Sabana Shari'ah REIT

[piggo]

It means they limit their potential tenants to businesses that fulfills the holy holy oh so holy beliefs of shariah.

This is extracted from Sabana-reit's home page. Click here

"Specifically, Sabana REIT is required to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities which are non-permissible under the Shari'ah Guidelines, which include activities relating to conventional financial and insurance services, gaming, non-halal production, tobacco-related products, non-permitted entertainment activities and stock-broking in non-compliant securities does not exceed 5.0% per annum of the gross revenue of Sabana REIT's portfolio of properties."

I was browsing their portfolios and it seems that being an industrial reit, it is highly unlikely that their lessees, tenants and or sub-tenants will bust their 5% threshhold. It may be easier for their limits to be reached in the case of retail i suppose. Dun think their business is limited by the shariah compliance at this point. Just my 2 cents worth.

Vested.

Thanks for pointing it out! Pays to read the finer lines It's based on total rental income, 5% may be hard to exceed for 1 tenant... but not so when combined. So they are still limiting themselves on "income opportunities" regardless of how good a deal it may be as compared to other industrial REITs. Not a good mix with the usual logic behind investing (i.e maximising returns).

[cfa]

1Q DPU downed 22% to 1.88 cents.

Singapore, 16 April 2014 – Sabana Real Estate Investment Management Pte. Ltd., the Manager of Sabana Shari’ah
Compliant Industrial Real Estate Investment Trust (“Sabana REIT” or the “Trust”), today announced a DPU of 1.88
Singapore cents for the quarter from 1 January 2014 to 31 March 2014, a 22.0% dip from the quarterly DPU
generated in 1Q 2013. This corresponds to an annualised distribution yield of 7.05%, based on an annualised DPU
of 7.62 Singapore cents and a closing price of S$1.080 per Unit on 15 April 2014.
Chief Executive Officer and Executive Director of the Manager, Mr Kevin Xayaraj said, “The decline in DPU in 1Q
2014 is reflective of more difficult and challenging market conditions. Our results for 1Q 2014 have been affected
by the conversion of four master‐tenanted properties into multi‐tenanted properties in 4Q 2013, which led to a
significantly lower overall occupancy rate for our multi‐tenanted properties.

[Dividend Warrior]

1Q DPU downed 22% to 1.88 cents.

Singapore, 16 April 2014 – Sabana Real Estate Investment Management Pte. Ltd., the Manager of Sabana Shari’ah
Compliant Industrial Real Estate Investment Trust (“Sabana REIT” or the “Trust”), today announced a DPU of 1.88
Singapore cents for the quarter from 1 January 2014 to 31 March 2014, a 22.0% dip from the quarterly DPU
generated in 1Q 2013. This corresponds to an annualised distribution yield of 7.05%, based on an annualised DPU
of 7.62 Singapore cents and a closing price of S$1.080 per Unit on 15 April 2014.
Chief Executive Officer and Executive Director of the Manager, Mr Kevin Xayaraj said, “The decline in DPU in 1Q
2014 is reflective of more difficult and challenging market conditions. Our results for 1Q 2014 have been affected
by the conversion of four master‐tenanted properties into multi‐tenanted properties in 4Q 2013, which led to a
significantly lower overall occupancy rate for our multi‐tenanted properties.

This shows how important Master tenants and their "Triple Net Lease" structure are to an industrial REIT.

[Singapore_guru]

It's going to get worse with further rolling off of head leases.

Their plan to divest under-performing assets is also going to be challenging - limited buyers $30mill & beyond

[Singapore_guru]

Sustainable net income is the most important thing investors need to understand - evaluating underlying market gross rent & operating expenses against 'triple net' leasebacks in addition to making allowances for vacancy

Prudent investors would have seen the writing on the wall with Sabana

[Greenrookie]

My blog write-up on Sabana:

Sabana release its Q1 results.

Q1 DPU is 1.88 cents is lower than the 2 cents that I projected.

2 cents is already 10% fall of DPU from Q4, and 20% fall in Q3.

Although Gross rent is more or less stable, the costs of converting to multi-tenants is really horrible, and out of control.

