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PR Newswire
08-02-2017, 10:04 AM
(This post was last modified: 08-02-2017, 11:04 AM by ACTIVIST SPEAKS.)
We respond briefly to the statements made by Sabana Manager.
a. The Manager explains that DPU dropped from 9.38 cent to 5.01 cent mainly due to the expiry of a number of master leases.
WE BELIEVE that the basis of a competent manager is to anticipate the expiry of master leases and ameliorate such negative effects. The actions of Sabana Manager have indicated otherwise.
b. The Manager explains that the purchase of 47 Changi South Ave 2 at a high price is justified by independent valuation by Savills and Knight Frank, taking into account the long term lease and rental income support. The Manager also tells you that it is not fair to compare current valuation of this property with book value of the property in the Sponsor’s book.
WE BELIEVE for Colliers, Savills and Knight Frank to separately and independently come to a valuation of exactly $23m for a property is too much of a coincidence unless they are using exactly the same inputs provided. We merely stated a fact that this property sits in Vibrant Group’s book at only $9.9m
WE BELIEVE the work done by the Manager in the purchase of this Changi South property is merely administrative in nature, we cannot understand why they are charging $200,000.
c. The Manager explains that the purchase of the 3 properties at 60% -88% higher than Cambridge Industrial Trust’s sale of their Ubi Ave 3 is justified by the independent valuation by Savills and Knight Frank (again). The Manager also highlighted the success and oversubscription of 209% in the recent Rights Issue.
WE BELIEVE that the Manager should let the unitholders decide if indeed these acquisitions are fair and accretive.
WE BELIEVE the Manager should let the unitholders decide whether we should buy a $10m property at $20m just because of a rental support arrangement.
WE BELIEVE when you price your rights at a substantial discount, it is a no brainer that if indeed unitholders do not subscribe, their proportional shareholdings would be substantially diluted.
d. The Manager points out the fee structure charged is consistent with the fee structure adopted by other REIT Manager. The Manager tells you that their interests is aligned with ours because they elected to receive 80% of their fees in Units since IPO.
WE BELIEVE that one should compare one’s performance with the performance of other REIT Managers when one points out one’s fee structure is in line with other REIT Manager.
WE BELIEVE that the Manager’s profit margin is close to 80% as they pointed out they only receive 20% in cash since IPO. And this 20% cash is enough to support their entire operation all these years.
The Manager is correct that we have not assembled a team to take over. When MAS allows 50 minority unitholders to convene a meeting to remove the manager, WE BELIEVE that MAS had not intended for us to look for an alternative manager. Logic will tell you that there is no way MAS will allow a group of unlicensed motley crew decides the fate of a $800m REIT owned by more than 30,000 unitholders. The logical step is for HSBC Trustee to look for the replacement manager (internal or external) with MAS endorsement and approval. The Trust Deed clearly allows the Trustee to remove the Manager under certain conditions. It is logical to assume that if the Trustee has the right to fire, he must also have the right to hire.
The Manager is also correct that removing the Manager may be an event of default under the terms of the outstanding loan facilities. WE BELIEVE this is an issue that the new Manager can solve. The Manager does not own the properties pledged. The REIT’s aggregate leverage ratio is less than 45%. WE BELIEVE this scare tactic is merely a strategy used to entrench them firmly in their appointment as the Manager of Sabana REIT.
Finally, the Manager highlights that in the event of a liquidation under current dire market conditions, the properties will be sold at a substantial discount to fair values. WE BELIEVE when you say things like this, you do not go on and ask unitholders for money to buy three more properties at a substantially higher price, justified by valuation houses, using acceptable desktop valuation methods, calculating with artificially prop up rental support, giving carbon copy valuation. You do not go on operating within the legal framework, practicing widely acceptable measures, acting within codified requirements, making non-criminal decision that eventually cause huge financial loss to tens of thousands of unitholders in a listed REIT.
Mdm Ho Chin, in her speech in 2005, highlighted the perils of a Manager buying an assets at inflated prices and the vendor agreeing to lease back the same property at inflated rents well above market rates. She said the REIT’s investment hurdles are technically met and both the Manager and the vendor can claim to be “winners” in the deal. “The losers are the unitholders” she added. While the Manager may sprain their wrists doing multiple high five with the vendors and valuation houses, the unitholders have to turn to calling this meeting to ”guard against clever financial engineering to disguise inherent blemishes.”
a. The Manager explains that DPU dropped from 9.38 cent to 5.01 cent mainly due to the expiry of a number of master leases.
