Quarz, Black Crane ask Sabana Reit trustee if manager failed to follow trust deed terms

FUND managers Quarz Capital Management and Black Crane Capital have asked the trustee of Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) to form an opinion as to whether the trust's manager, in pursuing a merger with ESR-Reit, failed to follow the terms of the trust deed to the prejudice of the participants.

In a letter sent on Thursday, they also asked the trustee, HSBC Institutional Trust Services (Singapore), to provide reasons for its conclusion.

Under the Securities and Futures Act of Singapore, a trustee is compelled to summon a unitholder meeting to determine a course of action if it forms the opinion that the Reit manager has failed to follow the terms of the trust deed to the prejudice of the participants, among other situations, the firms said.

In their letter, Quartz and Black Crane cited a provision in the trust deed for the Reit's manager to act in the best interests of the Reit and provide diligent and responsible management of the assets and liabilities of the Reit.

Given Sabana Reit's strong balance sheet and a slew of measures which the manager could have taken to enhance the distribution per unit, there is no imperative for the Reit to undertake a merger at this time, much less at such "unattractive" terms in relation to both net asset value (NAV) and dividend per unit dilution for unitholders, Quartz and Black Crane said.

They also pointed out that no transparent public sale process was undertaken to seek a better price for the Reit's portfolio.

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"We are of the view that by putting forward the proposed merger (which is at a substantial discount to Sabana Reit's NAV, even taking into account the depressed market after Covid-19), there is serious doubt as to whether the manager is acting in the best interests of Sabana Reit," they wrote.

Since July, Quarz has criticised ESR-Reit's implied offer price of 37.7 Singapore cents per Sabana unit under the merger as too low. Quarz and Black Crane, which claim to represent 10 per cent of Sabana's units collectively, have said they will vote against the proposed merger at the current terms.

Units of Sabana Reit were trading at 37 Singapore cents as at 4.37pm on Friday, down 0.5 cent or 1.3 per cent. Units of ESR-Reit were trading at 40 Singapore cents, down 0.5 cent or 1.2 per cent.