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Victorious Spirit Self Talk
asianguy
Senior
26-Apr-2022 22:18     
 
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 Alert Admin 		Repost letter from  QUARZ CAPITAL
 


STATEMENT BY QUARZ CAPITAL 

 

HISTORIC WIN FOR INDEPENDENT UNITHOLDERS AND FOR CORPORATE GOVERNANCE IN SINGAPORE


Dear fellow Sabana unitholders,

 

We thank all Sabana independent unitholders for uniting again to protect our interests  together.

 

Similar to the vote down of the value destructive merger in Dec 2020, this is the first time in  S-REIT history that unitholders successfully voted against the endorsement of a director.

 

Nearly 80% of all independent unitholders who voted, overwhelmingly rejected the  endorsement of Chan Wai Kheong (&ldquo Chan&rdquo ) &ndash a big win for corporate governance.

 

It cannot be clearer that independent unitholders have no confidence in the decision of  Wong Heng Tew and Tan Cheong Hin to appoint Chan.

 

Unitholders expect the endorsement of any future independent director to be done  promptly at an EGM instead of a nearly one-year wait where important decisions and  confidential information can potentially be leaked and made at the potential expense of  Sabana unitholders.

 

Nearly 70% of all independent unitholders who voted, also overwhelmingly rejected the DRP  and the unit issue mandate as they do not trust Sabana REIT Manager&rsquo s ability to execute.

 

Sabana REIT still has the worst vacancy rate among SGX-listed industrial REITs. Two assets  have remained completely vacant for years. The occupancy rate at 151 Lorong Chuan and  10 Changi South Street 2 are far below national average.   he manager&rsquo s continuing weak  execution cost unitholders at least 5-10% of lost DPU yearly.

 

The Board and CEO continues to come up with &lsquo excuses&rsquo for their lapses. It is shocking that  they now want a mandate to raise capital from unitholders.

 

It is becoming clearer that the 2 resolutions are potentially deemed to be tabled just for ESR  and their concert parties. It is because without their votes, these 2 resolutions would have  been overwhelmingly voted down by independent unitholders.

 

- What is the ulterior motive of the manager to issue new units when there is still so much to  be done at the current portfolio, Sabana&rsquo s REIT low leverage of 34.8% and the weak M& A  track record of the manager (Geo Tele which was sold at S$100m by the Sabana manager is  now valued by Capitaland at S$280m, costing unitholders S$0.17 in NAV (32%)?

 

- Might the unit issue mandate be done to potentially issue units to parties friendly or affiliated with  ESR Cayman and their concert parties at the   potential expense of independent unitholders?

 

- Are Tan Cheong Hin and Wong Heng Tew potentially eager to please the ESR Cayman owned  Sabana Manager who has made both of them one of the most highly paid director and  Chairman of any S-REITs despite the weak execution of the manager?

 

Given the successive decisions made by the board which mainly benefit ESR Cayman and its  concert parties to the detriment of Sabana independent unitholders, (such as actively  promoting the value destructive merger, appointing Chan Wai Kheong, making unitholders  bear the full cost of the failed merger, DRP and unit issue resolutions which independent  unitholder overwhelmingly vote against ), we believe that Wong Heng Tew and Tan Cheong  Hin should think about resigning or putting themselves up for endorsement for independent  unitholders to demonstrate their independence.

 

In order to protect all independent unitholders against any potential dilutive placements at  low prices which can be potentially issued to parties friendly to ESR Cayman which can be  highly detrimental to the interest of Sabana independent unitholders, Quarz hereby gives  notice to the Sabana REIT manager of our strong interest to subscribe and participate in any  placements that may be undertaken by the Manager. We request to be notified and to be  able to participate in any proposed private placements.

 

We remind the board of directors and Sabana REIT Manager of their fiduciary and statutory  duties to prioritize the interest of unitholders over those of the REIT Manager and its  shareholders.

 

Any deliberate action to preclude substantial independent unitholders from the placements  can be considered as a breach of your fiduciary and statutory duties.

 

We also reiterate that we would only consider any offers for our stake if it is offered to all  independent unitholders and above NAV.

 

Quarz is fully aligned with all independent unitholders!

