Sabana Shari'ah REIT

[CY09]

Purely my own opinion, the vacancy rate at Sabana is about the same as the industrial property segment (11.3%). If ESR is buying based on its ability to improve the vacancy rate, it has to mean that ESR's management is confident on its own ability to attract more tenants (same skill level as Mapletree or Ascendas) or it is hoping for an uptick of the industrial segment to boost vacancy rate.

http://www.jtc.gov.sg/industrial-propert...-rate.aspx

Based on what JTC is painting, i doubt there will be an impending uptick for the industrial properties segment. Evidence by Table 2, a significant amount of industrial space area built during the recent boom has not been filled up; on the contrary, more spaces seem to be added to the vacancy pool. With Singapore not growing that rapidly, I wont be surprised to see higher vacancy rates in the near term. If i were ESR, I will wait for 1-2 more years, wait for Sabana to revalue its property lower then snap it out.

From the JTC table, it also reminds me of the days when Industrial developers (e.g Oxley) used to make sales pitches telling people to buy an industrial unit as they can obtain rental yields of 6-8%; and now when I go around Ubi, these units are completed and vacant