Sabana REIT's logistics facility at Tai Seng Drive, Singapore. (Photo: REITsWeek)Sabana REIT's logistics facility at Tai Seng Drive, Singapore. (Photo: REITsWeek)

Current portfolio occupancy of Singapore-listed Shari’ah-compliant industrial REIT, Sabana REIT (SGX:M1GU), has dropped to approximately 86.6% as compared to 91.7% as at 30 September 2015.

The drop is a result of lease changes and expiries within the REIT’s portfolio of properties including 216 Pandan Loop which is now vacant with effect from 26 November 2015. The REIT has indicated that it is considering to divest the property as an option.

“The manager is evaluating a few attractive options including asset enhancement initiative (AEI) such as build-to-suit- and-lease, and divestment”, said Sabana REIT in a statement on 26 November.

Should the latter option be taken, 216 Pandan Loop will be the second property to be disposed after 3 Kallang Way 2A. Sabana REIT announced on 18 November that it was divesting the seven-storey building for SGD16.6 million to the property’s existing tenant, Fong Tat Motor.

“Pending the reinvestment of the net proceeds into other yield-accretive acquisitions, the funds will be used mainly for the repayment of the trust’s outstanding borrowings”, said Sabana REIT in its statement on 18 November with regards to the divestment of 3 Kallang Way 2A.

Sabana REIT has not indicated what it plans to do with the proceeds of 216 Pandan Loop should the property’s divestment go ahead.

News of the possible divestment comes against the backdrop of data released by Singapore’s Economic Development Board on 26 November indicating that the country’s manufacturing output fell by 5.4% in October 2015. This is the ninth consecutive month of declining output, heralding a challenging period ahead for Singapore-heavy industrial REITs.

Units of Sabana REIT fell by 0.7% at the end of the trading day on the Singapore Exchange to finish at SGD0.725.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.