is highly unlikely that their lessees, tenants and or sub-tenants will bust their 5% threshhold. It may be easier for their limits to be reached in the case of retail i suppose. Dun think their business is limited by the shariah compliance at this point. Just my 2 cents worth.

Vested.