Sabana Reit investors go on offensive, ask for EGM

Sabana Reit investors go on offensive, ask for EGM

Disgruntled investors have ignited a process that could unseat the board of Sabana Real Estate Investment Management and remove it from managing Sabana Shariah-compliant Reit.

A group of 66 investors who hold a combined 0.6 per cent stake in the industrial property trust has asked the Reit manager to convene a meeting to vote on the firm's removal.

They feel the manager is paid too much and want the firm replaced with an in-house management.

The management again defended its performance, stating on Tuesday that its falling annual distribution per unit (DPU) was due to "market conditions" and "policy changes" as master leases expired in 2013.

A date for the extraordinary general meeting has not been fixed but the rules require that it be held within two months of the request.

Three other resolutions will also be put to vote at this meeting, including one that directs the Reit trustee to incorporate an in-house Reit manager to replace Sabana Real Estate Investment Management.

It also calls for a search to be undertaken for qualified candidates to replace the current directors, including chief executive Kevin Xayaraj.

The last two resolutions order Sabana Reit to be wound up if the Reit manager cannot be replaced.

Read also: Angry investors want Reit manager kicked out

Mr Jerry Low, a retired stockbroker who mounted the campaign to fire the Reit manager, believes an in-house Reit manager that does not collect hefty acquisition and divestment fees will be better aligned with investors' interests.

He also disagreed with the management's argument that "market conditions" and "policy changes" as master leases expired in 2013 were behind the trust's lacklustre performance.

"The basis of a competent manager is to anticipate the expiry of master leases and ameliorate such negative effects," he said.

Investors were also vexed by Sabana Reit's decision last December to launch a heavily discounted 42-for-100 rights issue, which it said would fund the purchase of three non-yield accretive properties in Eunos and Changi.

Read also: Investors campaigning for removal of trust manager

After some investors expressed their disapproval, the Reit manager said on Monday that it would use $60 million out of the gross proceeds of $80.2 million from the rights issue to repay a $75 million term loan that comes due in August.

Phillip Capital analyst Richard Leow noted: "The bulk of the cash from the rights issue has been used to repay debt, instead of the debt being refinanced.

"If the manager is unable to secure new borrowings to make the proposed acquisitions, and the proposed acquisitions do not materialise, DPU this year would be materially negatively impacted due to the dilution from the rights issue, and without the offsetting income from the proposed acquisitions."

Sabana Real Estate Investment Management, together with Reit sponsor Vibrant Group, also moved to calm investors last week by embarking on a "strategic review".

The results should be announced in April, they said.

Vibrant Group and related entities hold 12.38 per cent of Sabana Reit.

The wild card if it comes to a vote will be elusive Chinese property tycoon Tong Jinquan, who took up a substantial stake in the Reit in 2014.

Mr Low said people working for Mr Tong have made contact with him but remained silent on his intent. Mr Tong's stake fell from 8.8 per cent to 6.2 per cent on Jan 26 after he chose not to participate in the rights issue.


This article was first published on Feb 09, 2017.
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