Sabana Shari'ah REIT

[newbieinvestor]

seems like no one is interested in this log trust?

I guess we are not sure what a "syariah-compliant" reit really mean ? How is it different from other reit ?

Hmm.. is that the reason why there is not much discussion? syariah-compliant means they comply with shariah laws ie no investment in vices-related such as alcohol, tobacco etc they also have strict rules such as a limit of 35% gearing.. Basically it limits the room for growth but at the same time makes the downside risk lesser too.

[Nick]

The tenants must not engage in 'sinful activities' like gambling, alcohol or pork etc. I believe their clients must not exceed a net debt to equity ratio of 33% as well.

I expect a lot of interest from institutional shareholders from Mid East and SEA since this will be the largest Shariah compliant REIT in the region.

(Not Vested)

[Blackjack]

Few reasons why I don't find this reit attractive.

1) No strong sponsor. Freight links as seed sponsor?
2) Shariah compliant business trusts, investment funds etc all pretty new in the market relatively. Not a problem by itself, but skills and experience of fund managers may be relatively weaker compared to counterparts, imho
3) Shariah compliant = limitations. Limitations in investment choices never a good thing. I personally don't buy the argument of limitations = lower volatility and hence risk
4) Profits from non-Shariah compliant businesses need to be donated. Not being a muslim I cannot appreciate this fact that profits are to be donated simply to comply with a constraint
5) I also don't buy the proposition of Shariah compliant = immense funding opportunities from ie Middle East investors. If the investment opportunity is good enough, there is no need to specially cater to a captive audience
6) Ipo issued at above nav? Fail.
7) Shariah compliant biz means every year they probably need to engage some external auditor to make sure their underlying biz are compliant. May lead to many risks building up with this kind of 3-party r/s over time, imho
8) Shariah compliant means its primary appeal towards funds, investors who need to have a mandate on how they invest. Since there are not many alternatives in the market (compared to the entire spectrum of devices), they have to put their money there for reasons of its either-here-or-nowhere.

That said, the last point is probably a double edged sword.

[yeokiwi]

There is at least one nice clause added to align the interest between shareholders and managers.

A performance fee equal to the rate of 0.5% per annum (or such lower percentage as may be determined by the Manager in its absolute discretion) of the Net Property Income of Sabana Shari'ah Compliant REITor the relevant SPVs in each financial year, payable on a yearly basis, provided Sabana Shari'ah Compliant REIT achieves at least 10.0% in annual growth in DPU over the previous financial year (calculated after accounting for the performance fee (if any) for that financial year and after adjusting, at the discretion of the Manager, for any new Units arising from the conversion or exercise of any instruments convertible into Units which are outstanding at the time of calculation, and any rights or bonus issue, consolidation, subdivision or buy-back of Units).


But, since it is so difficult to get the performance fee, the manager may just go for acquisition and divestment fee.haha..

Anyway it is still way better than 3-5% of performance fee that is based on net property income.

[momoeagle]

I ported this over from CNA forums



Comparing AIMSAMPIREIT and Sabana REIT, of which both are Industrial REITS

1) AIMS has a stronger sponsor than Sabana
2) AIMS has a higher yield
3) AIMS price is below NAV while Sabana is around NAV
4) AIMS does not have Shariah Compliant restrictions



Someone mentioned to me:
"I would say Sabana does not really have any influential sponsor, so that Sabana can make its own acquisition decision rather than to listen to some strong bullshiiiit sponsor."

My Reply:
I wouldn't agree with this. It shows to me that Sabana cannot make any decisions at all. However, they have merely the power to suggest what to acquire. The unitholders can at most vote for or against, not decide. No one has the power, no one has the control. In the end, it becomes a vehicle incapable of making and carrying out decisions.

[Stocker]

I ported this over from CNA forums



Comparing AIMSAMPIREIT and Sabana REIT, of which both are Industrial REITS

1) AIMS has a stronger sponsor than Sabana
2) AIMS has a higher yield
3) AIMS price is below NAV while Sabana is around NAV
4) AIMS does not have Shariah Compliant restrictions



Someone mentioned to me:
"I would say Sabana does not really have any influential sponsor, so that Sabana can make its own acquisition decision rather than to listen to some strong bullshiiiit sponsor."

My Reply:
I wouldn't agree with this. It shows to me that Sabana cannot make any decisions at all. However, they have merely the power to suggest what to acquire. The unitholders can at most vote for or against, not decide. No one has the power, no one has the control. In the end, it becomes a vehicle incapable of making and carrying out decisions.

Do you own any of the above counters ?

[yeokiwi]

Both AIMS and Sabana are so-so REITs.
On paper, AIMS probably has the better figures(NAV to price ratio,yield and supposedly stronger sponsor). But, the management quality and behaviour of AIMSAMPIREIT is less than desired.

It is too early to tell how the management of Sabana REIT will behave but for AIMSAMPIREIT, I think that the management is not too concerned about the unitholders' interest.

Unless there is some very compelling reason, I suppose I will not touch AIMSAMPIREIT due to the management behaviour.

The same concern is also applied to other stocks. I think there was a discussion on the Tuan Sing's management behaviour towards minority shareholders. Tuan Sing is a highly undervalued stock but the price that it is selling now probably reflects more of the management rather the value of the properties.

