Sabana Shari'ah REIT

[r0n]

https://links.sgx.com/FileOpen/Quarz%20O...eID=766682

Quarz analogy in their letter really crush the manager's scare tactics:

A property owner purchased a S$1million property and paid for most of it in cash, with only a small loan of $325,000 remaining. He hires a manager to take care of the property (leasing, maintenance, periodic refinancing of the loan). 

However due to the bad performance of the manager, the owner decides to fire the manager and to manage the property on its own. The manager, in a bid to prevent itself from being fired, comes up with ‘scare tactics’ and the ‘absurd claim’ that if he was fired, the bank would recall its loan and the property might need to be force sold. 

This manager’s claims are clearly absurd, false and misleading. It is completely clear that the loan is backed by the owner’s property and not the manager.

REITs are evergreen investment vehicles and some of the best clients for the banks as they pay interest to the banks forever. Sabana pays more than S$11 million of interest per year. We believe that Sabana’s bankers would hate to lose a good client such as Sabana REIT to their more than 15 other competing banks.

Getting clearer by the day that the manager is just spinning nonsense in order to scare unitholders to keep their fees.    shameful!!

You may understand more by spending some effort to read up on the structure and loan covenants of Sabana REIT before making all these comments. 

The loans are indeed backed by the REIT's properties but the manager is also owned by the biggest shareholder of the REIT no? No bank would want to risk their relationship with the sponsor for the relationship with the REIT when the sponsor has probably a lot more assets for them to work with. 

Not to mention the clearly absurd claim that REITS are evergreen investment vehicles - they are only as long lasting as their assets can be, and in a place like Singapore your industrial assets are mostly under 60 years old.

[steadyvalue]

By your logic, as ESR will still be 20% owner of the new internal manager and the biggest unitholder of Sabana REIT, banks will continue supporting the REIT la, if they want to support ESR.

So shareholders win by voting the current manager out and internalizing after all.

property loan is backed by property. its impossible to get a property loan without the property. That is the reason why the manager's claim is so ridiculous. Nothing in the portfolio changes after the manager is removed. actually the cashflow will become better due to the cost savings.

that is why with so many change of control of REIT managers, bank continue with the loan to the REIT.

you are forgetting that sabana will grow and will acquire newer properties with longer lease lives. Even 50-60 years, enough money for the bank to make money already. Why will banks spoil the relationship when they are already making so much money with Sabana now?

[r0n]

By your logic, as SR will still be 20% owner of the new internal manager and the biggest unitholder of Sabana REIT. By your logic, the banks will continue supporting the REIT la, if they want to support ESR.

property loan is backed by property. its impossible to get a property loan without the property. That is the reason why the manager's claim is so ridiculous. Nothing in the portfolio changes after the manager is removed. actually the cashflow will become better due to the cost savings.

that is why with so many change of control of REIT managers, bank continue with the loan to the REIT.

you are forgetting that sabana will grow and will acquire newer properties with longer lease lives. Even 50-60 years, enough money for the bank to make money already. Why will banks spoil the relationship when they are already making so much money with Sabana now?

ESR will not be 20% owner of the new internal manager, who is wholly owned by the trust. If you can't understand this point, I don't think we cannot go forward in this conversation.

Also kindly advise how many change of control of REIT managers have there been on SGX in the past 20 years? Interested to know your source of information.

[steadyvalue]

https://links.sgx.com/FileOpen/Quarz%20O...eID=766682

Quarz analogy in their letter really crush the manager's scare tactics:

A property owner purchased a S$1million property and paid for most of it in cash, with only a small loan of $325,000 remaining. He hires a manager to take care of the property (leasing, maintenance, periodic refinancing of the loan). 

However due to the bad performance of the manager, the owner decides to fire the manager and to manage the property on its own. The manager, in a bid to prevent itself from being fired, comes up with ‘scare tactics’ and the ‘absurd claim’ that if he was fired, the bank would recall its loan and the property might need to be force sold. 

This manager’s claims are clearly absurd, false and misleading. It is completely clear that the loan is backed by the owner’s property and not the manager.

REITs are evergreen investment vehicles and some of the best clients for the banks as they pay interest to the banks forever. Sabana pays more than S$11 million of interest per year. We believe that Sabana’s bankers would hate to lose a good client such as Sabana REIT to their more than 15 other competing banks.

Getting clearer by the day that the manager is just spinning nonsense in order to scare unitholders to keep their fees.    shameful!!

You may understand more by spending some effort to read up on the structure and loan covenants of Sabana REIT before making all these comments. 

The loans are indeed backed by the REIT's properties but the manager is also owned by the biggest shareholder of the REIT no? No bank would want to risk their relationship with the sponsor for the relationship with the REIT when the sponsor has probably a lot more assets for them to work with. 

Not to mention the clearly absurd claim that REITS are evergreen investment vehicles - they are only as long lasting as their assets can be, and in a place like Singapore your industrial assets are mostly under 60 years old.

By your logic, as SR will still be 20% owner of the new internal manager and the biggest unitholder of Sabana REIT. By your logic, the banks will continue supporting the REIT la, if they want to support ESR.

property loan is backed by property. its impossible to get a property loan without the property. That is the reason why the manager's claim is so ridiculous. Nothing in the portfolio changes after the manager is removed. actually the cashflow will become better due to the cost savings.

that is why with so many change of control of REIT managers, bank continue with the loan to the REIT.

you are forgetting that sabana will grow and will acquire newer properties with longer lease lives. Even 50-60 years, enough money for the bank to make money already. Why will banks spoil the relationship when they are already making so much money with Sabana now?

