Sabana REIT property at 23 Serangoon North Avenue 5. (Photo: REITsWeek)

The managers of ESR-REIT and Sabana Shari’ah Compliant REIT (Sabana REIT) have proposed a merger that would form the 5th largest industrial REIT in Singapore in terms of asset size.

“The enlarged REIT is expected to have a larger market capitalisation and free float, as well as higher trading liquidity”, said the managers in a joint statement issued earlier in the day.

“These will help to facilitate its potential inclusion in key indices which will provide the enlarged REIT with access to a wider and more diversified investor base and increased analyst coverage”, the statement added.

Sabana REIT and ESR-REIT announced their respective financial results for 1H 2020 earlier in the day.

Sabana REIT saw a 65% fall in distribution per unit (DPU) for the period, which came in at 0.47 cents.

Meanwhile, ESR-REIT saw a 42% fall in DPU for the same period year-on-year.

Both REITs have attributed their performance largely to difficult operating conditions amid the COVID-19 pandemic.

The merger that has been proposed will see ESR-REIT acquiring all units of Sabana REIT, in exchange for new units in ESR-REIT on a 94-for-100 basis.

Following the merger, ESR is expected to hold approximately 12.2% of the total issued units in the enlarged REIT.

Pending the approvals from unitholders, and the Singapore Courts, the merger is expected to complete by 4Q 2020.

Data from ESR-REIT's and Sabana REIT's latest results have been updated into the Singapore REITs table.

By Shariffa Al-Habshee

Shariffa joined REITsWeek in 2017, and monitors Asia-Pacific REITs for the publication.