[cfa]

((Copied from CNA forum.))

http://forum.channelnewsasia.com/viewtop...32#4066832


Posted: Sun Dec 05, 2010 11:14 am Post subject:

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momoeagle wrote:
Comparing AIMSAMPIREIT and Sabana REIT, of which both are Industrial REITS

1) AIMS has a stronger sponsor than Sabana
2) AIMS has a higher yield
3) AIMS price is below NAV while Sabana is around NAV
4) AIMS does not have Shariah Compliant restrictions


momoeagle wrote:
"I would say Sabana does not really have any influential sponsor, so that Sabana can make its own acquisition decision rather than to listen to some strong bullshiiiit sponsor."
I wouldn't agree with this. It shows to me that Sabana cannot make any decisions at all. However, they have merely the power to suggest what to acquire. The unitholders can at most vote for or against, not decide. No one has the power, no one has the control. In the end, it becomes a vehicle incapable of making and carrying out decisions.


shade343 wrote:
What nonsense and bulllshiiit. Cambridge was perfectly able to secure good loans without a strong sponsor back then. And they only issued a small percentage of new shares at a small discount to NAV to shore up the balance sheets compared to AIMS which diluted all of their existing sharrholders value by issuing new shares to George Wang and following it up with another rights shares.

1) AIMS is NOT a strong sponsor. They are just fund managers and they buying up Macarthurcook means nothing. There is no guarantee that they will come in and save the reit when things go awry.

2) When you include the 16cents/share you need to fork out twice for the rights isuue. The yield is much lesser than that. EVerybody conveniently forgets that Capital has a cost. There is no guarantee there wont be another round of rights issue from the REIT. Unitholders will end up having to fork out more capital to prevent themselves from being diluted.

3) The valuations done by the REIT is subjective. Back in 2009, In the acquisitions of properties from AMP Capital, AMP Capital sold those properties at full valuations to the REIT and shareholders had no say in it. So they are still carried on the books at full value.

4) That just means they do have access to Oil/Cash Rich Middle Eastern Investors and Islamic Financing facilities which shuts them out of the lucrative world of Islamic Investing and Financing.

You have shown to the world how ignorant you are by spouting nonsense that Sabana cant make influential decisions. THE MANAGEMENT OF THE REIT ALWAYS HAVE THE RIGHT TO MAKE BUSINESS DECISIONS ON BEHALF OF THE REIT WITHOUT THE NEED TO CONSULT THEIR UNITHOLDERS AS LONG AS THEY CONFORM TO THE CODE OF COLLECTIVE INVESTMENTS.

IN FACT, NOT HAVING A STRONG SPONSOR IS BETTER AS RECENT DEVELOPMENTS IN THE MARKET SHOWS THAT THE SO CALLED "STRONG SPONSORS" TEND TO BROKER LOTS OF INTERESTED PARTIES TRANSACTIONS FOR THE REITS THEY MANAGE.


momoeagle wrote:
There's always the risks and suspicion that sponsors dump assets to their REITs at high price. It is the standard, the yardstick, used here to denounce other REITs.

Yet with that in mind, why didn't anyone question on Freightlinks dumping their assets at high price to Sabana?

The NAV after IPO of $1.05 is $0.99.
Purchasers at IPO price would be buying something that is more expensive than the NAV. Putting it in another perspective, it would be a purchase above valuations.

So I really wonder, when people are complaining about sponsors dumping assets at high prices to REITs, have they ever wondered about an asset dump to IPO purchasers of Sabana REIT?



shade343 wrote:
IPO, It's Probably Overpriced, probably applies to most IPO REITs.

6cents above the NAV is hardly a high price to pay considering that you stupid AIMSAMPREIT unitholders voted in favour to sell new shares at a 52cents per share discount to the NAV to George Wang, AIMS and AMP Capital. PLus you guys voted in favour to buy up industrial properties from AMP at their full cost.

And 6cents above the NAV is a small price to pay knowing that your Investment will be the favoured reit of choice when Islamic funds comes knocking on the door. On top of that, obtaining your reit now have 2 forms of banking facilities to choose from when it comes to refinancing options. Islamic Banking and Traditional Banking.

If Sabana was considred high price, why did Metro, Innotek, Fidelity, Bank of Bahrian buy into it? Why didnt they buy into your AIMS?

Putting it in perspective for AIMSAMPreit unitholders, its like being poked twice in the backside. YOu dilute your shareholdings by selling out your value to George Wang, and later on you are forced to fork out more capital so that your REIT can buy over the industrial properties from AMP Capital at full valuations.

I would strong urged all people to relook the history of AIMSAMPREIT before buying into it.

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[Nick]

Is there a need to cut and paste comments from another forum ?

With regards to sponsor vs unsponsor REITs/Trust, it doesn't make much difference. There is nothing to stop Managers from acquiring properties at high valuation to beef up his fees - does it matter where he gets those assets from ? As unit-holders, you should aim to purchase unit as low valuation to form a margin of safety. There are good and bad REIT Managers - time is needed to see who add value and who destroy value.

As for the yield difference between AIMS and Sabana...it isn't much. Just 1% difference. The high yield reflects the short life span of industrial properties which will be handed over freely (if no lease extension) back to the State upon lease expiry. I think its the same for trust dealing with infrastructure assets.

[momoeagle]

It's weird how some people are turned off by paying for rights to buy properties near valuations,
yet are so comfortable with paying for an IPO that is clearly greater than it's NAV.