WE BELIEVE that the basis of a competent manager is to anticipate the expiry of master leases and ameliorate such negative effects. The actions of Sabana Manager have indicated otherwise.
b. The Manager explains that the purchase of 47 Changi South Ave 2 at a high price is justified by independent valuation by Savills and Knight Frank, taking into account the long term lease and rental income support. The Manager also tells you that it is not fair to compare current valuation of this property with book value of the property in the Sponsor’s book.
WE BELIEVE for Colliers, Savills and Knight Frank to separately and independently come to a valuation of exactly $23m for a property is too much of a coincidence unless they are using exactly the same inputs provided. We merely stated a fact that this property sits in Vibrant Group’s book at only $9.9m
WE BELIEVE the work done by the Manager in the purchase of this Changi South property is merely administrative in nature, we cannot understand why they are charging $200,000.
c. The Manager explains that the purchase of the 3 properties at 60% -88% higher than Cambridge Industrial Trust’s sale of their Ubi Ave 3 is justified by the independent valuation by Savills and Knight Frank (again). The Manager also highlighted the success and oversubscription of 209% in the recent Rights Issue.
WE BELIEVE that the Manager should let the unitholders decide if indeed these acquisitions are fair and accretive.
WE BELIEVE the Manager should let the unitholders decide whether we should buy a $10m property at $20m just because of a rental support arrangement.
WE BELIEVE when you price your rights at a substantial discount, it is a no brainer that if indeed unitholders do not subscribe, their proportional shareholdings would be substantially diluted.
d. The Manager points out the fee structure charged is consistent with the fee structure adopted by other REIT Manager. The Manager tells you that their interests is aligned with ours because they elected to receive 80% of their fees in Units since IPO.
WE BELIEVE that one should compare one’s performance with the performance of other REIT Managers when one points out one’s fee structure is in line with other REIT Manager.
WE BELIEVE that the Manager’s profit margin is close to 80% as they pointed out they only receive 20% in cash since IPO. And this 20% cash is enough to support their entire operation all these years.
The Manager is correct that we have not assembled a team to take over. When MAS allows 50 minority unitholders to convene a meeting to remove the manager, WE BELIEVE that MAS had not intended for us to look for an alternative manager. Logic will tell you that there is no way MAS will allow a group of unlicensed motley crew decides the fate of a $800m REIT owned by more than 30,000 unitholders. The logical step is for HSBC Trustee to look for the replacement manager (internal or external) with MAS endorsement and approval. The Trust Deed clearly allows the Trustee to remove the Manager under certain conditions. It is logical to assume that if the Trustee has the right to fire, he must also have the right to hire.
The Manager is also correct that removing the Manager may be an event of default under the terms of the outstanding loan facilities. WE BELIEVE this is an issue that the new Manager can solve. The Manager does not own the properties pledged. The REIT’s aggregate leverage ratio is less than 45%. WE BELIEVE this scare tactic is merely a strategy used to entrench them firmly in their appointment as the Manager of Sabana REIT.
Finally, the Manager highlights that in the event of a liquidation under current dire market conditions, the properties will be sold at a substantial discount to fair values. WE BELIEVE when you say things like this, you do not go on and ask unitholders for money to buy three more properties at a substantially higher price, justified by valuation houses, using acceptable desktop valuation methods, calculating with artificially prop up rental support, giving carbon copy valuation. You do not go on operating within the legal framework, practicing widely acceptable measures, acting within codified requirements, making non-criminal decision that eventually cause huge financial loss to tens of thousands of unitholders in a listed REIT.
Mdm Ho Chin, in her speech in 2005, highlighted the perils of a Manager buying an assets at inflated prices and the vendor agreeing to lease back the same property at inflated rents well above market rates. She said the REIT’s investment hurdles are technically met and both the Manager and the vendor can claim to be “winners” in the deal. “The losers are the unitholders” she added. While the Manager may sprain their wrists doing multiple high five with the vendors and valuation houses, the unitholders have to turn to calling this meeting to ”guard against clever financial engineering to disguise inherent blemishes.”