SINGAPORE (July 16): The managers of ESR-REIT and Sabana Shari’ah Compliant Industrial REIT (Sabana REIT) jointly announced the proposed merger of both REITs.

Following the completion of the merger, the enlarged REIT will have total assets amounting to around $4.1 billion, which places it among the top five developer-backed industrial S-REITs by asset size. The enlarged REIT will also become the fourth largest industrial S-REIT by market share based on gross floor area (GFA).

The merger will be done via a trust scheme of arrangement, where ESR-REIT will acquire all units of Sabana REIT in exchange for new units in ESR-REIT.

Following the completion of the scheme, unitholders in Sabana REIT will receive 94 consideration units for every 100 Sabana units held.

The implied scheme consideration payable to Sabana unitholders is $0.377 per unit. The implied total scheme consideration comes to up around $396.9 million.

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

The manager says the merger will lead to a larger market capitalisation of approximately $1.8 billion and a free float of approximately $1.3 billion, which may increase the probability of the enlarged REIT being included in key indices.

The merger, which is DPU-accretive for unitholders, will also improve portfolio diversification and resilience, with lower concentration risks.

Citigroup Global Markets Singapore, Maybank Kim Eng Securities, RHB Securities Singapore, and United Overseas Bank Limited are the financial advisers to the manager of ESR-REIT. Credit Suisse (Singapore) Limited and The Hongkong and Shanghai Banking Corporation Limited (HSBC) are the financial advisers to the Sabana REIT manager.

“The Merger is in line with our strategy to establish ESR-REIT as one of the leading Pan-Asian industrial REITs. It also provides us with the potential to reap significant operational synergies and realise upside through portfolio leaseup, AEI, and redevelopment opportunities, thereby enabling us to build long-term value for unitholders,” says Chui.

“The Merger will be transformational for Sabana REIT, accelerating our growth and propelling us immediately to be amongst the largest industrial REITs in Singapore,” says Donald Han, CEO of the manager of Sabana REIT.

“With ESR as a developer-sponsor, the Enlarged REIT will also have access to a pipeline of assets worth over US$22 billion ($30.57 billion) in a market where quality logistics properties are increasingly scarce. This better positions us to capitalise on further expansion opportunities and participate in the continued growth of the industrial sector as the global economy emerges from the COVID-19 pandemic,” Han adds.

In a separate filing, RBC Investor Services Trust Singapore, the trustee of ESR-REIT, has entered into a $460 million unsecured loan facility agreement in connection with the merger and the scheme.

The agreement was signed with Malayan Banking Berhad, RHB Bank Berhad, Sumitomo Mitsui Banking Corporation Singapore Branch and United Overseas Bank Limited (UOB), as mandated lead arrangers and bookrunners, as well as the original lenders. UOB will also serve as the facility agent.

The unsecured loan facility will go towards repaying HSBC Institutional Trust Services as trustee of Sabana REIT, the payment of upfront land premium to JTC, the payment of costs and other fees incurred in connection with the scheme, and working capital purposes for ESR-REIT.

Units in ESR-REIT closed flat at 39 cents on Wednesday, while units in Sabana REIT closed flat at 36 cents.