ESR Group has issued yet another open letter to the unitholders of Sabana REIT ahead of its extraordinary general meeting (EGM) to be held on Aug 7.
The group is the largest unitholder in Sabana REIT and the owner of the REIT manager.
In its letter dated July 25, the group referred to the move to internalize the REIT’s manager, noting that the passing of the second resolution tabled at the upcoming EGM would not “immediately and automatically result in the internalisation”.
Activist investor Quarz had requisitioned for an EGM to pass two ordinary resolutions. The first is to remove the current REIT manager “as soon as practicable” while the second is to vote for an internalisation of the manager. Under the second resolution, the REIT is also seeking to hire and appoint “qualified candidates” for the internal manager.
“It should now be clear to unitholders that the passing of [the second resolution] only means that the trustee is directed to take steps, including engaging advisers, on the process for internalization,” says the group, adding that Quarz’s “rally cry” that the passing of the resolution necessarily results in the internalization of Sabana REIT’s manager “wilfully ignores all the known and unknown hurdles that stand in the way of internalization”.
Should Sabana’s unitholders agree on the internalisation, the process may take as long as 12 months “or potentially significantly longer”.
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In addition, should the first resolution to remove the current manager be passed, there is no guarantee that its existing staff will remain in the interim for the second resolution.
Further to its letter, ESR Group alleged that Quarz, “caught in the middle of a falsehood”, had “conjured” up a figure of $40 million which the REIT would save from having an internal manager.
“There is no basis for this,” notes the group.
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“Quarz has also been deliberately vague in their statements by claiming that there would be ‘cost savings from removing the external manager’ and that the REIT can ‘potentially save more than $40 million of fees they need to pay to the external manager over the next 10 years’. It is entirely unclear what the ‘savings’ are,” the group adds.
On this, the group has urged Sabana REIT’s unitholders to “restore certainty and stability to the REIT” by voting against both resolutions at the EGM.
“The future of Sabana REIT has been thrown up in the air at the instigation of requisitionists whose proposals are, in the words of the Sabana manager, ‘incomplete, lack clarity and fail to outline the many inherent risks’,” it adds.
ESR Group had previously issued an open letter to Sabana REIT’s unitholders on June 26 to clarify that the monetary value of its stake in the REIT is a lot higher than that in the manager.
The group had also issued several responses to Quarz’s open letters dated June 28 and July 4, as well as Quarz’s statements released on July 19 and 20.
On July 9, ESG Group filed an injunction in the High Court to restrain Sabana REIT’s manager from holding the EGM. The interim injunction was dismissed on July 11 while the permanent injunction was dismissed on July 19.
The REIT trustee, HSBC Institutional Trust Services, on July 15, issued a draft letter where it detailed the steps and costs associated with the resolutions for the EGM.
On July 19, Sabana REIT reported a DPU of 1.61 cents for the 1HFY2023 ended June 30, 1.3% higher y-o-y.
As at 3.45pm, units in Sabana REIT are trading 1.5 cents lower or 3.45% down at 42 cents.