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gohmengt
Member
20-Apr-2022 18:31     
 
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 Alert Admin 		LongXia, common stop the show lah,...only troublesome thing is the face of director when voted out lah...
Down again? UP LAH, can read? ESR price? Cam down from 0.485 before failed merger to 0.415 and NAV is 0.37 now? i think its clear lah which is the troublesome company? hahahah

LongXia      ( Date: 20-Apr-2022 12:14) Posted:

Down again... such a troublesome company..
should have merge with ESR, so easy to get loans nowadays and at very good rates too.
 

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Jufo23
Member
20-Apr-2022 14:59     
 
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 Alert Admin 		haha, true lah....
By the way, last days to vote right now....
Send email to:  [email protected] !!!
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moonsun
Veteran
20-Apr-2022 14:46     
 
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 Alert Admin 		This present Singapore in a very unfavorable light. SGX and MAS might have to act to be deem as more fair to protect singapore as a financial centre.. :) bad news for those not so independent directors ?.

Jufo23      ( Date: 20-Apr-2022 13:37) Posted:

Great Bloomberg Neww article. Closer look at Sabana, and all the mismanagement comes to light.......

Singapore Investors Are Polite, But No Longer Pushovers
REITs have become the battleground between controlling and minority shareholders, with activist investors leading the charge 
By Andy Mukherjee
 
