Quarz’s plan to internalise Sabana Reit’s manager ‘reckless and irresponsible’, says ESR
ESR Group, the largest unitholder in Sabana Reit , said that activist investor Quarz Capital’s plan to internalise the Reit’s manager lacks clarity on the role of the trustee, HSBC Institutional Trust Services (Singapore).
In response to Quarz’s open letter on Wednesday (Jun 28), ESR called Quarz “highly reckless and irresponsible” for not providing any plans for the management of Sabana Reit should its resolutions pass at the Reit’s extraordinary general meeting (EGM).
Quarz had, prior to the letter, proposed two resolutions to be voted on at an EGM. The manager of Sabana Reit said this meeting will be held on Aug 4.
The first resolution concerns the removal of the manager of Sabana Reit while the second concerns the internalisation of the Reit management function of Sabana Reit.
“Its one and only proposed course of action is to redirect the responsibility of managing the negative consequences of their resolutions solely to HSBC Trustee, without consulting with HSBC Trustee on their willingness or their ability to take up such a role,” ESR said.
ESR said Quarz’s latest letter contradicts parts 4 to 6 of the second resolution that Quarz proposed.
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Parts 4 to 6 concern amendments to provisions of the trust deed to give unitholders a say in matters such as the appointment or removal of directors of the internal manager and the potential change of control in the internal manager.
Quarz said in its letter that it is “simply directing” Sabana Reit’s trustee to consider the best approach and necessary steps to carry out the internalisation process in the spirit of the second resolution, and that it is not currently proposing any amendments to the trust deed.
“We reiterate that to direct the trustee to consider an amendment without the terms of the proposed amendments is vague and provides no guidance to unitholders as to how such a resolution is to be voted on,” ESR said.
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Quarz believes the move to replace Sabana Reit’s manager – an external manager controlled by ESR – with an internal manager will net cost savings for unitholders.
This would also overcome potential corporate governance issues, which could lead to higher distributions per unit and unit prices for Sabana unitholders in future, it said.
On Friday, the trustee of Sabana Reit entered into a facility agreement with UOB for up to S$100 million in sustainability-linked term and revolving facilities.
The Reit’s manager said the facility agreement contains provisions relating to sponsor ESR’s shareholding, and also places restrictions on any change of the Reit’s manager or property manager.
It added that the facility agreement is “business as usual”, and the loan clauses do not deviate from existing facility agreements which the Reit already has.
Quarz has previously said that Singapore-listed Reits have changed hands with no publicly announced difficulties from lenders.
ESR, however, has flagged potential risks to Sabana Reit’s loans should control of the Reit manager change hands
Sabana Reit’s units closed flat at S$0.435 on Friday before ESR released its response.
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