ESR will not be 20% owner of the new internal manager, who is wholly owned by the trust. If you can't understand this point, I don't think we cannot go forward in this conversation.

Also kindly advise how many change of control of REIT managers have there been on SGX in the past 20 years? Interested to know your source of information.

They can do it 2 ways 

1) The trustee holds the internal manager for the full benefit for all unitholders. 

So the unitholders fully own the REIT manager indirectly. 

or 

2)  stapled security, whereby one share of the REIT manager is stapled with one share of the REIT. i.e if you have 10% of the REIT, you also have 10% of the REIT manager.

Up to how the trustee wants to do it.

So yes, unitholders will directly or indirectly own the manager in the proportion of their shares in Sabana REIT.

There have been more than 10 change of control of REIT manager. 
Go read Quarz letter. 

They even have a table showing this.

[steadyvalue]

From the Quarz website

Video on how to vote.
https://www.youtube.com/watch?v=QAF0ttV-G2M


We welcome and invite all Sabana unitholders to join our Webinar on Monday 31st of July 2023 at 7.30pm
to understand how VOTING FOR Resolution 1 and 2 can increase DPU, unit price and corporate governance at Sabana REIT!

Unitholders will also fully own the Internal REIT Manager together!

We will comprehensively address that the manager's claims are baseless, the internalization is well established with strong and legal safeguards to protect unitholders
Link to webinar: https://us02web.zoom.us/j/88970799227
(Meeting ID 889 7079 9227)

Please contact/whatsapp us: +65 8684 6968 for any assistance.

[weijian]

There have been more than 10 change of control of REIT manager. 
Go read Quarz letter. 

They even have a table showing this.

Hi steadyvalue,
Would you be able to point us towards which table it is? There are quite substantial letters at savesabana.com and I am not able to find this table.

In general, I believe there has been many changes in control of REIT manager (eg. previous manager selling out to ESR at Sabana REIT) but they are generally due to friendly M&A, and not hostile change of control.

[dreamybear]

There's a table on page 2 in the 27 Jul doc :

QUARZ CAPITAL ISSUES OPEN LETTER TO THE UNITHOLDERS, MANAGEMENT AND BOARD OF SABANA REIT (SGX: M1GU)
https://links.sgx.com/FileOpen/Quarz%20O...eID=766682
".... Throughout the 21-year S-REIT's history, the banks have consistently extended their support to new REIT manager and/or manager ownership changes in the more than 10 change of control situations....

[TABLE]

...."

[weijian]

There's a table on page 2 in the 27 Jul doc :

QUARZ CAPITAL ISSUES OPEN LETTER TO THE UNITHOLDERS, MANAGEMENT AND BOARD OF SABANA REIT (SGX: M1GU)
https://links.sgx.com/FileOpen/Quarz%20O...eID=766682
".... Throughout the 21-year S-REIT's history, the banks have consistently extended their support to new REIT manager and/or manager ownership changes in the more than 10 change of control situations....

[TABLE]

...."

hi dreamybear,

Thanks a lot. There seems to be a precedent on the local exchange for an internalization of the REIT manager. It was done by Croesus Retail Trust back in 2016.

I took a quick look at that:

(1) CRT had to pay 50mil to purchase over the manager and then internalize it. So it is not exactly apple-to-apple comparison here where the REIT manager will be voted off, before setting up a totally new team to take over. Before the new team is ready, the old team will be the interim manager (Question: Can the old team reject the interim appointment? Or for the sake of its parent ESR's 20+% stake, it should stay on I reckon). IIRC, it is almost impossible to vote off the manager for a Trust as it requires 75% to pass, but easier for a REIT manager at 50%.

(2) So because the CRT paid up, the Sponsor continued to provide it ROFR for any future asset injections. But with the Internal Manager, we can assume that the assessment for any asset purchases from its ex-owners (ie. the Sponsor), will be more than the typical "at arms length" now..  If ESR is voted off, I wonder how will Sabana REIT be able to scale up in future? There isn't any friendly party to buy from.

CRT internalization proposal in 2016:
https://links.sgx.com/FileOpen/CRT_Inter...3B302N20MV

I wonder if any past CRT shareholders had anything to share about whether the actual tangible benefits (cost reduction, DPU increase) as espoused, actually happened? CRT shareholders received a GO 1 year later and was delisted in 2017. So we were not able to observe the actual effects.

[CY09]

"friendly buyer" should not happen in business. Its the one who gives the most value. If the representative who is disposing the asset accepts a lower price than other offers, the representative is not acting in the best interest of the company and pherhaps should consider a political career to join a political party who has been in the news for its members' lack of integerity and ethics.

"Discussion at arm's length", valuations are there to ensure sales are done fairly. Among the industrial buildings in Singapore, there are still many individual landlords looking to sell, OKH global is 1 such listed company who is trying to offload its logistics assets

In the unlikely case that there are no industrial land owners selling assets in a private treaty purchase, Sabana could consider bidding for Government land sales project and hire/work with industrial land developers such as Boustead projects to have new assets to be injected

[steadyvalue]

What was particularly interesting in Quarz webinar was the future potential of the internal manager to be a platform and manage other property portfolios and earn even more fees for all unitholders. Like Capitaland and Keppel.

But they say that the focus to improve DPU and share price to 53 cents above.

I like the idea, is a win win for shareholders.

Its an even better deal that croesus as shareholders there have to buy manager for 50m.

But now sabana shareholders get the internal manager for 3-5m. No wonder Sabana manager coming up with so much rubbish to stop this as they know the chicken that lays the golden egg is going to shareholders now 

Voting YES to owning the manager