Sabana REIT's property near Serangoon, New Tech Park. (Photo: REITsWeek)

Changes have taken place at Sabana REIT, but does the crisis represent an opportunity for astute investors? REITsWeek examines.

It has been somewhat of a rollercoaster ride for unitholders of Singapore-listed industrial landlord Sabana REIT these past three years.

In April 2013, the counter was trading as high as SGD1.13 but by January 2017, it was changing hands for as low as SGD0.34.

After enduring quarter upon quarter of falling unit prices, shrinking DPUs, questionable acquisitions, and dilutive equity placement exercises, a group of 66 unitholders decided that enough was enough, and served the REIT with a requisition letter in February 2017.

Among demands in this letter included one for an extraordinary general meeting (EGM) in which a resolution to remove the REIT’s manager would be tabled.

Promises to conduct a “strategic review” also failed to placate the dissatisfied investors who questioned a number of transactions that seemed to have been executed in favour of the REIT’s sponsor rather than unitholders.

The EGM was finally granted on 28 April, but the bid to oust the manager failed to receive the mandate required from unitholders present then.

About 69.5% of the votes cast during the EGM were against the removal of the REIT’s manager.

Many thought that the backing of strong institutional unitholders may have sealed the fate for what was then seen as an insignificant rebellion by a small band of 66 disgruntled unitholders.

It was almost a David versus Goliath situation but what many did not realise then was that the stone that would fatally wound the manager may have already been slung just a little prior to the EGM.

At the REIT’s annual general meeting (AGM), a resolution for the REIT to issue new units and grant convertible instruments was surprisingly rejected.

It is plausible that the negative publicity and subsequently unfavourable media coverage generated from the revolt may have increased visibility on Sabana REIT’s performance, and denied it further access to this crucial equity fundraising it requires at the meeting.

Given these tightening circumstances, and perhaps in a bid to partly clean the slate in anticipation of a fresh start, Sabana REIT announced on 9 May, amid yet another set of poor quarterly results, that the CEO of its manager, Kevin Xayaraj, will step down.

Read: Sabana REIT terminates acquisition plans as 1Q 2017 DPU tumbles by 24%

His last day will be on 31 December 2017 “or such earlier date as may be agreed” between himself and the company’s board of directors.

It was a moral victory of sorts for the small band of investors, who despite having a less than 1% stake, fired a disambiguous warning shot to the rest of the REITs in Singapore to never ignore the voices of the smaller retail unitholders like themselves.

So with its main antagonist gone, does Sabana REIT now present a value proposition for yield seekers?

There are several factors to consider before taking the plunge for while the CEO of Sabana REIT’s manager may soon be history by the end of 2017, a number structural challenges will still be there after his departure.

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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.