(Bloomberg Opinion) --  Corporate bosses could always count on Singapore&rsquo s  culture of obedience to herd small investors into lowball mergers or take-private  deals. No longer. Shareholders are fighting back, with real estate investment trusts emerging as the battleground for activists to take on managers.
It&rsquo s a welcome development. REITs pool investors&rsquo   money and raise debt to own  property. They pass on most of the rental revenue  and gains on sales  &mdash   after  maintenance expenses, management fees, property levies  and interest costs &mdash   as dividends. To the city&rsquo s wealthy but aging population, these tax-efficient investment vehicles have an  intuitive appeal.
But Singapore&rsquo s  favorite asset class has  a governance problem.  By wielding outsize influence on the managers of trusts  &mdash   which are often  privately owned operations &mdash     REIT  sponsors  are able  to push an agenda that may not always be in the best interests of minority investors. Yet, thanks to activists like Swiss value investor Jan Moermann, such  maneuvers  are  no longer guaranteed to win. 
In December 2020, Moermann&rsquo s  Quarz Capital Management Ltd. and Hong Kong-based Black Crane Capital persuaded shareholders  to  vote down  the  proposed all-stock merger  of Sabana Shari&rsquo ah Compliant Industrial REIT with  ESR-REIT, a  larger rival. ESR Cayman Ltd., a Hong Kong-based  owner and developer of logistics assets, controls the manager of ESR-REIT while being the largest unit holder in Sabana REIT. The manager of Sabana, which owns warehouses and other industrial properties,  had recommended to investors  that they accept the offer  even though it was 25% below the book value of their shares. 
From  South Korea  to  India, shareholder activism in Asia has tended to run into nationalist outrage-mongering. Singapore is different. While a  questioning culture may be new to the island-state, openness to foreign money and ideas is ingrained. Which is why the  first defeat of an undervalued Singapore REIT merger became a watershed, emboldening  even local investors to adopt  a somewhat more confrontational stance.
After two trusts linked  to Singapore state investor  Temasek Holdings Pte. announced a  S$4.2 billion ($3.1 billion) tie-up  last  December, David Gerald, the president of the city&rsquo s two-decade-old Securities Investors Association, shot off a  press statement, asking the manager if  unit holders of Mapletree North Asia Commercial Trust wouldn&rsquo t  be better served by only considering a merger at an offer price above net asset value. Following  Moermann&rsquo s activism  and Gerald&rsquo s letter, Mapletree Commercial Trust &mdash   the acquirer  &mdash   added a pure-cash option to the all-scrip and scrip-plus-cash menu, effectively sweetening its offer.
Going beyond special situations such as buyouts and mergers, activist investors are  shining  a light on the process by which a  REIT manager in Singapore arrives at any financing decision,  scrutinizing it for its potential to add or destroy value. To that end, Moermann is once again  engaged in a war of words with Donald Han, the chief executive officer of the manager of Sabana Industrial REIT. (It has dropped its  Shari&rsquo ah Compliant tag so it can own  industrial  properties that don&rsquo t necessarily follow  Islamic principles.)
The manager wants shareholders to approve a dividend reinvestment plan,  issuance  of new shares, and appointment of Charlie Chan, a former Credit Suisse Group AG trader, as an independent director. Quarz, the second-largest investor  in Sabana, says  in a  YouTube video  that it has serious doubts about Chan&rsquo s independence as he has had financial dealings with ESR Cayman, the REIT&rsquo s controlling shareholder, in the past.
Besides,  according to Bloomberg data, Chan  is the fifth-largest shareholder of Aims  Apac  REIT, a  rival to Sabana in which ESR Cayman again owns the biggest stake. Han has  responded  by saying that Chan&rsquo s dealings with ESR Cayman took place before it became a sponsor of  Sabana. Chan told the Business Times that he&rsquo s just a shareholder in Aims Apac, and not  a  &ldquo kingmaker&rdquo .
Moermann&rsquo s team is also asking shareholders to vote against the proposed equity dilution. As one of  Singapore&rsquo s more lightly leveraged  REITs, Sabana  can  always raise additional  debt. In an e-mail reply to my questions, Han said that while the trust has &ldquo substantial headroom&rdquo to borrow, it' s crucial to have more options available in order  to act on  new opportunities should  they arise.
So far, however, Quarz&rsquo s advice to Sabana shareholders has been on the money: Since  the merger fell through, the stock has given a  total return of 44%, the third best among all Singapore REITs. And while the manager may be  right about the need to scale up the trust,  it won&rsquo t hurt to  improve its track record of extracting value from  existing assets. Sabana sold a six-story data center for S$99.6 million in cash in January 2019. Two years and a renovation later, 9, Tai Seng Drive  had won a  certificate for environmental-friendlinessand was valued by the new owner  at S$280 million.
Han says  that  data centers require  high capital expenditure to develop and specialized expertise &mdash which Sabana didn&rsquo t have &mdash to manage them. Additionally, a  Singapore government moratorium  on new data centers in 2019 altered the demand-supply situation, a development that  the REIT manager couldn&rsquo t possibly have foreseen. The sale proceeds were used, among other things, to add a  new retail and F& B component  to the trust&rsquo s flagship technology park. However, Quarz says the per square foot cost of this enhancement was even higher than building a new mall on Orchard Road, Singapore&rsquo s main shopping district. 
Whatever the outcome of the April 26 shareholder meeting, Quarz&rsquo s advocacy  has already led to an improvement in how intermediaries  report the votes  of investors in respect to the shares in their custody. The city&rsquo s  &ldquo one proxy rule&rdquo   used to present  a distorted picture of shareholders&rsquo intention by preventing  banks and brokers from submitting  two separate aggregate values  of &ldquo for&rdquo and &ldquo against&rdquo votes by their customers. The usual practice was to simply report the difference in the winning side&rsquo s favor. Now that custodians have to supply both values in the proxy form, dissent in M& A situations has  a fairer shot  at success. 
Next year will mark the 10th anniversary of a  penny-stock scandal  that sapped the confidence of Singapore investors. Over the past decade, the  stock  market  has seen daily turnover shrink  at a compounded annual rate of 1%. REITs have been  a rare bright spot, and shareholders are doing their bit to protect its sheen: The increasingly keen contests  over everything from price to proxy suggests that the city-state&rsquo s  polite investors are no longer pushovers. But regulators have a role, too.  Making  REIT managers  more accountable to all unit holders &mdash   and not just the sponsor &mdash   is the obvious next step.     

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Jufo23
Member
20-Apr-2022 13:37     
 
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 Alert Admin 		Great Bloomberg Neww article. Closer look at Sabana, and all the mismanagement comes to light.......

