SABANA Industrial Reit&rsquo s substantial shareholder Volare Group on Friday (Jan 20) launched a voluntary conditional offer to acquire an additional 10 per cent of Sabana units at S$0.465 per unit.

 

The offer price represents a premium of 9.4 per cent over the volume-weighted average price on Jan 20 it is also respectively 8.6 per cent, 9.7 per cent and 6.9 per cent over the volume-weighted average price during the one, two and six-month periods preceding Jan 20.

 

Volare, which holds 5.4 per cent of issued units in Sabana, is a Switzerland-incorporated entity with various businesses. Its subsidiary, Oel-Pool SG, is one of Switzerland&rsquo s leading suppliers of fossil fuels, and operates over 700 petrol stations together with its unit, Moveri.

 

Volare&rsquo s other business lines include vehicle care, wood production and trade, construction services and investments in real estate.

 

The group said it is launching the partial offer to diversify its business away from fossil fuels and build up its real estate portfolio.

 

Sabana&rsquo s units are thinly traded, Volare noted, which prevents it from acquiring units from the open market efficiently, and prevents larger unitholders from selling. It believes the partial offer presents a good opportunity for unitholders to monetise their holdings.

 

Quartz Capital, which had slammed a controversial potential merger between Sabana and larger rival ESR-Reit in 2020, called Volare&rsquo s offer attractive.

 

&ldquo The offer is at an attractive premium of over 34 per cent over the lowball implied-merger offer of S$0.348 recommended by the Reit manager in Dec 2020 (one Sabana unit for 0.94 times ESR-Reit unit),&rdquo said Quarz Capital Asia&rsquo s head of research, Havard Chi.

 

&ldquo Unitholders get to eat twice &ndash pocket the coming dividend and also tender at the attractive offer.&rdquo

 

Chi said Sabana faces a number of serious challenges. Its occupancy rate has remained below that of its peers and the national average, and its unit price consistently trades at a large discount to its net asset value.

 

&ldquo Given the attractive offer, we believe it might make sense that unitholders tender part of their units at a good price to a strong independent unitholder, and also retain some to vote against the manager,&rdquo he said.

 

On Oct 20, Sabana Real Estate Investment Management CEO Donald Han, acquired 100,000 units of Sabana Industrial Reit : M1GU 0% at 40 cents per unit.

 

This increased his direct interest from 0.01 per cent to 0.02 per cent.

 

A real estate veteran, Han has experience covering most sectors of the property market, including industrial, having spent more than 30 years in various senior management and advisory positions.

 

His experience ranges from residential agency to collective en bloc, office investment sales to retail leasing, regional hospitality, and hotel disposition to international project marketing.

 

On Oct 19, Sabana Industrial Reit provided a Q3 2022 business update. It achieved a portfolio occupancy of 92.2 per cent excluding 1 Tuas Avenue 4, which is undergoing an asset enhancement initiative.

 

Its positive 10.2 per cent rental reversion in Q3 2022 was its 10th positive quarterly reversion in the past 11 quarters.

 

Under its asset enhancement initiatives, the manager of the Reit has proposed a plan to convert 1 Tuas Avenue 4 into a new warehouse and logistics facility, subject to approval from the relevant authorities.

 

The manager added that it is concurrently in discussions with several prospective tenants, such as third-party logistics companies and/or other users, and that the new facility will incorporate green and smart features.

 

FOR the trading sessions that spanned Oct 21 to 27, the Straits Times Index (STI) declined 0.3 per cent, with the Hang Seng Index falling 6.1 per cent and the FTSE Bursa Malaysia KLCI gaining 0.5 per cent.

 

Overall, institutions were net sellers of Singapore stocks for the four sessions ended Oct 27, with just over S$100 million of net outflows, following the S$40 million of net outflows for the preceding five sessions. This put the 2022 year-to-Oct-27 net institutional inflows at just over S$460 million.

 

UOB : U11 +4%, Jardine Matheson Holdings : J36 +0.68%, Singtel : Z74 +1.66%, DBS : D05 +2.96%, and Sats : S58 -1.52% led the net institutional outflows for the period.

