Sabana Shari'ah REIT

[ghchua]

Hi weijian,

Nothing surprising, since Quarz Capital is selling to their partner Volare Capital.
https://links.sgx.com/1.0.0/corporate-an...8c974ce676

[sgmystique]

Inputs from Havard Chi on a chatgroup that I am a part of:
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Hi guys, sorry for the delay in response. 🙏

Its abit close to what XYZ mentioned, this 2% is held by an investor under a very loose advisory model. He was already a Sabana unitholders and approached us during the Sabana merger in 2020. At the point, the emphasize was to vote in a bloc to defeat the low ball merger. As we had much more input into how the investor voted in EGMs/AGMs, we counted the units together in line with regulation.

Subsequently, we and the investor both bought more units around 0.35 - 0.4 in early 1H2021 when Black Crane exited. That was how he achieved built a more than 2% stake. The investor also tendered some units into the partial offer by Volare in 2023.

As we will soon be subjected to more trading restrictions, it would be rather unfair if this specific investor was to be bound by these restrictions as well. 

As such, the decision was taken to close this loose advisory relationship and the investor was interested to sell part of the stake. 

We are not privy to the discussions, but we believe that the buyer potentially wanted a bigger stake due to the undervaluation.
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For us, the strategy remains the same. We are currently in the admin process now. I think Mr ABC and DEF would second this, we have been been mostly busy with the legal work for the MAS license application to support the trustee in pushing forward with the internalization process.
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Once this part is done, we can finally push forward with the plans to increase DPU and unit price

[weijian]

Charlie was voted down in an EGM requisited by Team Quarz/Volare. So I would assume he represents Team ESR. This may be the best outcome for both teams after suffering ~10mil of collateral damage.

If this eventually transpires, it will demonstrate the stickyness of the AUM business model. Of course, also plenty of lessons for the existing asset managers to learn from to prevent future "AUM leakages".

Former Sabana Reit director Charlie Chan, other unitholders requisition EGM to seek sale of assets

THE manager of Sabana Industrial Real Estate Investment Trust (Sabana Reit : M1GU 0%) has received a requisition notice for an extraordinary general meeting (EGM) from unitholders owning over 10 per cent of the trust.

https://www.businesstimes.com.sg/compani...ale-assets

[CY09]

I do think with in fighting, dissolving the company and asset strip might be the best outcome.
If an EGM does come, my 2 cents is vote for an asset sale. Given the book value of 50 SG cents and 36.5 cents share price, it is quite a good return point.

The proceeds can be invested into other better performing REITs

<Not vested in Sabana REIT, however very afraid of how ESR runs its REITs and treats it like a piggy bank to extract money, not a good parent similar to OUE/Lippo>

[CY09]

I am reading the full requistion notice by Former Sabana Reit director Charlie Chan and his group, I have a question

https://links.sgx.com/FileOpen/Sabana%20...eID=830723

Why would this group of shareholders ask for a price discovery process to happen now? At the end of January each year, Sabana REIT would have received the valuation of its properties by Savillis and C&W which is updated as of the end of the preceding year. What could be done is instead of a price discovery process be requistioned, is for a disposition mandate similar to Manulife US REIT be done as part of EGM agenda.

Manulife US REIT sets that any sale has to be at most 15% lower than the market price/valuation of the asset only. Sabana REIT shareholder could have just asked for such a dispostion mandate to quicken the process instead of dragging out a price discovery process.

[weijian]

hi CY09,

These guys manage millions to billions. So when one of them does something we think doesn't make sense, it is generally us who hasn't had enough sense. Of course, we don't put these guys on a pedestal with halo effects. But generally their action make sense (to me) and reflect something closer to the truth of matters.

For a start, let's have ChatGPT to define for us what does "price discovery" means (in italics):

The price discovery process is the mechanism through which buyers and sellers interact to determine the market price of a good, service, or financial instrument. It reflects the balance between supply and demand.

The above definition should make very clear how different a price discovery process is to a year end valuation report. The former involves a buyer and a seller to interact via a 3rd party (agent) for a market price. The latter involves solely an owner paying a 3rd party (valuer) for a valuation price. So naturally, a few questions come up --> Are the 2 prices - market price and valuation price - very similar? If they are, why is there a need to "duplicate" it via additional time/costs? So isn't the alternate obvious by now?

And finally, if Charlie belongs to the ESR camp, then it costs nothing to "drag the process". Matter of fact is as the process drags on, the interim property manager which they own, continues to charge the relevant fees. So the longer it drags, the more beneficial to them, isn't it?

[CY09]

Hi Weijian,

That's where I am wondering for the second last para, unless the appointed Singapore valuers are doing fraudulent calculations, their valued report can be used as a reference and immediately the company can conduct a sale process to get bids and if they fall within the acceptable range, a sale is done (similar to how the government does its land sales). This is a very efficient and quick process as opposed to the price discovery method and the commission involved is the only cost.

Your last para is something I am trying to hide as "read between the lines". A disposition mandate quickens the process and reduces the time and how things will drag on. If what you said in the last para is reality and there is a conflict of interest, I would openly say it shows how unethical Charlie and ESR are as being the group of shareholders who are asking for the EGM.

[weijian]

hi CY09,

I will advise against using the F and U words, which may invite unnecessary attention. In my paragraphs, I am just stating facts but the F and U words can be construed as opinions.

When Mr Market assigns a discount to market valuation. He could be wrong or right but more often than not, Mr Market is approximately correct. A good example would be the big discount between Avarga (holding company) and the portion of Taiga shares Avarga owns. After relevant taxes and liquidation costs, the real discount is multiple folds smaller than the numerically calculated discount. After accounting for loss of control, the numerical discount that Mr Market gave could actually be wrong (too little discount)!

Now back to Sabana REIT. A good way to judge the valuation would be to see whether they have recently sold assets at above/below last market valuation. If they are consistently selling at below NAV, then we can make our judgement from there. I did a quick check and did not see any significant asset sales by Sabana REIT in the last 3-5years, hence there isn't a reliable track record to judge.

IMHO, I think OPMIs vested in Sabana REIT or not, would be hoping that this EGM resolution passes and allow us some precious learning on a real time basis.