Singapore Investors Are Polite, But No Longer Pushovers
REITs have become the battleground between controlling and minority shareholders, with activist investors leading the charge 
By Andy Mukherjee
 
(Bloomberg Opinion) --  Corporate bosses could always count on Singapore&rsquo s  culture of obedience to herd small investors into lowball mergers or take-private  deals. No longer. Shareholders are fighting back, with real estate investment trusts emerging as the battleground for activists to take on managers.
It&rsquo s a welcome development. REITs pool investors&rsquo   money and raise debt to own  property. They pass on most of the rental revenue  and gains on sales  &mdash   after  maintenance expenses, management fees, property levies  and interest costs &mdash   as dividends. To the city&rsquo s wealthy but aging population, these tax-efficient investment vehicles have an  intuitive appeal.
But Singapore&rsquo s  favorite asset class has  a governance problem.  By wielding outsize influence on the managers of trusts  &mdash   which are often  privately owned operations &mdash     REIT  sponsors  are able  to push an agenda that may not always be in the best interests of minority investors. Yet, thanks to activists like Swiss value investor Jan Moermann, such  maneuvers  are  no longer guaranteed to win. 
In December 2020, Moermann&rsquo s  Quarz Capital Management Ltd. and Hong Kong-based Black Crane Capital persuaded shareholders  to  vote down  the  proposed all-stock merger  of Sabana Shari&rsquo ah Compliant Industrial REIT with  ESR-REIT, a  larger rival. ESR Cayman Ltd., a Hong Kong-based  owner and developer of logistics assets, controls the manager of ESR-REIT while being the largest unit holder in Sabana REIT. The manager of Sabana, which owns warehouses and other industrial properties,  had recommended to investors  that they accept the offer  even though it was 25% below the book value of their shares. 
From  South Korea  to  India, shareholder activism in Asia has tended to run into nationalist outrage-mongering. Singapore is different. While a  questioning culture may be new to the island-state, openness to foreign money and ideas is ingrained. Which is why the  first defeat of an undervalued Singapore REIT merger became a watershed, emboldening  even local investors to adopt  a somewhat more confrontational stance.
After two trusts linked  to Singapore state investor  Temasek Holdings Pte. announced a  S$4.2 billion ($3.1 billion) tie-up  last  December, David Gerald, the president of the city&rsquo s two-decade-old Securities Investors Association, shot off a  press statement, asking the manager if  unit holders of Mapletree North Asia Commercial Trust wouldn&rsquo t  be better served by only considering a merger at an offer price above net asset value. Following  Moermann&rsquo s activism  and Gerald&rsquo s letter, Mapletree Commercial Trust &mdash   the acquirer  &mdash   added a pure-cash option to the all-scrip and scrip-plus-cash menu, effectively sweetening its offer.
Going beyond special situations such as buyouts and mergers, activist investors are  shining  a light on the process by which a  REIT manager in Singapore arrives at any financing decision,  scrutinizing it for its potential to add or destroy value. To that end, Moermann is once again  engaged in a war of words with Donald Han, the chief executive officer of the manager of Sabana Industrial REIT. (It has dropped its  Shari&rsquo ah Compliant tag so it can own  industrial  properties that don&rsquo t necessarily follow  Islamic principles.)
The manager wants shareholders to approve a dividend reinvestment plan,  issuance  of new shares, and appointment of Charlie Chan, a former Credit Suisse Group AG trader, as an independent director. Quarz, the second-largest investor  in Sabana, says  in a  YouTube video  that it has serious doubts about Chan&rsquo s independence as he has had financial dealings with ESR Cayman, the REIT&rsquo s controlling shareholder, in the past.
Besides,  according to Bloomberg data, Chan  is the fifth-largest shareholder of Aims  Apac  REIT, a  rival to Sabana in which ESR Cayman again owns the biggest stake. Han has  responded  by saying that Chan&rsquo s dealings with ESR Cayman took place before it became a sponsor of  Sabana. Chan told the Business Times that he&rsquo s just a shareholder in Aims Apac, and not  a  &ldquo kingmaker&rdquo .
Moermann&rsquo s team is also asking shareholders to vote against the proposed equity dilution. As one of  Singapore&rsquo s more lightly leveraged  REITs, Sabana  can  always raise additional  debt. In an e-mail reply to my questions, Han said that while the trust has &ldquo substantial headroom&rdquo to borrow, it' s crucial to have more options available in order  to act on  new opportunities should  they arise.
So far, however, Quarz&rsquo s advice to Sabana shareholders has been on the money: Since  the merger fell through, the stock has given a  total return of 44%, the third best among all Singapore REITs. And while the manager may be  right about the need to scale up the trust,  it won&rsquo t hurt to  improve its track record of extracting value from  existing assets. Sabana sold a six-story data center for S$99.6 million in cash in January 2019. Two years and a renovation later, 9, Tai Seng Drive  had won a  certificate for environmental-friendlinessand was valued by the new owner  at S$280 million.
Han says  that  data centers require  high capital expenditure to develop and specialized expertise &mdash which Sabana didn&rsquo t have &mdash to manage them. Additionally, a  Singapore government moratorium  on new data centers in 2019 altered the demand-supply situation, a development that  the REIT manager couldn&rsquo t possibly have foreseen. The sale proceeds were used, among other things, to add a  new retail and F& B component  to the trust&rsquo s flagship technology park. However, Quarz says the per square foot cost of this enhancement was even higher than building a new mall on Orchard Road, Singapore&rsquo s main shopping district. 
Whatever the outcome of the April 26 shareholder meeting, Quarz&rsquo s advocacy  has already led to an improvement in how intermediaries  report the votes  of investors in respect to the shares in their custody. The city&rsquo s  &ldquo one proxy rule&rdquo   used to present  a distorted picture of shareholders&rsquo intention by preventing  banks and brokers from submitting  two separate aggregate values  of &ldquo for&rdquo and &ldquo against&rdquo votes by their customers. The usual practice was to simply report the difference in the winning side&rsquo s favor. Now that custodians have to supply both values in the proxy form, dissent in M& A situations has  a fairer shot  at success. 
Next year will mark the 10th anniversary of a  penny-stock scandal  that sapped the confidence of Singapore investors. Over the past decade, the  stock  market  has seen daily turnover shrink  at a compounded annual rate of 1%. REITs have been  a rare bright spot, and shareholders are doing their bit to protect its sheen: The increasingly keen contests  over everything from price to proxy suggests that the city-state&rsquo s  polite investors are no longer pushovers. But regulators have a role, too.  Making  REIT managers  more accountable to all unit holders &mdash   and not just the sponsor &mdash   is the obvious next step.     
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moonsun
Veteran
20-Apr-2022 12:20     
 
