Sabana Shari'ah REIT

[AQ.]

Interestingly enough, its bond are trading almost near par after dropping to about 92 cents on the dollar in 2017.

https://www.bondsupermart.com/main/bond-...6TD3000006

In 2017 the manager did not have the share issuance mandate. In 2018 they got it back and so if dirt hits the fan, a quick placement/rights at a huge discount will solve the pblm.

Bond holders will rejoice @ expense of equity.

[weijian]

The default looks like cash flow neutral but it is a bad time to have 1 of your master tenant defaulting...

ISSUE OF NOTICE OF TERMINATION FOR DEFAULT ON RENTAL PAYMENT IN RELATION TO 10 CHANGI SOUTH STREET 2, SINGAPORE 486596  

Singapore, 31 August 2018 – Sabana Real Estate Investment Management Pte. Ltd., as manager of  Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT”, and as manager of  Sabana REIT, the “Manager”), refers to 10 Changi South Street 2, Singapore 486596 (the “Property”),  which is currently leased to Adviva Distribution Pte. Ltd. (the “Tenant”) under a lease agreement dated  15 December 2014 as supplemented by a supplemental lease agreement dated 30 November 2017  (collectively, the “Lease Agreement”), between HSBC Institutional Trust Services (Singapore) Limited,  in its capacity as trustee of Sabana REIT (the “Trustee”), and the Tenant.  The Manager wishes to announce that it has today issued a notice of termination to the Tenant, arising  from the Tenant’s failure to pay rent and other sums payable under the Lease Agreement.  

http://infopub.sgx.com/FileOpen/10_Chang...eID=523709

This is hilarious.

The building was bot in 2014 thru a sale&leaseback for $55mio.
In 2016, Sabana spent $7.4mio on "additions & alterations work providing additional GFA of 49,415 sq ft"
In 2017, supplementary lease was signed with master tenant "which will generate an additional S$1.0 million in rental p.a.". Valuers valued this property @ 62mio.
In 2018, tenant defaulted.

Such entertainment! esp with the unitholders giving the manager the share issuance mandate again!

I don't follow Sabana in detail. But after Activist Speak's actions, i started to scan through their financial reports. From their last few presentations, they have been putting their distributions with share mandate and without, side by side in contrast very conscientiously. This definitely had a nudging effect on shareholders to give the share mandate back to them. This is also not hard since most shareholders investing in REITs, probably have distributions as their top concern.

[AQ.]

That's true, and that's why I am not vested. For a brief period of time I was deliberating whether to take a stake after all the chain of events from Activist Speaks to ESR upping stake in Sabana and talks between ESR-Sabana. With the share issuance mandate given back to the manager, all such thoughts were dismissed and I am happy to watch this REIT from far - it's realtime comedy.

The DPU might be propped up temporarily with fees paid in units, so headline yield looks gr8. But eventually the rise in units just means further dpu dilution+ nav drops further down the road. It's just a matter of time before another equity fund raising exercise - be it rights or placement to buy another property. I suppose there will be a spin in the future with the announcement of "VIBRANT GROUP ENTERS STRATEGIC PARTNERSHIP TO SUPPORT MAJOR CHINA LOGISTICS PLAYER IN ITS FIRST FORAY OVERSEAS"

http://infopub.sgx.com/FileOpen/Press%20...eID=523313

Nonetheless this is still set to look interesting - ESR's next moves after gobbling Viva will be closely watched.

[Shrivathsa]

This must be a first, at least in the history of Sabana, to be able to sell a property above its valuation.