 

Meanwhile, CapitaLand Integrated Commercial Trust : C38U -1.56%, OCBC : O39 +1.78%, Yangzijiang Shipbuilding (Holdings) : BS6 -2.42%, Sembcorp Marine : S51 +3.28% and Singapore Airlines : C6L -0.39% led the net institutional inflows for the four trading sessions.

 

Share buybacks

 

There were 20 primary-listed stocks conducting share buybacks over the four sessions ended Oct 27, with a total consideration of S$10.4 million, a figure lower than the preceding week&rsquo s S$14.3 million.

 

Yangzijiang Financial Holding : YF8 -4.41% led the four-session buyback consideration tally, purchasing 7.5 million shares at an average price of 33.9 cents per share. The company has bought back 6.44 per cent of its issued shares (excluding treasury shares) on the current mandate, as of Oct 27.

 

Olam Group : VC2 0% bought back 1.75 million shares at an average price of S$1.29 per share.

 

Nanofilm Technologies International also bought back 300,000 shares at an average price of S$1.75 per share. In its previous buyback mandate, the leading provider of nanotechnology solutions in Asia purchased 1.09 per cent of its shares, with the current mandate seeing the company buy back 0.38 per cent of its issued shares as of Oct 21.

 

Director and substantial shareholder transactions

 

The four trading sessions saw approximately 40 changes to director interests and substantial shareholdings filed for more than 20 primary-listed stocks. This included 11 company director acquisitions with three disposals filed, while substantial shareholders filed five acquisitions. 

SABANA Industrial real estate investment trust&rsquo s (Reit) third quarter 2022 occupancy has hit a high of 89.1 per cent, a level not seen since Q3 2017. Without 1 Tuas Avenue 4, which is undergoing asset enhancement, total occupancy would have been 92.2 per cent.

 

The Reit : M1GU -1.22% has signed 83,588 square feet (sq ft) of new leases and renewed 71,266 sq fft of leases. The renewals come with a positive 10.2 per cent rental reversion, Sabana Reit&rsquo s 10th positive quarterly reversion since the first quarter of 2020. But the rental reversion is lower than 17.4 per cent for the second quarter of 2022

 

The weighted average lease expiry for Q3 2022 stands at 2.7 years, a dip from 2.8 years for Q2 2022.

 

The bulk of the borrowings for the Reit (73.3 per cent) are on fixed rates and the weighed average fixed debt expiry of 2.2 years. The aggregate leverage ratio for Sabana Reit stands at 33.7 per cent.

 

There is a proposal to convert 1 Tuas Avenue 4 into a brand new warehouse and logistics facility, subject to approval from the authorities. There are ongoing discussions with prospective tenants for the property.

 

&ldquo As we forge ahead, we are doing our utmost to manage our costs, optimise our funding sources, and seize opportunities that will enhance our portfolio resilience,&rdquo said Donald Han, chief executive officer, Sabana Industrial Reit manager.

SABANA Industrial Real Estate Investment Trust : M1GU +2.3% (Sabana Reit) on Wednesday (Jul 20) posted a distribution per unit (DPU) of S$0.0159 for the first half of its fiscal year ended June, up 7.4 per cent from S$0.0148 in the corresponding year-ago period. 

 

Donald Han, chief executive of Sabana Reit&rsquo s manager, said that the company has &ldquo improved&rdquo on its portfolio value over the past 6 months, which has translated to a higher net asset value per unit and higher net property income. &ldquo Together, these have enabled us to reward unitholders with a higher DPU,&rdquo he added.

 

&ldquo We&rsquo ve been in pole position in the industrial real estate investment trust (Reit) space in Singapore,&rdquo Han said at a briefing accompanying the results announcement.

 

He noted that Sabana Reit had outperformed key indices in the first 6 months of the year, with its unit price rising 2.3 per cent for a total return of 5.8 per cent for H1. In comparison, the benchmark Straits Times Index (STI) dipped 0.7 per cent from January to June 2022, while the iEdge S-Reit Index declined 6.1 per cent and the FTSE ST All-Share Reit Index retreated 5 per cent.

