THE manager of Sabana Industrial Real Estate Investment Trust (Sabana Reit) has received a requisition notice for an extraordinary general meeting (EGM) from unitholders owning over 10 per cent of the trust.
In a bourse filing on Friday (Jan 17), the manager said it is considering the requisition notice and consulting with the trustee, as well as seeking legal advice.
The letter was submitted by Chan Wai Kheong, better known as Charlie Chan, and seeks to pass three resolutions.
The first resolution asked for trustee HSBC Institutional Trust Services (Singapore) and the manager to commence and undertake a price discovery process, with a view of “achieving a possible sale of all or majority” of the Reit’s assets.
The former independent non-executive director, together with the unitholders, also requested that the trustee and/or the manager appoint an “internationally reputable” firm of property consultants “with a track record” of selling Singapore industrial properties to oversee the price discovery process.
They noted that the fees of the consultants should be based on market rates and be paid to them on a “success basis” after the transaction is approved by unitholders.
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Any reimbursable out-of-pocket expenses incurred by the consultants during the process should be capped at S$8,000, the group added.
Lastly, they also asked Sabana Reit’s trustee and manager to complete the price discovery process within three months from the passing of the resolutions.
“Significant costs”
The unitholders had called for the EGM as they believe “significant costs” have been and continue to be incurred by the Reit in relation to the internalisation process.
Citing Sabana Reit’s third-quarter business update, the unitholders pointed out that the manager and trustee have incurred cumulative expenses of S$10.9 million.
“Given the costs incurred and to be incurred in connection with the internalisation, about 10 per cent of distributable income for H1 2024 was retained for prudent capital management and further retention may be required for subsequent periods, which will result in a reduction in distribution per unit (DPU),” they noted.
The group also cited the poor performance of Sabana Reit’s unit price and DPU as a reason for requisitioning an EGM.
The Reit’s unit price has fallen by 17.4 per cent with a total return of negative 8.1 per cent from Jun 7, 2024, to Nov 29, said the unitholders.
During this period, the Reit’s DPU also dipped to S$0.0249 as at Jun 30, 2024, down 18.9 per cent from S$0.0307 in the previous year. The decline was mainly attributed to costs incurred during the internalisation process.
The unitholders also pointed out the “poor trading liquidity” of Sabana Reit, which results in unitholders being “unable to realise their investments” in the trust without impact on its unit price.
They also noted that refinancing costs will potentially increase amid the trust’s bond issuance.
In June last year, the Reit’s trustee issued S$100 million in aggregate principal amount of 4.15 per cent sustainability-linked guaranteed bonds due 2029. A guarantee was provided by trust fund Credit Guarantee and Investment Facility.
The unitholders expect costs incurred to come in at about 1 per cent per annum and aggregate costs to be about 5.15 per cent per annum.
Moreover, refinancing costs and capitalisation rates for valuation are likely to rise amid a higher-for-longer interest rate environment, they noted. This would thus result in a lower DPU and net asset value for the Reit, the group added.
Therefore, they believe that a price discovery process would “allow the true intrinsic value of the Sabana assets to be uncovered”.
Units of Sabana Reit were trading 2.7 per cent or S$0.01 lower at S$0.355 after the midday trading break on Friday.