When Sabana has 100% Master leases, NPI is about 0.94 time of GPI.

I expect NPI to be 0.8-0.85 times of GPI, since more than half of its leases are still master leases, but it is 0.75 times of GPI

So, the fall is not one-off. The cost of fall is recurring. From QR:

(b) Property expenses increased by 394.4% mainly due to:

(i) Property and lease management fees incurred for the Acquisition Property;
(ii) Higher property tax, maintenance, utilities and applicable land rent expense, in line with the increase
of directly managed multi-tenanted properties from one in 1Q 2013 to six in 1Q 2014;
(iii) Higher property management fees in line with the higher revenue from 151 Lorong Chuan; and
(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

In line with the higher property expenses, net property income decreased by 9.2%

——————————

With exception of (i), the rest are recurring.

All this is not the worst yet, given how badly they control “costs” of transition from Master tenants to Multi-tenants, they have master leases out for renewal again in 2014 and almost everything up for renewal in 2015.

With its “wonderful” track record, and current low yield as compared to other proven industrial reits (Acendas has yield of about 6.8%), there is nothing left anymore.

Not sure how much school fees I will pay for this, but its time to say goodbye.

Lesson?

Who says management is secondary to business? Industrial space rental business is straight forward business.

I didn’t take into consideration:

(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

(i) is unnecessary, yes, GPI will fall even further, but NPI for Q3 andQ4 remain the same despite higher GPI from Chai Chee, so Chai Chee from whatever is a highly value destroying venture, which can’t even be yield neutral. It is giving negative yield.

Good bye.

I hope readers bought it cheap. I am quite sure the price will fall very badly tomorrow.

[Dividend Warrior]

My blog write-up on Sabana:

Sabana release its Q1 results.

Q1 DPU is 1.88 cents is lower than the 2 cents that I projected.

2 cents is already 10% fall of DPU from Q4, and 20% fall in Q3.

Although Gross rent is more or less stable, the costs of converting to multi-tenants is really horrible, and out of control.

When Sabana has 100% Master leases, NPI is about 0.94 time of GPI.

I expect NPI to be 0.8-0.85 times of GPI, since more than half of its leases are still master leases, but it is 0.75 times of GPI

So, the fall is not one-off. The cost of fall is recurring. From QR:

(b) Property expenses increased by 394.4% mainly due to:

(i) Property and lease management fees incurred for the Acquisition Property;
(ii) Higher property tax, maintenance, utilities and applicable land rent expense, in line with the increase
of directly managed multi-tenanted properties from one in 1Q 2013 to six in 1Q 2014;
(iii) Higher property management fees in line with the higher revenue from 151 Lorong Chuan; and
(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

In line with the higher property expenses, net property income decreased by 9.2%

——————————

With exception of (i), the rest are recurring.

All this is not the worst yet, given how badly they control “costs” of transition from Master tenants to Multi-tenants, they have master leases out for renewal again in 2014 and almost everything up for renewal in 2015.

With its “wonderful” track record, and current low yield as compared to other proven industrial reits (Acendas has yield of about 6.8%), there is nothing left anymore.

Not sure how much school fees I will pay for this, but its time to say goodbye.

Lesson?

Who says management is secondary to business? Industrial space rental business is straight forward business.

I didn’t take into consideration:

(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

(i) is unnecessary, yes, GPI will fall even further, but NPI for Q3 andQ4 remain the same despite higher GPI from Chai Chee, so Chai Chee from whatever is a highly value destroying venture, which can’t even be yield neutral. It is giving negative yield.

Good bye.

I hope readers bought it cheap. I am quite sure the price will fall very badly tomorrow.

Hi Greenrookie, are you divesting Sabana tomorrow?

[Singapore_guru]

Anyone think they did the AGM before Q1 results to avoid the 'hard questions' of a big drop in DPU??

Management can't be trusted

[cfa]

Overpaid the properties, in exchange for a higher rental master lease , now the tide goes out and the shits hit the fan.

[gutman]

Just divested all my holdings in Sabana, which I have held for 3+ years.