More than one side to story about concerns of director independence

WE thank David Gerald for his recent op-ed "Quarz has a case for opposing appointment of director, but other objections not as clear-cut" (BT, Mar 18, 2022).

As the article rightly noted, and we agree, it is crucial for investors to consider all points of view as well as their own financial goals and situations in deciding how they would like to vote at the upcoming annual general meeting for Sabana Industrial Reit (Sabana).

In that regard, on behalf of the board of Sabana, I would like to provide more clarity to some of the points raised in relation to Chan Wai Kheong's appointment as an independent director of the Reit. Indeed, we are grateful that Gerald and his team at the Securities Investors Association (Singapore) (Sias) had agreed to meet with us this past week so that we can provide them with the necessary clarification and assurance, which I shall elaborate on below.

We understand that there have been concerns expressed by certain unitholders about whether Chan can be deemed an independent director of Sabana.

One argument raised has been about him receiving payment from the sale of his unitholdings in the then-Cambridge Industrial Reit (the forerunner of ESR-Reit) to ESR Cayman in 2017. We have addressed this point on several occasions, but to briefly reiterate - Sabana at that point was completely independent of ESR Cayman; it was not until 2019 that ESR Cayman became Sabana's sponsor. What transpired between Chan and ESR Cayman was a purely financial decision made between the 2 parties based on the information they had at that point. In any case, how could Chan have been privy in 2017 to a decision and action that ESR Cayman would only take in 2019?

It is also worth noting that Chan was a unitholder of Sabana at the point of the proposed merger with ESR-Reit in 2020. Not only that, he voted against the merger based on his determination of what was best for him and other unitholders like him at that point in time.

Another important point that bears repeating is that Chan was actually recommended as a board nominee by Quarz Capital, who began actively lobbying against his appointment barely a few weeks after he was appointed. The Sabana board had accepted Quarz's recommendation of Chan in good faith and in a collaborative manner to take the Reit forward. As we have expressed previously, we remain deeply puzzled by this about-turn; in fact, we have sought to clarify this with Quarz on several occasions. Chan has assured us he is unaware of any reasons behind this about-turn on Quarz's part.

Having done thorough due diligence, the board of Sabana is of the firm view that the appointment of Chan is in the best interests of unitholders and the company. His appointment would not have been proposed otherwise. His strong, independent views and commitment to doing right by unitholders, as well as his nearly 4 decades of experience and leadership in the financial and investment sector, mean that the board found him "fit and proper" and more than well-qualified as an independent director.

The board acknowledges that it has not been a smooth journey for Sabana over the past few years, but with perseverance and a disciplined execution of its refreshed strategy, the manager has built firm foundations that has allowed it to turn the Reit around and deliver a robust performance in FY 2021 amid a uniquely challenging situation. We remain fully committed to the long-term interests of the Reit and all our unitholders.

As the Reit now embarks on its next phase - to grow value - for unitholders, Chan's experience in investment management, his independence and his perspectives as a minority investor in the Reit will be an additional and crucial boost in stewarding the manager in the right direction.