Sabana Shari'ah REIT

[GreedandFear]

In Sabana REIT, there is no board in the REITs at all.  The entire board (including the independent directors) are with the Manager.  What it means is if we remove the manager, we remove the entire board.  Someone just pointed out on FB that in the trust deed - the manager cannot leave without the approval of the Trustee and the removal of the manager must be by notice given in writing by the Trustee.  That means until we find a suitable candidate to head the internal set up, the trustee will not remove the present manager to maintain the legality of the trust.  After the set up is done, the trustee will remove the present manager according to the resolution passed.

That solve all transition problem....back to square one, how can we muster enough votes to remove this manager?

Even if you believe that the independent directors are not truly "independent" they still have a fiduciary duty to act in the best interest of the shareholders so if the resolution requires them to commence a search for an internal manager then I think you will find that they will do this in a serious way. Otherwise they leave themselves open to lawsuits.

[ACTIVIST SPEAKS]

I see your point. My reading suggests the trust deed points towards the Trustee being responsible for the appointment of the next manager. As such, it is logical to infer that the Trustee may also responsible for the incorporation of a new internal manager set up and staffing. Anyway, Sabana is challenging the legality of our resolutions and our lawyers are also studying to defend them. But one thing is for sure, the meeting is definitely on because our resolution 1. the removal of the manager is codified. They cannot deny us of this vote. We leave it to the legal experts. Meanwhile, we will try to muster as many votes as possible by raising awareness.

[specuvestor]

Maybe Activists should ask Trustee for an opinion for the transactions. I think the trustee fee too good $. They should be acting like an ID rather than merely an administrator. IMHO MAS should tighten up this fiduciary duty of the trustee. They should act on behalf of the interest of the beneficiaries and accountable to the beneficiaries not the manager.

This is canadian law but looks very similar to what I understand our Trust law is, which are both Anglo based. But the ruling is that the trustee's duty is on the trust not the beneficiary:
http://www.lexology.com/library/detail.a...4f75844b83

So another way to phrase it is to ask HSBC their opinion on the transactions to safeguard the interest of the trust.
http://www.sabana-reit.com/the-trustee.html

Firstly before we debate further we have to understand that the trust is not a legal entity. The trustee is the legal entity to discharge the obligations of the trust. If I am not wrong, the Investment Management Agreement (IMA) is signed between the trustee and the investment manager
https://singaporelegaladvice.com/law-art...singapore/

The trustee takes instruction from the beneficiary who also appoints the trustee. The beneficiary also appointed the Manager and the IMA was signed on inception as per the beneficiaries' instruction. There lies the problem as I stated above. They are deemed to be an administrator doing the execution on behalf of the beneficiary rather than a fiduciary duty. They will execute what the beneficiaries decide ie remove the manager but it is grey if it is their duty to recommend an alternative. That is why if an alternative manager is proposed, it will make the process much easier and proposal to be adopted.

Without that the trustee will just wait for instruction from heaven.

Please see my post above before getting confused again. There is no ID for a REIT. The directors are the directors of the Investment Management Company

The trustee removes the IM because they are the one appointed them, AS INSTRUCTED BY THE BENEFICIARY. A trust does not necessarily need a manager. Anyone of us can set up a trust without a manager. When you buy a life insurance on yourself with your wife as beneficiary, you are already setting up a statutory trust under section 73 of Conveyancing and Law of Property Act

If a REIT is mandated to have a manager (IM or Property Manager?) it is a requirement by MAS. I don't think it affects the "legality" of the trust.

Personally I don't think it is the trustee duty to appoint a manager. But as I posted above, I think it should be the trustee's fiduciary duty to make sure the manager do their job in best interest of the beneficiary.

The other thing to consider is that one can keep the Property Manager in tact which technically means the REIT can run status quo on its own until you decide on the IM. The problem is usually the property manager is owned by the sponsor as well. A bit similar to the problem in Aljunied when the opposition won.

[ACTIVIST SPEAKS]

haha...and yes, in this case, the property manager is wholly owned by the manager who is in turn owned by the Sponsor. Agree on the point on "legality" of the trust and yes, it is a requirement by MAS to have a manager at all times.

We do have confirmation that the trustee may appoint the manager with the approval of the unitholders...it was something that was bugging us all these time. Simply becos if we (widely dispersed minorities) remove the manager, there is no one to appoint the next manager except the trustee. So it was a relief that it was confirmed that the Trustee has this right to do so. However, everything is academic if we cannot muster enough votes to remove the manager. It will have to take a massive, never seen before, turnout of minorities to overcome the 13% the sponsor and manager hold.

