ESR says ‘amicable approach’ with Quarz is to prioritise Sabana Reit and unitholders

ESR GROUP said that its choice to “pursue an amicable approach instead of legal action” was to prioritise Sabana Industrial Real Estate Investment Trust (Sabana Reit) and its unitholders.

“This ensures that information disseminated to unitholders is clear, accurate and not misleading so that informed choices can be made,” it noted.

It issued a statement on Monday (Apr 8) after reaching a resolution with Quarz Capital over court proceedings initiated by the property company against the activist investor regarding alleged defamatory statements.

To recap, Quarz last Friday said it reached an “amicable” resolution with ESR “without any admission of liability on the part of either party”.

The activist investor acknowledged its public letter dated Jul 19 was erroneous in mentioning that the removal of the external Sabana manager will result in cost savings to Sabana Reit of about S$7.25 million of fees.

It highlighted as well that its statements about a potential conflict of interest should not be understood to mean that ESR had intended to act or were acting in actual or potential conflict of interest.

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Quarz also said the alleged defamatory statements were “not intended to defame or publish falsehoods” relating to ESR.

In its Apr 8 letter, ESR maintained that the entire episode with Quarz has “resulted in a diminished value” of Sabana Reit’s unit price, notwithstanding estimated costs of about S$3.3 million as at end-2023 incurred from the Reit internalisation process.

ESR said that costs borne by unitholders were further “exacerbated” by the recent Mar 8 extraordinary general meeting, which was requisitioned by a group of unitholders led by Quarz who called themselves the Sabana Growth Internalisation Committee.

“All these factors impact Sabana Reit’s performance and its distribution per unit. For us, the only goal is to achieve unity and profitability for all unitholders. We seek to work with all parties to ensure an outcome that is in the best interests of all unitholders,” said ESR.

“We have always maintained that the cost savings of internalisation have been grossly overstated and Quarz’s proposal does not take into full consideration the complexities of the internalisation process and the significant time and costs it will take, as per the trustee’s comments,” added the company, referring to HSBC Institutional Trust Services (Singapore) as Sabana Reit’s trustee.

Earlier in 2023, ESR and Quarz were involved in a public battle over the internalisation of the Reit management function of Sabana Reit.

Units of Sabana Reit were unchanged at S$0.36 as at 4.19 pm on Monday, after ESR issued its statement during the midday trading break.