Sabana Shari'ah REIT

[weijian]

This is a mess...
Directionally, internalisation makes sense.  But Quarz makes few errors in how they executing it, IMHO.
These include:
2) accusing/ implying ESR having no integrity. This makes ESR have to fight them to save their own reputation
3) I think Quarz didnt have a side talk with ESR to buy or sell their stake in REIT. Now is impossible due to (2)
Passing all the resolutions proposed in coming EGM will not solve the issue and likely will only lengthen the pain, unless MAS step in.  Best is either ESR or Quarz exit.

hi header,
I think (3) is probably not probable. Quarz owns ~14% and ESR owns slightly over 20%. If Quarz were to acquire the entire 20% stake from ESR, it would cross 30% and would trigger the threshold for a mandatory general offer. This means Quarz needs to extend the entire offer to everyone else. They could then jolly well end up with >50% and Sabana REIT becomes their subsidiary.

Quarz is in the business of buying undervalued assets, not managing asset with low ROA. ESR is in the business of managing AUM and so it will not be selling without a good price (whether is it the asset manager or their AUM)

[ghchua]

Takeaways from Sabana REIT's March 8 EGM as cost and complications bite
https://www.theedgesingapore.com/news/re...tions-bite

Clearly, for investors, what has been missing from the local S-REIT regime is education on the structure of S-REITs. For instance, not all unitholders are aware of the differences between the Business Trust Act 2004 and the Code on Collective Investment Schemes (CIS) Property Funds.

I guess the differences between a Business Trust structure like Croesus Retail Trust and Property Funds like Sabana REIT had been the contention of the discussions here previously. I think some unitholders do know the differences, but they simply refused to accept the trustee's interpretations of the trust deed.

[weijian]

Most of these questions are about cost, which I think is missing the big picture. I guess it hurts for REIT owners to retain capital and not to distribute out as dividends?

IMHO, when facing "an opponent", one has put on their shoes and think like them. If one insists on own stance without considering the other party's position/thoughts, then most of the actions may actually come to naught.

QUESTIONS / COMMENTS RAISED AT THE EXTRAORDINARY GENERAL MEETING HELD ON 8 MARCH 2024

Question: Unitholder No. 8 inquired the rationale as to why the Trustee is not excluding the votes of interested parties at the EGM to propose amendments to the Trust Deed. He expressed his concern that this key issue is not being addressed.

Answer: The Trustee explained that it notes Unitholders’ differing views on this issue, but the issues should be considered sequentially. Since the Trustee’s position is that amendments to the Trust Deed are required, it intended to obtain clarity on that issue first via the Order 32 process before moving on to the question of voting.

https://links.sgx.com/FileOpen/Sabana%20...eID=795005

[weijian]

The base rate for white collar office employee annual turnover is ~10-20%. A 47.6% turnover probably means that the staff are looking for new jobs back at the parent ESR, I suppose.

1Q 2024 INTERIM BUSINESS UPDATE

Total resignation rate since 7 June 2023 (Receipt of requisition notice) to 15 April 2024 stands at 47.6%
• The Manager has hired replacements for the various roles, of which about 26.7% of these positions have been filled by new hires; The Manager will continue to proactively hire to fill vacancies

https://links.sgx.com/FileOpen/Sabana_%2...eID=796594

[ghchua]

SGX RegCo had spoken. All parties can vote on Trust Deed Amendments, if an EGM is needed to implement internalisation.

https://links.sgx.com/1.0.0/corporate-an...92f8a23cfa

[Shiyi]

Looks like game over for Quarz and REIT internalisation process.
Two-thirds of votes required for the amendments of the Trust Deed. No way for the sponsor to support internalisation.

[ghchua]

Looks like game over for Quarz and REIT internalisation process.
Two-thirds of votes required for the amendments of the Trust Deed. No way for the sponsor to support internalisation.

Hi Shiyi,

Not yet, the game is still on.

Reason being the main contention is whether Trust Deed Amendments for internalisation needs to be voted by unitholders via an EGM.

SGIC (includes Quarz) and trustee each has different interpretations of the above. The matter is now to be settled by the Court.