Sabana Reit not convening EGM requisitioned by fund managers

THE manager of Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (Sabana Reit) said it will not be convening the extraordinary general meeting (EGM) requisitioned by Quarz Capital and Black Crane Capital.

In a bourse filing on Nov 22, Sabana Reit said that it had "carefully considered" the requisition notice it received from the fund managers regarding five resolutions that the latter proposed for investors to vote on, and "strongly" urged unitholders to "focus on the merits of the (proposed) merger and the (trust scheme of arrangement)".

Responding to the resolution relating to the Reit manager's rationale behind the hiring of three former ESR employees, it said that "none of the relevant persons are decision-makers in the context of the merger", and thus there is no "serious conflict of interests".

The recruitment of the trio was "duly carried out in accordance with the Sabana manager's recruitment procedures and process which is in line with market practice", and that they were assessed to have the right skill-pool and experience, added the statement.

As for concerns raised by the fund managers with regard to certain members of the board and the majority of the senior management team having prior substantial and long-term relationship with ESR-Reit, Sabana Reit's manager said that only Ng Shin Ein has a "deemed business relationship with the ESR group" for purpose of the securities and futures regulations.

Even then, following the completion of payment from InfinitySub to Ms Ng for the divestment of her entire interests in Blackwood Investment - which was "terminal in nature and solely for the purposes of the divestment" - on Aug 30 last year, Ms Ng no longer has any agreement or understanding with the ESR group in relation to Sabana Reit and its units, it added.

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The statement also noted that the other two independent directors, as well as Donald Han, the manager's chief executive, "have no relationship whatsoever with the ESR group".

In Quarz and Black Crane's fourth resolution, the fund managers requested that the board make "further study and investigations of the merits of the proposed merger", among other disclosures, to which Sabana Reit's manager replied that it has "the overall responsibility and discretion to manage the business of Sabana Reit", and that it is "correspondingly the responsibility and discretion of the Sabana manager to recommend proposed business transactions".

It has also not received any alternative and/or competing proposals or offers as at Nov 22, added the manager.

As for the payment of its distribution, Sabana Reit's manager said it intends to declare and pay unitholders a cleanup distribution in the event that the trust scheme of arrangement is approved and becomes effective.

But should it fall through, the manager will also "endeavour to make distribution in the ordinary course of business", taking into consideration factors such as market outlook and cash flow required for working capital of its business.

Finally, relating to concerns surrounding Ms Ng's independence, Sabana Reit's manager said the proposed merger with ESR-Reit was first explored in late April this year, after she had ceased to be a director of Blackwood Investment.

Additionally, Ms Ng had disclosed to the relevant independent directors the terms of the divestment of her entire interests in the company, which was determined on a "willing buyer willing seller basis". Sabana Reit's board of directors also noted that the consideration received by Ms Ng for the divestment was at a valuation in line with the consideration received by Vibrant Group for the divestment of its effective stake in the Sabana manager.

Other than the divestment agreements, there is no agreement, arrangement or understanding - "whether formal or informal, written or oral", in relation to Sabana Reit and/or Sabana units between Ms Ng and ESR Cayman, or any of its subsidiaries or associated companies, said the manager.

As at 2.58pm on Monday, units of Sabana Reit were up 1.4 per cent or 0.5 Singapore cent to 35.5 cents, while ESR-Reit units rose 3.9 per cent or 1.5 cents to trade at 40 cents.