Panel formed by Quarz seeks authorities’ guidance on Sabana internalisation

A COMMITTEE formed by activist investor Quarz and other unitholders of Sabana Industrial Real Estate Investment Trust : M1GU 0% (Sabana Reit) has sent an open letter to the regulatory authorities to seek guidance on the internalisation of the Reit’s manager.

The Sabana Growth Internalisation Committee (SGIC) on Tuesday (Dec 5) said it “urgently seeks guidance” from the Monetary Authority of Singapore (MAS) and Singapore Exchange Regulation (SGXRegCo) on two legal questions.

The first is whether the Sabana Trustee is “wrong in its interpretation of the trust deed, and its position on how to proceed with internalisation”.

The second question is whether the sponsor and its concert parties should be barred from voting on a resolution to amend the trust deed to effect the internalisation, because they are interested parties in the matter, given that the move would “directly affect their own fee income”.

The trustee had said on Nov 7 that certain amendments to Sabana Reit’s trust deed are necessary to effect the internalisation, and that such amendments are subject to an extraordinary resolution of unitholders.

But SGIC said on Tuesday that unitholders “totally disagree and are highly concerned” with the position.

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In a draft letter to unitholders in July, ahead of the EGM requisitioned by Quarz, the trustee had earlier raised the need for another EGM and extraordinary resolution to amend the trust deed.

Quarz has been in an ongoing battle with Sabana Reit’s sponsor ESR Group over the internalisation of the Reit’s management function.

In June, Quarz requisitioned an extraordinary general meeting (EGM) to pass two resolutions relating to the internalisation. It said that the cost savings to be reaped from the removal of the external manager would benefit unitholders. Its letter also highlighted its concerns over matters of corporate governance.

However, Sabana’s manager, HSBC Institutional Trust Services and ESR Group, had warned that the process was not so straightforward, as there were risks and uncertainty for unitholders. The trustee also noted that the process would take a considerable amount of time – at least 12 months – and costs would be incurred for the internalisation.

Proxy advisors also recommended that unitholders vote against the resolution for internalisation, in view of uncertainties and potential adverse consequences.

Nevertheless, Quarz had said in July that there are strong legal and regulatory frameworks in Singapore to safeguard unitholders during the process of setting up an internal manager; it also said in the following month that the trustee should take no more than three to four months to do the preparatory work required to set up the internal manager.

On Aug 7, unitholders of Sabana Reit voted in favour of internalisation, and both resolutions were carried. The Reit’s trustee said on Nov 7 that it was working closely with its appointed advisers to carry out the implementation of the resolutions in a “compliant and prudent manner to protect the interests of all unitholders”.

It added that many of the issues and matters to be considered are interconnected and nuanced, and should not be over-simplified.

The Business Times has reached out to the trustee, and the regulatory authorities for comment.