Sabana Shari'ah REIT

Sabana REIT, after 2 proposed acquisitions, could yield 10%

With equities taking major hits in recent months and with more volatility expected in the near term, S-Reits have become attractive for their relative stability and high yield.

For example, Sabana Shari'ah Compliant Industrial REIT (88.5 cents) is expected to yield around 10%.

It was the focus of analyst reports after announcing on 11 Sept the proposed acquisitions of 2 Toh Tuck Link for S$39.8m and 3A Joo Koon Circle for S$40.2m.

Both are sale and leaseback transactions on a triple net basis for a term of three years.

Daiwa analyst David Lum CFA estimates that the acquisitions, both scheduled to be completed in 4Q11, would be distribution-per-unit (DPU) accretive.

Daiwa has revised up its DPU forecasts by just over 5% for 2012-13.

[Image: sabana_sept11.jpg]

Can we compare NPI yield across properties ? Surely such a metric depends on the quality of the counter-party, the length of the lease, length of land lease, location of property etc. It would be difficult to imagine why a Manager should acquire higher yielding assets over time ? If Sabana bought a property in some ulu area with a 2 year lease to a near bankrupt lessor and demand 15% NPI yield, it would surely be NPI yield accretive but is it wise ? I don't see much value in using this metric to determine the quality of an acquisition. What do you think ? The true test of Sabana Management quality will be during a major crisis. A number of small cap reits made huge acquisitions in 2007/08 but few survived without destroying investor value ie First REIT, CDLH-T. Let's see whether Sabana will join this esteem group !

(Not Vested in any REIT)

deleted.

bobby is lame. basically one of the unresponisve investor relations.

I am starting to be skepitcal about Sabana's acquisition. These are ulu industrial properties on a sale to leaseback. Would the yield on histroical cost be below the current yield on assets. If i remember it is around 6.77%-7% (have to go back and check.)

Its a low benchmark but should these leasee got problem what will happen then?

(15-09-2011, 12:04 PM)Drizzt Wrote: bobby is lame. basically one of the unresponisve investor relations.

I am starting to be skepitcal about Sabana's acquisition. These are ulu industrial properties on a sale to leaseback. Would the yield on histroical cost be below the current yield on assets. If i remember it is around 6.77%-7% (have to go back and check.)

Its a low benchmark but should these leasee got problem what will happen then?

I have emailed the Phillip analyst with a list of queries and hope to hear back from him. He should have better Management access and needs to know answers to my queries too before he can write his report. Will update again.

2 Toh Tuck Link is considered ulu with poor public transport services.

Issue to check is the current occupancy rates and average lease expiry. Doesn't really matter ulu or not. Since there is 3 year agreement for now. Of course longer term location still matters.

I was at Jurong East and dropped by to take a look at 2 , Toh Tuck link.
Main tenants are Hertel Industry services, Eastward marketing, Tavica logistics , NetBizz office supplies and many others . Few units are being renovated. One basement car park .

the XIRR using net property income after interest should be around 6.77%

I think development projects is the only way to create value in an industrial reit. Sale and leaseback isn't great...especially when the top properties have already been sold years ago to MLT, AREIT, CIT etc.