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Sabana REIT: 4Q 2012 DPU 2.41c.

Thursday, January 17, 2013

The management of Sabana REIT have once again exceeded their own forecast and they have announced a DPU of 2.41c for 4Q 2012.

The REIT goes XD on 23 Jan 13 and the income distribution is payable to unitholders on 28 Feb 2013.

Gearing: 37.6%

Interest cover ratio: 5.4x

NAV/unit: $1.07

All in financing cost: 4.3%

The numbers are all good except for the fact that 44.7% of leases by gross revenue are still expiring this year. There is no news on any progress made towards the renewal of these leases and that could explain Mr. Market's more cautious attitude towards this REIT.

Sabana REIT's distribution yield is currently the highest in the S-REIT universe. Annualised, we are looking at a distribution yield of some 8.38% based on the last closing price of $1.15 per unit.

Unless it is able to assure Mr. Market that all of the expiring leases in 2013 are being renewed and with positive rental reversions to boot, its unit price could find it harder to rise much higher.

In the meantime, however, we could see unit price moving higher as the REIT goes CD tomorrow.

See presentation slides: here.

Related post:
Sabana REIT: 3Q 2012 DPU 2.34c.


SnOOpy168 said...

红包 for us.

Not familiar with the leasing aspect of commerical property market but I do believe that pre-expiry renewal discussions takes place months ahead. Hopefully with some upside on the rental too.

Otherwise, keeping up with the 8.x% yield is going to be tough for the world largest listed Shari'ah Compliant REIT with S$1.13b assets.

I have faith in this team.

AK71 said...

Hi SnOOpy168,

I think they won't have much of a challenge renewing the contracts expiring this year as the heightened increase in the supply of industrial space would really kick in sometime in 2014/2015.

Rental reversions could be marginally positive given difficult business conditions.

Once they manage to get this issue out of the way, we could see further yield compression which could send unit price up another 10%.

In the meantime, like you, I will wait for the hong bao. :)

JCK said...

Nice nice!

FoodieFC said...

also the DUP likely to go down as they do not need to give 100% as dividends.

AK71 said...

Hi FoodieFC,

Indeed, from the 3rd year onwards, Sabana REIT could reduce income distribution by 10%. :)

Unknown said...

Hi AK,

Sabana go higher to 1.215 today. I would very much want to keep the Reits as it pay be more than 9% yield, but not sure how to calculate when to sell the Reits for capital gain instead?

AK71 said...

Hi Connie,

How to calculate when to sell? Er... Sounds like a question in Astrology 101. ;)

The answer is inside you. :)

5 steps to take in REIT investment.
Staying positive on S-REITs.

You might also want to read my last blog post on Sabana REIT to get a feel of things.

Sell or not? You decide.

Unknown said...

Thks for the prompt reply AK!

AK71 said...

Hi Connie,

I didn't do anything. Like always, I was just talking too loudly to myself. :)

JCK said...

Posted to Sabana IR
Wonder of they will reply?

"First of all, congratulations on the improved performance on last years Q1.

A few concerns

a)Manager's fees (5,491) (4,358) (26.0%)

The Manager's fees has increase considerably by 26%. How are these fees awarded?

b) Weighted average master lease duration(by gross revenue)

This number for 2013 is of extreme concern.
The number has remained at approx. 44% for a while now. 2013 is already passed its 1st qtr.
What are the steps taken by the Manager to address this?
What are the expectations of the addressing of this issue?

Thanks for your reply"

JCK said...

Manager's Fees

For so long as Sabana Shari’ah Compliant REIT is listed, the Manager is entitled under the
Trust Deed to the following management fees:

a base fee not exceeding the rate of 0.5% per annum of the value of the Deposited
Property, payable on a quarterly basis; and

a performance fee equal to the rate of 0.5% per annum (or such lower percentage as may
be determined by the Manager in its absolute discretion) of the Net Property Income of
Sabana Shari’ah Compliant REITor the relevant SPVs in each financial year, payable on
a yearly basis, provided Sabana Shari’ah Compliant REIT achieves at least 10.0% in
annual growth in DPU over the previous financial year (calculated after accounting for the
performance fee (if any) for that financial year and after adjusting, at the discretion of the
Manager, for any new Units arising from the conversion or exercise of any instruments
convertible into Units which are outstanding at the time of calculation, and any rights or
bonus issue, consolidation, subdivision or buy-back of Units).
No performance fee will be paid to the Manager for the Forecast Year 2011.

