Sabana Reit trustee signs S$100 million UOB facility tied to changes in Reit manager
Chong Xin Wei
THE trustee of Sabana Industrial Real Estate Investment Trust (Sabana Reit) has entered into a facility agreement with UOB for up to S$100 million in sustainability-linked term and revolving facilities.
The agreement covers a term loan facility of S$75 million and a revolving credit facility of S$25 million, the Reit manager said on Friday (Jun 30).
Proceeds from the four-year facilities will go towards refinancing its existing debt, asset acquisitions, asset-enhancement initiatives and working capital requirements.
The Reit manager, Sabana Real Estate Investment Management (SREIM), noted that the facility agreement contains provisions relating to sponsor ESR Group’s shareholding. It also places restrictions on any change of the manager or property manager of the Reit.
Three circumstances will result in a “review event”: One is when the sponsor ESR Group, which also owns the manager, no longer holds at least 50.1 per cent of the issued share capital.
The other two circumstances are SREIM ceasing to be the manager of the Reit, and Sabana Property Management ceasing to be the Reit’s property manager without prior written consent.
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The manager warned that if a review occurs, Sabana Reit may be unable to use the loans from the facility agreement. The agreement may also be cancelled and become due and payable if the Reit and the facility agent fail to agree on amendments to the terms arising from the review within 30 days.
Assuming that the facility agreement is fully drawn and existing debt has been refinanced, the manager estimates the aggregate level of facilities that may be affected to be about S$388 million.
In a statement to The Business Times, the manager of Sabana Reit said: “Today’s announcement on the Facility Agreement is business as usual, and the loan clauses as set out in the announcement do not deviate from the existing facility agreements which the Reit already has in place and that were previously announced.”
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Earlier this month, activist investor Quarz Capital requisitioned an extraordinary general meeting (EGM) to remove the manager of Sabana Reit as soon as practicable.
The move has drawn pushback from both the manager and ESR Group, which noted that a change in manager may lead to a breach in loan covenants; this is because Sabana Reit has entered into facilities or financing agreements containing restrictions on a change of manager – including its stepping down.
In response, Quarz said in an e-mail to The Business Times that some Singapore-listed Reits have changed their managers without any public announcement of difficulties with their lenders.
In its first letter requesting the EGM, Quarz said that replacing SREIM with an internal manager would resolve potential corporate governance flaws and could result in higher distribution per unit and unit price to Sabana unitholders in the future.
SREIM and ESR Group have warned unitholders in subsequent letters that following through on Quarz’s proposal could destroy the value of their investment. ESR Group believes Sabana Reit would be cast into a “prolonged period of uncertainty”, which could result in a “loss of confidence” in the Reit by investors and lenders.
Units of Sabana Reit were trading flat at S$0.435 as at 9.03 am on Friday.
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