Lessons from the Sabana Reit saga
The way Reits are structured makes it hard for unit holders to tackle issues with manager
by Goh Eng Yeow
Published May 8, 2017
As an asset class, real estate investment trusts (Reits) have done so well in the past decade that investors could not go wrong by taking wagers on them.
According to some estimates, Reits have enjoyed an average compounded annual return of 10 per cent over the past five years, assuming that the dividends were reinvested.
This makes them far better as investments than keeping money in the bank, which attracts close-to-zero interest rates.
Reits are closed-end funds that operate in a similar manner to unit trusts. But unlike unit trusts that invest in shares, Reits specialise in income-generating real estate assets such as shopping malls, offices and industrial buildings.
Just because they have worked out fine so far does not mean nothing can go wrong with them. As with other asset classes, there will always be one or two bad apples that fail to make the grade. What do investors do then, other than vote with their feet?
First, kudos to them for getting as far as they did in requisitioning the extraordinary general meeting (EGM) to have a vote on the issue. As Mr Jeffrey Low - the stockbroker instrumental in making this happen - noted, nobody had thought that this would even be possible given the disparate way in which the unit holdings had been dispersed.
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(one of the Strategic Review recommendation).