Hopefully, they sell all and refund the money to unit holders (not holding my breath on that)

Sabana  Real  Estate  Investment  Management  Pte.  Ltd.,  the  Manager  of  Sabana  Shari’ah 
Compliant Industrial Real Estate Investment Trust (“Sabana REIT” or the “Trust”), is pleased to 
announce that HSBC Institutional Trust Services  (Singapore) Limited, in its capacity as trustee 
of Sabana REIT  (the “Trustee”), has on this day, entered into a conditional sale and purchase 
agreement  (“SPA”)  for  the  proposed  divestment  of  9  Tai  Seng  Drive,  Geo‐Tele  Centre, 
Singapore  535227  (the  “Property”) with Perpetual  (Asia) Limited in its capacity as  trustee of 
ADC  Singapore  Trust  (the  “Purchaser”)  for  the  sum  of  S$99.6  million  (the  “Sale 
Consideration”) (the “Divestment”)

The  Property  comprises  a  six‐storey  industrial  building  with  an  authorized  business  use  as 
Carrier  Hotel/Data  Centre,  located  within  the  Tai  Seng  Industrial  Estate,  along  Hougang 
Avenue  3  in  the  north‐eastern  part  of  Singapore.  The  Property  has  a  gross  floor  area  of 
approximately 218,905 square feet with a remaining land tenure of approximately 37 years.  
The  Property  has  an  open  market  value  of  S$39.6  million  based  on  the  latest  available 
property  valuation  report  in  respect  of  the  Property  dated  30  June  2018  (the  “Property 
Valuation Report”). The Property Valuation Report had been commissioned by the Manager of 
the Trust and was prepared by an independent valuer, Edmund Tie & Company (SEA) Pte Ltd, 
using the capitalisation approach and discounted cash flow analysis method.

Full disclosure: Still have some dead units in this , so and as when it rises (by a bit), will say good bye to those.

[weijian]

Not trying to take away any credit from the sales above NAV.

The sale price for this non performing asset 1 Tuas Avenue (started to go downhill ~ 1year ago) is 11.18mil, 52% less than 30th June valuation of 23.3mil. Nonetheless, it is comparable/sightly higher to an updated market value by 2 independent valuers (11.1mil and 10.9mil) with new assumptions from Management. So the entity doing the valuation is an independent 3rd party, but the valuation can never be independent because the main inputs is still provided by the paying customer.

It reminds me of what Activist Speaks bought up before once: https://www.valuebuddies.com/thread-255-...#pid136077

PROPOSED DIVESTMENT OF 1 TUAS AVENUE 4, SINGAPORE 639382

http://infopub.sgx.com/FileOpen/Sabana_A...eID=526806

[CY09]

This is why on the whole I am generally skeptical of all REITs valuation.

Firstly, their valuers are hired by the REITs themselves, this itself is a conflict of interest because it is unlikely a valuer who values the ppty low will get the contract next year

Secondly, as mentioned the inputs and projections are provided by these companies themselves; garbage in garbage out.

We are beginning to see the fallout in the third rated REITs where valuations did not meet reality

[ACTIVIST SPEAKS]

http://infopub.sgx.com/FileOpen/Announce...eID=528355

Vibrant is required to sell its 51% stake in the Manager as part of the terms of the consent solicitation in connection with its Notes.


Very very strange how things turn out....

[specuvestor]

http://infopub.sgx.com/FileOpen/Announce...eID=528355

Vibrant is required to sell its 51% stake in the Manager as part of the terms of the consent solicitation in connection with its Notes.  


Very very strange how things turn out....

allow or "required"? Vibrant itself is also not in best shape

[ACTIVIST SPEAKS]

Oh yeah... “allow” is correct. Judging by Vibrant’s current position, “required” may also be correct.

[AQ.]

It looks more like the previous notes had convenants restricting Vibrant from selling the manager - Bonds will not want coy to sell assets and distribute it to equity/asset strip, jeopardising b/s and odds of bond repayment. New convenants allow them to do so, but deposit in escrow so sale proceeds are ringfenced towards bonds.

So it looks like Vibrant is now keen to selloff the reit manager and the noose is tightened even more. ESR should be keen.

Next corporate actions should be interesting - i will doubt Vibrant waste the share issuance mandate given so perhaps a large asset sale into Sabana comes next esp with proceeds from the recent divestments - this will boost AUM and hence price of manager.