Sabana REIT pulls plug on Eunos property purchase but silent on future plans

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In the face of fierce criticisms from investors, Sabana REIT has terminated plans to acquire 107 Eunos Avenue 3 but stopped short of confirming what it plans to do with the remainder of funds that were originally raised to partly purchase the property.

Sabana REIT first announced in December 2016 that it was acquiring the six-storey light industrial building with a basement carpark from General Cars Fleet Management for SGD34.5 million (USD25 million).

“The proposed acquisition of the property on a long leaseback term is expected to benefit unitholders by improving asset and tenant diversification with the addition of a quality industrial building”, Sabana REIT said then in its statement to justify the acquisition.

To partly fund the acquisition of 107 Eunos Avenue 3, and two other properties located at 72 Eunos Avenue 7, and 47 Changi South Avenue 2, Sabana REIT raised some SGD80.2 million via a 42 for 100 rights issue in late-2016.

However the acquisition began to raise the eyebrows after some unitholders pointed out that the property has a remaining lease of just 24 years, and questioned the reliability of 107 Eunos Avenue 3’s valuation.

This was especially so after other properties in the vicinity of Eunos were acquired by other REITs for far lower purchase considerations despite featuring longer leases.

Read: Sabana REIT continues downward slide as questions remain over acquisition

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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