Sabana Shari’ah Compliant Industrial REIT and ESR-REIT, two Singapore-listed real estate investment trusts, are being urged to merge by activist fund Quarz Capital Management Ltd.
Quarz began buying into Sabana REIT in 2018 and controls around 4% to 5% of the firm, Chief Investment Officer Jan Moermann said.
In an open letter to Sabana REIT released Thursday and obtained by Bloomberg News, Quarz said the pair, which share a common investor in Hong Kong-listed ESR Cayman Ltd., should merge to solve the issue of overlapping investment mandates between the two trusts, which may have corporate governance implications.
“We are not convinced by ESR’s argument that they are able to clearly manage Sabana and ESR REITs independently,” the letter said. “As a recently listed company in Hong Kong, ESR has a fiduciary duty to enhance the value of its shareholders, which translates to ensuring that the value of its stakes in both ESR and Sabana REITs are maximized.”
Sabana REIT declined to comment. ESR-REIT didn’t immediately respond to a request for comment.
It’s not the first time Quarz has angled for REIT consolidation in Singapore.
In April, it said Ascendas Hospitality Trust and Ascott Residence Trust should join forces to boost shareholder value and avoid potential conflicts after a separate deal that saw CapitaLand Ltd. gain ownership of the managers of both REITs.
That merger subsequently transpired, with Ascott Residence announcing its intention to acquire Ascendas Hospitality Trust in July. The transaction is expected to complete at the end of this year.
Wave of Deals
There has been a wave of REIT tie-ups in Singapore. Earlier this year, OUE Commercial REIT agreed to buy OUE Hospitality Trust. In 2018, ESR-REIT and Viva Industrial Trust merged to create a larger logistics trust. In January, CapitaLand struck a S$6 billion ($4.4 billion) deal to buy Temasek Holdings Pte units Ascendas Pte and Singbridge Pte.
Quarz is proposing that ESR-REIT merge with Sabana REIT in a cash and unit transaction where 0.92 units of the former and S$0.067 cash would be exchanged for one unit of Sabana REIT, giving a value of about S$0.545 per unit.
For Sabana REIT unitholders, the potential offer provides a takeover premium of about 21%, Moermann said.
“The two REITs primarily invest in the Singapore industrial sector, which is limited in size and transactions,” the letter said. “Undoubtedly, both might tender for the same assets. As ESR’s stake in ESR-REIT has a substantially larger value versus the stake in Sabana, this can potentially create corporate governance concerns on which REIT should have priority. It would be clearly inequitable to Sabana’s minority unitholders if the REIT is forced to invest out of Singapore such that ESR can mitigate this issue.”
Units in Sabana REIT rose 2.2% Thursday, the most in three weeks, to S$0.460 while units in ESR-REIT increased 1.9%, the most since Sept. 19, to S$0.530.
Source: Bloomberg
Can’t stop reading? Read more
Partners Group hires Leonard Green veteran to co-lead $13.2bn healthcare strategy
Partners Group hires Leonard Green veteran to co-lead $13.2bn healthcare strategy Partners Group has appointed Pete Zippelius as Co-Head of its Private Equity Health & Life vertical, as the private equity firm strengthens its leadership team in a key growth...
TA backs iBase-t to scale AI-driven manufacturing in aerospace and defence
TA backs iBase-t to scale AI-driven manufacturing in aerospace and defence TA Associates has made a strategic growth investment in iBase-t, as the private equity firm increases its exposure to AI-enabled industrial software across the aerospace and defence sector....
17Capital raises record $7.5bn NAV loan fund as private equity financing demand accelerates
17Capital raises record $7.5bn NAV loan fund as private equity financing demand accelerates 17Capital has closed its Credit Fund 2 at $7.5bn, as the private credit manager sets a new record for NAV loan fundraising and reinforces the rapid growth of the asset class....