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 Alert Admin 		I think its clear that ESR wanted to get Sabana at cheap cheap price.. lets stop this for benefits of retail investors..
so many conflict of interest.. not independent director etc.. vacant building not lease out.. why ?
Voted AGAINST!
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LongXia
Veteran
20-Apr-2022 12:14     
 
LongXia About Contact  Quote this Post!  
Yells: "BBs never say why when they buy, never tell when they sell!!"
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 Alert Admin 		Down again... such a troublesome company..
should have merge with ESR, so easy to get loans nowadays and at very good rates too.
 
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Jufo23
Member
18-Apr-2022 15:00     
 
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 Alert Admin 		Saw this post on Quarz' s campaign wbsite, strong message. Fully agree with it: 

We thank Ben for his strong expertise in simplifying and explaining difficult topics (in ways we are not able to do)

DRP and new unit issue at below NAV are hugely dilutive to unitholders. The main reason why Sabana' s NAV has not recovered more is the 2x DRP at $0.42 when NAV is at $0.52.

As the article points out, only 29% of unitholders (ESR and Tong holds 24% unitholding) voted for the DRP while 17% rejected. This means that the overwhelming majority of unitholders reject DRP.

As only 31% of unitholders elected DRP instead of cash, most of the DRP is taken up by ESR and Tong at unitholders' expense. In essence, the resolution seems to be done seemingly to issue units at cheap price mainly to the sponser and its friend.

We also strongly reject the new unit issue mandate. A potential messy and badly executed acquisition with a new unit issue (rights/placement) at a sharp discount to Sabana' s current price can potentially crash Sabana' s price back to < $0.40.

This would TOTALLY DESTROY WHAT UNITHOLDERS HAVE WORKED TOGETHER FOR in the last 2 years. As alot of unitholders remember from the 2017 days, there' s no stopping a rights/placement and acquisitions once unitholders have given the manager the mandate.

