SINGAPORE (July 26): The manager of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Sabana REIT) has reported a distribution per unit (DPU) of 0.81 cent for 2Q17, down 24.3% from the 1.07 cent DPU declared a year ago.

Unitholders will receive their 2Q distributions in cash on August 29.

2Q income available for distribution was $8.6 million, 5.5% down from $9.1 million in 2Q16, and will be distributed based on approximately 1.053 billion units issued as of June 30.

Gross revenue was down 2.9% at $22 million in 2Q compared to $22.6 million a year ago due to lower contribution from its properties at 8 Commonwealth Lane; 508 Chai Chee Lane; 23 Serangoon North Avenue 5; 123 Genting Lane and 2 Toh Tuck Link.

The REIT also saw reduced revenue contribution from 39 Ubi Road 1, which had been converted into multi-tenanted lease arrangements in 4Q16.

As such, net property income (NPI) for the quarter was $12.9 million, 7.4% down from the $14 million reported in 2Q16.

Property expenses grew 4.2% to $9 million due to higher net impairment losses on trade receivables over the quarter, largely from arrears from the master tenants at 1 Tuas Avenue 4 and 6 Woodlands Loop and on higher service, repairs, maintenance, property tax, land rent, utilities and marketing expenses from 39 Ubi Road 1.

In a late night regulatory filing on Tuesday, Sabana Real Estate Investment Management (SREIM) explains that it has provided another reduction of its base fee for the quarter.

Without its general mandate to issue new units – due to its failure to obtain authorisation at its April 28 annual general meeting (AGM) – it is unable to continue to receive 80% of its base fee units, and has to receive its fee fully in cash from 1Q onwards. Such a payment would reduce the income available for distribution, says SREIM.

The final 2Q DPU is a result of the REIT’s manager opting to forgo 25% of its fees ($310,000) for 2Q as well as 75% of its 1Q fees ($944,000) in an attempt to cushion the impact on the DPU.

Assuming the manager had been able to receive 80% of its fees in units or 100% of its fees in cash, DPU for 2Q would have been 87 cents and 78 cents respectively.

SREIM says that while expects market conditions to remain challenging, it is focusing on managing short-term volatility through marketing and leasing efforts, retaining existing tenants while improving its occupancy levels in the multi-tenanted buildings to secure long-term value for unitholders.

Ahead of their maturity, the manager has commenced discussions with the relevant parties on the possible renewal of the five master leases expiring this year, three of which are sponsor-related properties.

SREIM also recalled that it had announced the termination of three proposed acquisitions which were to be funded, in part, by a rights issue completed earlier this year.

See: Vibrant announces termination of proposed sale of Changi South property to Sabana REIT

See: Sabana REIT manager CEO Xayaraj steps down; acquisition of 47 Changi South Ave 2 aborted

See: Sabana REIT aborts acquisition of 72 Eunos Ave 7 property

The trust is in the midst of undertaking a strategic review.

The manager reiterates that the strategic review committee (SRC) continues to evaluate non-binding proposals from several parties, although no binding agreements have been entered to as of the date of its announcement.

Units of Sabana REIT closed flat at 46 cents on Tuesday.