Sabana Reit unitholders vote against giving manager authority to issue new units

SABANA Industrial real estate investment trust (Reit) unitholders voted against the fourth resolution authorising the Reit manager from issuing units to make or grant convertible instruments at the company’s annual general meeting held on Tuesday (Apr 25).

This was one of two resolutions unitholders voted against, the other being the third resolution to endorse Elaine Lim as an independent non-executive director.

Activist investor Quarz Capital had issued an open letter on Apr 14 calling on unitholders to vote against the third and fourth resolutions at the Sabana Reit annual general meeting. Independent proxy advisory firm Glass Lewis also issued a proxy paper on Mar 29 supporting all the resolutions tabled for the meeting.

Of the votes recorded, 57.9 per cent of unitholders voted against the fourth resolution, with 42.1 per cent voting for. Quarz claimed that this resolution was not necessary given the Reit’s low leverage, and served neither the unit price nor unitholders.

The Reit manager is now unable to fundraise by issuing new units to support asset enhancement initiatives or have flexibility in capital management.

“We respect the decision of our unitholders in relation to Resolution Four... As manager of the Reit, our goal is to generate long-term unitholder value and Resolution Four would have allowed for greater flexibility in our capital management strategies should the right opportunities arise,” said Donald Han, chief executive officer of Sabana Reit’s manager.

For the third resolution, 89.5 per cent of unitholders voted against and 10.5 per cent voted for, endorsing Lim as an independent non-executive director. Lim will remain as a non-independent non-executive director after the resolution failed to pass.

Quarz had claimed that Lim was a “back-door” entry for ESR Group, an allegation that Sabana’s manager has refuted, adding that it was “unfounded” and had “no merit”.

“The nomination and remuneration committee reaffirms and stands by its decision to bring Mrs Lim onboard. The team looks forward to working with Mrs Lim to further improve the performance of the Reit for the benefit of our unitholders,” said Tan Cheong Hin, chairman of Sabana Reit’s manager.

The failure to pass the two resolutions was hailed as a historical win for unitholders in Singapore by Quarz. The activist investor called on Singapore shareholders to unite and take back their rights to appoint directors, evaluate boards and management, and ensure they work for shareholders’ best interest.

Quarz said that Reit managers need to start working for unitholders, rather than maximise their management and acquisition fees.

“The result could not have been clearer as unitholders unanimously rejected the board and management’s proposals. This result shows that the unitholders should not be taken for granted, and unitholder democracy in Singapore is well and alive,” said a spokesperson from Quarz.

Units of Sabana Reit closed up $0.005 or 1.1 per cent to S$0.45.