Quarz believe that NOW IS NOT THE TIME for DRP and new issue unit. Let' s focus on filling vacant space and improve DPU and unit price and we can think of this later.

We hope all unitholders can VOTE AGAINST RESOLUTIONS 3, 4, 5 with us. Lets send a strong message, Unitholders are Watching Sabana REIT Manager!

Focus on improving the portfolio and deliver our DPU and unit price upside before we will trust you!
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gohmengt
Member
18-Apr-2022 14:42     
 
gohmengt About Contact  Quote this Post! Style: Fundamental   Mood: excited
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 Alert Admin 		LongXia U always trying to discredit lah,..go invest in ur diamond ESR lah and leave sabana,...what side ur on,...clearly ESR

LongXia      ( Date: 18-Apr-2022 12:30) Posted:

Such a troublesome company... always fight fight fight, vote against la, low ball la, ...
There are better REITs to invest, like salmon ESR. Going to move soon.
Don' t waste your time, this time. It needs only 50% + 1 vote for the resolutions to go through.
if the resolutions do not go through, means no confidence in the company and price will go
to below 40 eventually....
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laksaman57
Supreme
18-Apr-2022 14:03     
 
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 Alert Admin 		Quartz has proven itself to be aligned with unitholder interest & helped the reit to higher NAV, share price & performance.
Let' s follow their lead to VOTE AGAINST resolution (3), (4) & (5). 
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GoldenPig
Veteran
18-Apr-2022 13:13     
 
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 Alert Admin
" The results of Sabana Reit' s last AGM - held on Apr 27, 2021 - suggest that most unitholders actually did not vote for the DRP. In fact, the majority of them did not vote at all.
   
Less than 490.8 million Sabana Reit units were voted at last year' s AGM on the resolution to authorise the manager to allot and issue new units under the DRP. Of that, 303.6 million units were voted in favour of the resolution while 187.2 million were voted against it.
   
Given that investors holding an overwhelming majority of Sabana Reit' s units have demonstrated a preference to receive their distributions in cash, it seems strange that its manager is trying to perpetuate a DRP that would have a dilutive impact on them."

The above extract shows that the writer is not exactly unbiased. The writer noted that the majority of shareholders did not vote at all and chose to interpret that this majority did not want a DRP. I was among that majority that did not bother to vote. I was busy with other things. Had I chosen to vote, I would have voted for the DRP. But I am also fine with either outcome. If I were really against it, I would make sure I voted against it. 

An unbiased interpretation would indicate that only 187.2 million shares are really against a DRP and voted against it. The majority of shares are either For it or fine with either outcome.
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laksaman57
Supreme
18-Apr-2022 12:41     
 
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 Alert Admin 		Back in 2017, althought the reit mgr was not voted out, resolution to authorise reit mgr to issue new share was thrown out.
After that, the reit value started to improve and its share price started to recover, proving that it was the right move.
Unitholders confidence improved & relaxed to re-authorised the issue of new share.
But alas the latest low-ball ' merger' should wake up unitholders to re-instate the cancellation of the authorisation to issue new shares.
This will help focus the reit toward improving the low occupancy rate of the high vacany properties.

Unitholders need to be active in steering this reit with their votes.

https://www.businesstimes.com.sg/companies-markets/sabana-unitholders-vote-to-keep-underperforming-manager
" Sabana unitholders vote to keep underperforming manager ...but resolution to authorise Reit manager to issue shares is thrown out,..."

 
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LongXia
Veteran
18-Apr-2022 12:30     
 
LongXia About Contact  Quote this Post!  
Yells: "BBs never say why when they buy, never tell when they sell!!"
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 Alert Admin 		Such a troublesome company... always fight fight fight, vote against la, low ball la, ...
There are better REITs to invest, like salmon ESR. Going to move soon.
Don' t waste your time, this time. It needs only 50% + 1 vote for the resolutions to go through.
if the resolutions do not go through, means no confidence in the company and price will go
to below 40 eventually....
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Jufo23
Member
18-Apr-2022 10:34     
 
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 Alert Admin 		That' s a very unbiased and informative article by BT about Charlie' s Angels (aka Sabana)....  angel
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Joelton
Supreme
18-Apr-2022 09:57     
 
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 Alert Admin
Sabana Reit tussle shifts to the pros and cons of its distribution reinvestment plan
Units issued at a discount under the DRP are having a dilutive impact on investors who own most of the Reit
 
THE manager of Sabana Industrial Reit (Sabana Reit) and activist investor Quarz Capital Management have been working hard to win over investors ahead of what is likely to be a contentious annual general meeting (AGM) on Apr 26.
 
