Sabana Reit trustee’s first meeting with internalisation committee fails; unitholders requisition EGM

HSBC Institutional Trust Services’ first meeting with the internalisation committee of Sabana Industrial Real Estate Investment Trust (Sabana Reit : M1GU 0%) did not take place as intended on Monday (Mar 25), as the committee members did not attend the event.

HSBC Institutional Trust Services, which is Sabana Reit’s trustee, said on Tuesday that the committee members instead wished to focus discussions on proposed amendments to the trust deed, as well as an ongoing court application filed on Jan 9 regarding the Reit’s internalisation process.

The internalisation committee was set up last week by HSBC Institutional Trust Services and includes several employees from activist investor Quarz Capital. This came about after unitholders of the Reit voted for eight out of the 10 resolutions proposed by Quarz, which relate to how the trustee should handle the internalisation of Sabana Reit.

To recap, certain unitholders – including Quarz and members of the internalisation committee – disagree on whether proposed trust deed amendments are required to implement the internalisation, and whether an extraordinary general meeting can be convened to consider such proposed amendments.

On Jan 9 this year, HSBC Institutional Trust Services filed an application to seek the court’s guidance on the issue of whether the Reit manager, its shareholders, and related parties ought to be permitted to vote on any resolution to amend the trust deed.

In its statement, the Reit trustee said its proposed Mar 25 meeting with the newly-established internalisation committee was meant to be “open and constructive”.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

Its purpose was to seek the committee members’ views on various work streams affecting the progress of the implementation of Sabana Reit’s ongoing internalisation process.

In its latest announcement dated Mar 26, the trustee reiterated that the Jan 9 application was meant to clarify such key issues and steps for the internalisation process, and to “ensure that the views of all unitholders are properly considered in an appropriate forum”.

Therefore, it urged unitholders to “respect the ongoing court process”, and to allow for these issues to be “appropriately heard by the court and decided in an orderly manner”.

“A decision by the court on the Order 32 Application will provide clarity for all unitholders,” it added. 

Meanwhile, HSBC Institutional Trust Services said it remained “ready and willing to engage in a constructive manner with the internalisation committee in respect of the ongoing internalisation process”.

It further requested that members of the internalisation committee ink non-disclosure agreements to “safeguard the confidential information” of Sabana Reit.

“Until such non-disclosure agreements are entered into by the members of the internalisation committee, the trustee is only able to discuss public information in meetings with the internalisation committee.”

Over the midday trading break on Tuesday, the Reit manager announced it received a requisition notice from several unitholders to table a set of seven resolutions in its upcoming April 2024 annual general meeting (AGM), or alternatively hold an extraordinary general meeting (EGM) right after the AGM at the same venue.

These unitholders – who include Quarz’s chief investment officer Jan Frederic Moermann and the activist investor’s head of research, Havard Chi – collectively own over 10 per cent of Sabana Reit.

Chi and Moermann are also members of the internalisation committee.

Among the seven resolutions, the requisitioners are requesting for HSBC Institutional Trust Services to be directed to consult with, and seek regulatory waivers or directions from regulatory authorities such that the trustee may provide written certification for new proposed amendments to the trust deed.

Other resolutions sought to prevent the trustee from incorporating any amendment to the trust deed relating to external borrowings, or the establishment or acquisition of subsidiaries held by the manager, unless it provides written certification for the proposed amendments.

The requisitioners further called for the trustee to be directed to “provide a clear timeline for when internalisation can be completed” – as well as to consult with the Monetary Authority of Singapore (MAS) on all proposed amendments and seek regulatory waivers or directions from MAS “such that internalisation can be successfully implemented”.

“We believe that this would result in cost savings and be in the best interests of all unitholders,” wrote the requisitioners in their Mar 25 notice.

The Reit manager said it is considering the requisition notice as well as the Mar 26 trustee statement, and is seeking legal advice. “As the trustee has been directed by unitholders to effect the internalisation exercise, the manager will be discussing with the trustee on their next steps,” it added.

Units of Sabana Reit were down S$0.005 or 1.4 per cent at S$0.36 as at 4.07 pm on Tuesday, after the latest announcement.

The internalisation committee has separately reached out to The Business Times (BT) claiming it was “surprised to learn that many of the important correspondences between the trustee and the internalisation committee have been conveniently left out” in the trustee’s Mar 26 statement.

Contrary to the trustee, the internalisation committee said that the Mar 25 meeting’s failure to take place came as both parties were unable to agree on an agenda, the format, as well as appropriate terms and conditions of the meeting.

In a WhatsApp message seen by BT, the committee maintained that any proposed trust deed amendments by the trustee should be “discussed openly with all unitholders with the support of the regulators”.

Not allowing the internalisation committee to address and discuss key matters with the trustee would be in “full contradiction to the resolutions passed and voted in by unitholders” at the Reit’s Mar 8 EGM, it added.

Addressing the trustee’s court application filed on Jan 9, the committee opined that initiating the Order 32 Application was “worse still” as legal fees would be “ironically” borne by unitholders.

“The Singapore law encourages parties to resolve their disputes without court intervention and consider litigation to be the ‘last resort’. However, the trustee insists on ‘locking itself’ into an opposing position to the unitholders when these issues could have been discussed through an open dialogue and discussion,” said the committee.

“It seems that the trustee is highly insistent on ‘being right’ about its position and having the court to ‘approve’ its position even after MAS stepping forward to provide various waivers and clarifications, and forgetting that the ultimate objective of all these efforts is to work towards the success of internalisation.”