In a proxy paper dated Feb 28, proxy advisor Glass Lewis has recommended voting against 8 of the 10 ordinary resolutions in Sabana Industrial REIT’s EGM on March 8. The resolutions were proposed mainly by Quarz Capital Asia, and nine additional unitholders. The nine unitholders own 0.04% of Sabana REIT.
The two resolutions are resolution 2, which is proposing regular written updates on the internalisation process, and resolution 10, directing the Trustee to seek written confirmation, guidance and/or directions from the relevant regulatory bodies in the Trustee's ongoing Application in HC/OA 19/2024.
For resolution 2, Glass Lewis says “Given that the Trustee has no objections to complying with this directive, and coupled with the fact that the Trust is already substantially complying with the matter being requested here, we believe unitholders can reasonably support this proposal, as it would simply affirm a stance that appears to us to be mutually shared by both the Trustee and the Proponents. Accordingly, we recommend that unitholders vote FOR this proposal.”
For resolution 10, Glass Lewis says “Considering that the Trustee has not expressed any views on this proposal that would suggest opposition to the matter, coupled with our view that the clarity being sought under this proposal could be relevant/critical to other matters concerning the ongoing internalisation, we believe this proposal can reasonably warrant unitholder support at this time. Accordingly, we recommend that unitholders vote FOR this proposal.”
The regulators are likely to be making a statement based on the listing rules on which S-REIT trust deeds are premised on who can vote in EGMs on extraordinary resolutions.
Questions have been raised on who should be allowed to vote on resolution 3, where Quarz is proposing two of its representatives and directors as part of the resolution to form some sort of internalisation committee to oversee the Trustee. Should Quarz be allowed to vote on this resolution?
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As a background, on Aug 7, 2023, Quarz proposed two resolutions, one was to vote out the external manager of Sabana REIT, Sabana Real Estate Investment Manager (SREIM), and resolution 2, an ordinary resolution, to effect the internalisation of the REIT management function by incorporating a subsidiary wholly owned by the Trustee and appointing such a subsidiary to act as the manager of Sabana Industrial REIT.
As the Trustee went about doing this task, Quarz requisitioned a second EGM with a number of resolutions, which have been distilled down to 10 to be voted on March 8. It is most likely they will all be passed as they require more than 50%. On Aug 7, 2023, Quarz’s resolutions were passed with between 55% and 57% of unitholders voting in favour with both Volare and Quarz voting together.
Glass Lewis says “The Proponents” (which are mainly Quarz Capital Asia) are highly concerned about and completely disagree with the Trustee’s interpretation of Sabana REIT’s trust deed, which potentially jeopardizes the internalisation process.”
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The Trustee says that certain amendments need to be made to the trust deed to effect the Internalisation, and that such amendments would need to be put forth as an extraordinary resolution. The Proponents believe that an S-REIT - governed by the code on Collective Investment Schemes (Property Funds) - is similar to the Business Trust Act of 2004 which governs business trusts such as Croesus Retail Trust. The differences between them include tax transparency, owning operating companies, loan-to-asset ratios, payout ratios, and so on.
As at Dec 31, 2023, Sabana REIT has spent some $3.6 million on the internalisation process.