Quarz is rallying unitholders of Sabana Reit to withhold their endorsement of former Credit Suisse trader Chan Wai Kheong as an independent director refuse its manager the mandate to issue new units and put a stop to its distribution reinvestment plan (DRP).
 
The manager of Sabana Reit is urging unitholders to support all the resolutions that will be tabled at the AGM, arguing that they are crucial to its plans to enhance and grow the real estate investment trust (Reit).
 
The war of words is beginning to generate more heat than light though. In particular, the chief executive of Sabana Reit' s manager Donald Han was quoted last week by The Business Times saying " anyone who' s against the idea (of DRPs) has got other ulterior motives" .
 
As an investor who is ambivalent about DRPs, I thought it worthwhile to delve into this provocative statement.
 
My purpose is not to influence how unitholders of Sabana Reit vote at the upcoming AGM, but to promote a debate on what I think is an important issue for investors.
 
The way I see it, companies that offer DRPs should explain what they plan to do with the cash that is accumulated and why their boards did not simply declare a smaller dividend payout in the first place.
 
More importantly, investors should generally not vote for a DRP unless they intend to take advantage of it.
 
DRPs - good or bad?
 
Let me begin by explaining my misgivings about DRPs.
 
Dividends are the portion of a company' s earnings that its board and management have decided does not need to be retained in order to sustain and grow its business.
 
So, assuming the company had made an honest determination of how much it could afford to pay as dividends, the implementation of a DRP would only result in it accumulating unneeded cash that weighs down its return on equity.
 
This broadly applies to Reits too. While some Reit managers privately grumble that having to distribute nearly all their distributable income in order to qualify for tax transparency treatment leaves them with limited financial flexibility, all Reits carry substantial debt on their balance sheets to boost their profitability and distributions per unit (DPUs).
 
Assuming a Reit has a robust portfolio and a sustainable capital structure, a DRP would only result in it needlessly issuing new units and accumulating idle cash - which would ultimately erode its DPU.
 
In short, the motives of companies and Reits that offer DRPs - which are a stealthy form of capital raising - should be closely scrutinised.
 
DRPs make somewhat more sense from the perspective of investors, though.
 
Investors who own a particular stock or Reit are likely to be positive about its prospects, and inclined to keep reinvesting in it. A DRP is a fuss-free and cost-effective way to do this.
 
Over long periods of time - assuming the underlying stock or Reit performs well - investors who reinvest the cash distributions they receive would come out well ahead of investors who simply pocket the income.
 
During the 10-year period up to end-2019 - before the pandemic started - the FTSE ST Reit Index delivered a total return of 123.3 per cent on a non-dividend-reinvested basis, but 175.7 per cent on a dividend-reinvested basis.
 
During the 5-year period up to Apr 14 - despite some Reits not having fully recovered from pandemic - the FTSE ST Reit Index has returned 40.8 per cent on non-dividend-reinvested basis, and 45.4 per cent on a dividend-reinvested basis.
 
DRP dilution
 
Yet, investors should be wary of the prices at which any new shares or units are issued under the DRP of a company or Reit.
 
Companies and Reits that offer DRPs while their shares or units are trading at depressed levels are effectively putting income-oriented investors at a disadvantage.
 
Case in point: Sabana Reit distributed nearly S$16.9 million - or S$0.0157 per unit - with respect to its H2 FY2021.
 
On Jan 28, the Reit' s manager said new units issued under its DRP would be priced at S$0.4265 apiece. This was a 2 per cent discount to Sabana Reit' s volume-weighted average traded price adjusted for its H2 FY2021 DPU during the 10 market days to Jan 28.
 
It was also a nearly 18 per cent discount to Sabana Reit' s net asset value (NAV) as at end-2021 of S$0.52 per share.
 