JCK said...

Manager's fees pt 2

The Manager is also entitled to:
k 1.0% (or such lower percentage as may be determined by the Manager in its absolute
discretion) of the acquisition price of real estate or real estate-related assets acquired
directly or indirectly, through one or more SPVs, pro rated if applicable to the proportion of
Sabana Shari’ah Compliant REIT’s interest. For the purposes of this acquisition fee, real
estate-related assets include all classes and types of securities relating to real
estate; and

k 0.5% (or such lower percentage as may be determined by the Manager in its absolute
discretion) of the sale price of real estate or real estate-related assets disposed, pro rated
if applicable to the proportion of Sabana Shari’ah Compliant REIT’s interest.
For the
purposes of this disposal fee, real estate-related assets include all classes and types of
securities relating to real estate.

No acquisition fee is payable for the acquisition of the Properties from the Sponsor in connection
with the Offering. However, the acquisition fee is payable for the remaining Properties (other than
the Properties acquired from the Sponsor). In accordance with the CIS Code, where the
Manager receives a percentage-based fee when Sabana Shari’ah Compliant REIT acquires
real estate from an interested party, or disposes of real estate to an interested party, the
acquisition or, as the case may be, the divestment fee should be in the form of Units issued at
prevailing market prices, such Units not to be sold within one year from the date of issuance.
Any payment to third party agents or brokers in connection with the acquisition or divestment of
any real estate of Sabana Shari’ah Compliant REITshall be paid by the Manager to such persons
out of the Deposited Property of Sabana Shari’ah Compliant REIT or the assets of the relevant
SPV, and not out of the acquisition fee or the divestment Fee received or to be received by the

The acquisition fee and divestment fee are payable to the Manager in the form of cash and/or
Units (as the Manager may elect) at the then prevailing market price provided that in respect of
any acquisition and sale or divestment of real estate assets from/to interested parties, such a fee
should be in the form of Units issued by Sabana Shari’ah Compliant REIT at prevailing market

Any increase in the maximum permitted level of the Manager’s acquisition fee or disposal fee
must be approved by an Extraordinary Resolution passed at a Unitholders’ meeting duly
convened and held in accordance with the provisions of the Trust Deed.

AK71 said...


If you have any reply from them regarding the lease renewals, please feel free to share with us here. Thanks. :)

I am too busy and exhausted to blog these few days. So, will have to depend on readers' contributions. ;p

You might be interested in this:
REITs: Performance fees.

1Q 2013 DPU at 2.41c
NAV/unit: S$1.06
Gearing: 37.7%
Interest cover: 5.1x

XD 24 April 2013
Payable on 30 May 2013

AhJohn said...

Hi JCK, interesting, why they don't reply question 2?

JCK said...

Reply from Saban IR

Thank you for your email and my apologies for the late response as we were experiencing trouble with the mailbox on our website. Here are our responses to your questions:

1. In regards to the Manager’s fees – they have increased due to the five acquisitions made in 2011 and one in 2012. When properties are acquired, the Manager is entitled to acquisition fees. When we did our IPO forecast, it was with the assumption that if no acquisitions were made and therefore the reason why the Manager’s fees was above what was forecasted.

2. In regards to the weighted average master lease duration – this constitutes five master leases (which will expire on 25 November 2013). Actually, with six new acquisitions since IPO, the weightage of the leases expiring in 2013 has already come down from 59.5% at the time of IPO to the 44.7% as of 31 March 2013. It is not possible to take in new tenants or increase the rent until the leases have ended on 25 November 2013 and hence, unless we make new acquisitions before November 2013, the figure would likely stay at 44.7%. In regards to what will happen after the master leases end in November 2013, we will only have a clearer indication sometime in late May-June since master tenants are only required to give us an official response on whether they would renew/ do a partial renewal of/not renew their leases.

AK71 said...


Thanks for sharing the response from Sabana REIT's managers.

So, I guess we will have to wait until July for a report from them on the renewals.

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