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No merger for Sabana REIT with ESR-REIT

The Edge Singapore
The Edge Singapore 12/4/2020 02:32 PM GMT+08  • 3 min read
No merger for Sabana REIT with ESR-REIT
Sabana REIT's merger with ESR-REIT is off, as trust deed amendment did not get sufficient votes
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On Dec 4, Sabana Shariah Compliant Industrial REIT announced that less than 75% of votes were cast in favour of the Sabana Trust Deed Amendments Resolution, hence the resolution to amend the trust deed was not passed at its EGM. According to the announcement 66.67% of units voted in favour of amending the trust deed, and 33.33% voted against. The Scheme Resolution for the merger is contingent upon the approval of the Sabana Trust Deed Amendments Resolution at the EGM, and hence Sabana REIT’s managed did not convene the Scheme Meeting.

“We would like to thank everyone who voted, and we respect their decision. While we believe the Merger has a compelling strategic rationale, unitholders have expressed that they prefer for Sabana REIT to remain as a standalone REIT. We are heartened by their confidence in Sabana REIT’s prospects and remain committed to continue creating value for all unitholders,” says Donald Han, CEO of Sabana REIT’s maanger.

SEE:Time for Quarz Capital and Black Crane to make their case to Sabana Manager’s board and unitholders?

As stated in their many open letters, Quarz Capital and Black Crane are likely to convene an EGM to vote out the current manager, and vote for internalisation. Before they declare victory, the two fund managers may need to look at the arithmetic. All unitholders would be able to vote at the next EGM. Taking away the major unitholders and the two hedge funds, around 37% to 38% of the minority unitholders supported the ESR-REIT merger, and 19% were against it. The two hedge funds may have their work cut out for them in their future EGM.

In November last year, Quarz wrote an open letter to ESR Cayman and the world at large, recommending that ESR-REIT and Sabana REIT should merge. In July this year, following the announcement of the proposed merger, Quarz did everything it could to thwart the merger.

The other challenge, of divesting the assets and returning the monies to unitholders, has unique and distinctive issues. JTC needs to approve the transactions.

For now, Han is back at work. “We have been working hard to increase the portfolio’s occupancy rate and this remains a priority. Discussions with existing and prospective tenants to renew leases and secure new ones are ongoing,” he added. “The asset enhancement initiative at New Tech Park is progressing well too and we are focused on completing it by the first quarter of 2021. We are also exploring other potential portfolio rejuvenation opportunities in a prudent manner, balancing the need to be cautious amid ongoing macroeconomic uncertainties and the need to grow."

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