 

Gross revenue for H1 was up 14.7 per cent year on year to S$44.9 million from S$39.1 million, due primarily to higher a portfolio occupancy of 88.2 per cent &ndash which in turn came largely on the back of a newly secured 10-year master lease for 30 and 32 Tuas Avenue 8. 

 

H1&rsquo s portfolio occupancy was also 4.8 percentage points higher than in the same period last year, and the highest level since Q3 2017. Excluding 1 Tuas Avenue 4, which is being activated for a major asset enhancement initiative (AEI), the overall occupancy for H1 would have been 91.3 per cent. 

 

Property expenses for the period slipped 33.1 per cent year on year to S$17.8 million from S$13.4 million, while net property income rose 5.2 per cent to S$27 million from S$25.7 million. 

 

Total amount available for distribution came in at S$17.1 million, some 9.6 per cent higher from the previous year&rsquo s S$15.6 million. 

 

Han noted that Sabana Reit&rsquo s proactive leasing efforts have also resulted in sustained rental reversions. 

 

Sabana Reit&rsquo s rental reversion for H1 came in at 9.1 per cent. The 17.4 per cent rental reversion for Q2 is the 9th positive quarterly reversion in the past 10 quarters, which Han said is &ldquo consistently among the highest within the Singapore industrial Reit sector&rdquo . He said the Reit has also delivered a return on investment of 5.8 per cent for H1, despite volatile market conditions. 

 

Han said Sabana Reit aims to achieve an upsized portfolio valuation of more than S$1 billion between 2025 and 2027. 

 

Sabana Reit has also strengthened its tenant mix, which now includes a higher proportion of tenants from more resilient sectors such as electronics and healthcare. The Reit has 151 tenants across 14 sectors, which it said ensures &ldquo cash flow resilience&rdquo . 

 

Sabana Reit&rsquo s manager also continues to proactively engage existing tenants ahead of lease expiries, and has successfully renewed 55 per cent of leases expiring in FY2022. 

 

As at end-June, aggregate leverage stood at 33.4 per cent, and weighted average all-in cost of borrowing was 3.35 per cent. The Reit&rsquo s weighted average debt maturity stands at 3.3 years, with no outstanding loans maturing in 2022 and 2023. 

 

Amid a rising interest rate environment, the Reit manager guided that every potential 20 basis point (bps) increase in interest rates could result in a 0.5 per cent reduction in DPU per annum, or a decline of S$0.0001.

 

Looking ahead, Han said the Reit has activated a major asset enhancement initiative (AEI) at its property at 1 Tuas Avenue 4, which will be converted into a high-specification logistics facility with a gross floor area of about 165,000 square feet (sq ft).

 

Targeted for completion by the second half of 2023, the AEI will be funded through internal resources, he said.

 

The Reit manager added that Sabana Reit remains on the lookout for accretive acquisitions despite the uncertain market conditions and rising interest rate environment.

 

&ldquo We&rsquo ve been on the lookout for opportunities there are still opportunities in the market, both overseas and in Singapore,&rdquo Han said. &ldquo The market is volatile right now&hellip (But) we&rsquo re sitting in a sweet spot and sometimes if you wait, you can get a good deal.&rdquo

 

Sabana Reit said that while Singapore&rsquo s economy continues to expand, the rising inflationary pressures led mainly by high energy prices, rising interest rates and the prevailing uncertainties in the external environment could dampen the industry&rsquo s outlook. 

 

The Reit said it continues to see expansionary demand in the Singapore industrial sector and remains cautiously optimistic in its mid-term outlook. 

 

&ldquo The manager will stay focused on proactive lease management to attract expansionary tenants, create value by enhancing asset potential and pursue yield-accretive acquisitions to expand portfolio growth, in order to deliver long-term sustainable value for all its unitholders,&rdquo added the Reit.