Sabana Reit manager disputes fund managers' internalisation proposal

THE proposed merger of ESR-Reit and Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) is "the only offer that is currently on the table", the Reit manager's board said in a statement on Friday night, responding to fund managers Quarz Capital and Black Crane Capital's call to unitholders to reject the deal and internalise the Reit's management.

The Reit manager also asked the fund managers to "substantiate their claims or provide more details so that the management team and unitholders can carry out a serious analysis of their claims and proposals".

Quarz and Black Crane advise entities that collectively hold more than 11 per cent of Sabana Reit, and oppose the proposed merger at its current terms of 0.94 ESR-Reit unit for one Sabana Reit unit.

Their latest statement on Wednesday called for the internalisation of Reit management, saying this should be done after the merger falls through.

An extraordinary general meeting (EGM) on the proposed merger is due to be held on Dec 4, with unitholder voting having already begun.

On Friday, Sabana Reit's manager said it had "reviewed the statement but was unable to determine the workability and benefits of the internalisation proposal". It pointed out that such a move would require consent from banks, so that Sabana Reit does not risk defaulting on its existing obligations.

The Reit manager added that "the two fund managers are proposing a very different and highly uncertain path for Sabana Reit as a standalone Reit without a sponsor vis-a-vis merger to create a larger Reit with a strong sponsor."

It also questioned several estimates made by the fund managers, including:

* The S$2 million cost savings from internalisation;

* Sabana Reit's 2021 standalone DPU being more than 20 per cent above the 2020 level; and

* Annual net rental and distribution income for the retail component of 151 Lorong Chuan at S$3.7 million and S$3.1 million respectively.

"The Board finds that some of these claims are unrealistic," it added.

The Reit manager noted that "the fact of the matter is that the Sabana Manager has not received any alternative offers for Sabana Reit and/or its assets".

If the merger is not approved at the EGM, the ESR-Reit Manager and its concert parties will be restricted from making another offer for Sabana Reit in the next 12 months.

Following Sabana Reit's statement, Quarz and Black Crane said that they intend to provide their comprehensive views and answers to the Reit managers' questions within a week.

They clarified that for the internalisation, they do not intend to purchase the Reit manager from ESR-Reit. Rather, the internal manager "will be owned by all unitholders and for all unitholders".