SABANA Industrial Real Estate Investment Trust (Reit) unitholders questioned the choice of the three director candidates put up by the trustee for the Reit when it becomes internally managed without a sponsor.
They are concerned that one of the candidates appeared to prefer an externally managed Reit; that another had been investigated by an overseas regulator, while the third had been a director with another Reit that recorded dismal financial performance.
Sabana Reit, which has been fraught with challenges in the process of internalisation, on Sunday (Oct 13) published responses to questions from unitholders, including explaining its process of proposing Dr Chew Tuan Chiong, Jimmy Chan and Sandip Talukdar as directors.
The Reit will convene a requisitioned extraordinary general meeting on Oct 18 to vote on the proposed internal-manager directors recommended by the requisitionists and the trustee.
Dr Chew was cited for his views in 2021 in a debate between internal or external Reit management, in which the former chief executive of Frasers Centrepoint Trust had said that small Reits “do not yet have economies of scale, and need support from the sponsor in terms of pipeline, management, talent pool and sufficient presence to exert a level of gravitas in the market.”
Unitholders commented that those views are “in conflict” with the impending operating structure of Sabana Reit, which is becoming an internally managed Reit.
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The trustee, however, pointed out that Dr Chew’s experience and track record in managing and overseeing Reits were considered to meet the criteria set for the search process.
“Dr Chew showed an open-mindedness towards an internalised management model given the precedents in other jurisdictions where internalised Reits have been successful, and also demonstrated an understanding of the nuances, challenges and also opportunities which an internally managed Reit could potentially face throughout his assessment and interview process.”
Dr Chew also responded to the concerns by saying that his view, expressed in 2021, was grounded in an understanding of the marketplace reality.
“A Reit that sheds a sponsor is abandoning a number of synergies and economies of scale, both tangible and nuanced. The problem is more acute for smaller Reits. One of several consequences is the likely increase in costs of debt refinancing…” he said.
However, Dr Chew hopes to draw on his understanding as a Reit practitioner to help Sabana Reit and its unitholders – including himself – to navigate the business challenges.
Chan was flagged by unitholders for having been probed by the Hong Kong Securities and Exchange Commission. The regulator had stated that his company, Maxsen Capital, had promoted itself as carrying on regulated activities in Hong Kong for about six years, despite not having been given approval to do so.
He quit the board of a Singapore-listed Reit in 2016 over the investigation.
No enforcement action was taken against Chan nor Maxsen Group by the Hong Kong regulator after the company made regulatory submissions and amendments to its website to better reflect the group’s business and scope of services, the trustee noted.
Chan is currently regulated as a licensed representative of an asset manager in Hong Kong, the trustee said.
Talukdar’s competence was an area of focus for unitholders, who highlighted that he had been an independent director with the external manager of Lippo Mall Indonesia Retail Trust (LMIRT) from 2020 to 2023.
“Your duties included strategic oversight, evaluating property acquisitions and ensuring alignment of management and unitholders’ interest. During your service at LMIRT, the share price lost 90 per cent of its value. Distributions to the perpetual bondholders and subsequently, unitholders, were stopped,” Sabana Reit unitholders noted.
Talukdar responded by saying that he satisfied the selection criteria set out by the trustee.
The requisitionists have nominated a total of six candidates as directors of the internal manager for the Reit: Lim Hock Chuan, Bhavik Umesh Doshi, Konrad Duttwiler, Jan Moermann, Havard Chi, and Saha Anshuman Manabendranath.
Sabana Reit units closed at S$0.375 unchanged on Friday.