Despite this steep discount to NAV, Sabana Reit' s manager said on Mar 21 that only 12.2 million new units would be issued under the DRP - increasing the Reit' s total outstanding units from nearly 1,070 million to more than 1,082.1 million.
 
That means only about 31 per cent of Sabana Reit' s outstanding units tapped the DRP. The remaining 69 per cent would have received their distribution in cash, and suffered the dilutive effect of Sabana Reit issuing new units to their fellow unitholders under its DRP at a steep discount to NAV.
 
Ulterior motives?
 
This brings me back to Han' s co-lourful statement about investors opposing the DRP having ulterior motives.
 
Why would unitholders of Sabana Reit vote for a DRP that they had no intention of tapping and that would have a dilutive impact on them?
 
The results of Sabana Reit' s last AGM - held on Apr 27, 2021 - suggest that most unitholders actually did not vote for the DRP. In fact, the majority of them did not vote at all.
 
Less than 490.8 million Sabana Reit units were voted at last year' s AGM on the resolution to authorise the manager to allot and issue new units under the DRP. Of that, 303.6 million units were voted in favour of the resolution while 187.2 million were voted against it.
 
Given that investors holding an overwhelming majority of Sabana Reit' s units have demonstrated a preference to receive their distributions in cash, it seems strange that its manager is trying to perpetuate a DRP that would have a dilutive impact on them.
 
Surely, it would be fairer to the majority of Sabana Reit' s unitholders if the DRP were stopped - at least until the Reit' s units garner a stronger market valuation. The small proportion of unitholders who want to reinvest their distributions in more Sabana Reit units could still purchase existing units in the market.
 
Unitholders of Sabana Reit who prefer to receive their distributions in cash should vote against the DRP resolution at the upcoming AGM. And, they should let the Reit manager know they have no ulterior motives. The DRP is simply not in their best interests.
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laksaman57
Supreme
18-Apr-2022 09:04     
 
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 Alert Admin 		Investors who bought Sabana REIT with CPF, should make the effort to go to their respective banks to submit their proxy forms.
Gentle reminder of potential bank's one-proxy rule.
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moonsun
Veteran
18-Apr-2022 07:55     
 
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 Alert Admin 		👍 vote against resolution too..
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mrwise
Supreme
18-Apr-2022 00:08     
 
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 Alert Admin 		Yes!  Voted Against Resolution 3, 4 and 5!


 

laksaman57      ( Date: 16-Apr-2022 09:37) Posted:

Done. Voted AGAINST resolution 3,4 & 5 💪

Jufo23      ( Date: 15-Apr-2022 11:44) Posted:

Stop being distracted! the main issue is to vote chan out and stop the issue of new shares!!

Otherwise a bad merger offer or rights might come!!

and unitholders will have to hold the bag again

Vote against resolutions 3 4 and 5 and submit soon! closing date is approaching
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gohmengt
Member
16-Apr-2022 14:52     
 
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 Alert Admin 		Sabana Board: Not independent, proposing bad mergers to help big bro ESR get assets cheap lah,...cmon they think unitholders are stupid!!!!
Sabana Management: Not independent, donnie is fishing in his own pond my little birdie tells me, promote the lady lahcheeky,...we all know what is going on,...another drama?...I bet Quarz dont even know lah,...
--> sit back and enjoy the show!

LongXia      ( Date: 13-Apr-2022 14:44) Posted:

Sometimes damage control is more damaging....

the market, black or white, is not stupid.... today price drops....
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gohmengt
Member
16-Apr-2022 14:46     
 
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 Alert Admin 		Ikan billis smart enough lah, knows when salmon wants to swallow it cheap lah,...look at the shareprice lah,...market tells you your birdie is wrong,...

LongXia      ( Date: 15-Apr-2022 23:46) Posted:

Can an ikan bilis ever grow to be as big as a salmon? Obviously no.
once an ikan bilis will always be an ikan bilis. 
instead of helping the management to grow the company, they just interested in petty stuff.
these resolutions are ordinary resolutions, need only 50% plus 1 vote.
my little birdie tells me, 100 % all the resolutions will be passed......
if not, below $0.40 awaits
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