[Boon]

Confusion is part of the learning process.
 
In Singapore, RM (Reit Manager) is a Company (or corporation)
 
“At least half of the Manager’s board of directors must be independent directors if unitholders do not have the right to appoint the Manager’s directors.”
 
http://www.mas.gov.sg/news-and-publicati...arket.aspx
 
What is the point of giving right to unitholders to appoint members of BOD of the RM company?
 
If this right to appoint members of BOD is not given (or exercised), what is the intent of mandating that at least half the Manager’s BODs must be independent directors?
 
The purpose of ID in RM company is to protect interests of unitholders of the Reit which the RM manages, and not to protect shareholders’ interests of the RM company, IMO.
 
Technically speaking, since RM must be a separate company, internalization of RM means making the RM company wholly owned by unitholders – and there are more than one way to achieve this……………………. 
_____________________________________________________________________________________________________________________

[Boon]

Just a thought on “artificial rental support” acquisition:
“Yield accretive” to unit-holders” or “fee accretive” to Reit Manager?

“Acquisition fee” is pegged to purchase price of a property. 

The higher the “purchase price”, the higher the “acquisition fee” earned by the Reit Managers(hence the Sponsors).

Property is valued based on its ability to generate income.

Artificial rental support (at above market rate) thrown in by Sponsors would artificially inflate valuation.

HIGHER rental support and LONGER rental support period would lead to
=> higher valuation
=> higher purchase price (paid by the Reit) 
=> higher acquisition fee earned by the Reit Managers (hence Sponsors)

“Recurring base management fee” is pegged to property value.

HIGHER rental support and LONGER rental support period would lead to
ð higher valuation for LONGER period 
ð higher recurring management fee earned by the Reit Managers (hence the Sponsors)
___________________________________________________________________________

[Ray168]

The Manager said the property price is valued by license valuer. Not my fault.

And the BOD (own people) also approve the acquisition.

So, everyone happy to pocket the extra.

This type of loophole must to plug and rectify immediately.

Just a thought on “artificial rental support” acquisition:
“Yield accretive” to unit-holders” or “fee accretive” to Reit Manager?

“Acquisition fee” is pegged to purchase price of a property. 

The higher the “purchase price”, the higher the “acquisition fee” earned by the Reit Managers(hence the Sponsors).

Property is valued based on its ability to generate income.

Artificial rental support (at above market rate) thrown in by Sponsors would artificially inflate valuation.

HIGHER rental support and LONGER rental support period would lead to
=> higher valuation
=> higher purchase price (paid by the Reit) 
=> higher acquisition fee earned by the Reit Managers (hence Sponsors)

“Recurring base management fee” is pegged to property value.

HIGHER rental support and LONGER rental support period would lead to
ð higher valuation for LONGER period 
ð higher recurring management fee earned by the Reit Managers (hence the Sponsors)
___________________________________________________________________________

[corydorus]

It will be interesting to find out all the license valuers in all the other REITs property by a matrix.
And see who is more reliable.

[specuvestor]

Confusion is part of the learning process.
 
In Singapore, RM (Reit Manager) is a Company (or corporation)
 
“At least half of the Manager’s board of directors must be independent directors if unitholders do not have the right to appoint the Manager’s directors.”
 
http://www.mas.gov.sg/news-and-publicati...arket.aspx
 
What is the point of giving right to unitholders to appoint members of BOD of the RM company?
 
If this right to appoint members of BOD is not given (or exercised), what is the intent of mandating that at least half the Manager’s BODs must be independent directors?
 
The purpose of ID in RM company is to protect interests of unitholders of the Reit which the RM manages, and not to protect shareholders’ interests of the RM company, IMO.
 
Technically speaking, since RM must be a separate company, internalization of RM means making the RM company wholly owned by unitholders – and there are more than one way to achieve this……………………. 
_____________________________________________________________________________________________________________________

The RM is a company own by shareholders and usually not the unitholders. My understanding is that unless the RM is majority owned by the Trust, the RM need to have 1/2 of the board as ID, to prevent conflict of interest with the sponsor, not so much to guard the interest of the unitholders per se.

[ACTIVIST SPEAKS]

This is also my understanding.... Strange that only two of Sabana's five directors are independent.

P.S. just read. It will only take effect on the first AGM after 31 Dec 16.