Singapores Sabana REIT And ESR-REIT Announce Plans To Merge

Two Singapore-listed real estate investment trusts Sabana Shari’ah Compliant Industrial REIT and ESR-REIT have proposed a merger that would see the latter acquiring all units of Sabana REIT.

The announcement of the proposed merger comes eight months after activist fund Quarz Capital Management called for their merger to solve the issue of overlapping investment mandates between the two trusts. Sabana REIT and ESR-REIT share a common investor in Hong Kong-listed ESR Cayman.

The merger will be effected by way of a trust scheme of arrangement in compliance with the Singapore Code on Take-overs and Mergers, with ESR-REIT acquiring all units of Sabana REIT in exchange for new units in ESR-REIT.

Following the merger, ESR is expected to hold approximately 12.2 per cent of the total issued units of the enlarged REIT.

According to the announcement, the merger will provide the enlarged REIT with benefits such as improved portfolio diversification, enhanced growth outlook, enlarged asset base, and a solidified position as a benchmark developer-backed industrial Singapore REIT (S-REIT), among others.

The merged entity will have total assets of approximately S$4.1 billion ($2.9 billion) and will become the fourth-largest industrial S-REIT by market share based on gross floor area.

The merger will also lead to a larger market capitalisation of approximately S$1.8 billion ($1.3 billion) and a free float of about S$1.3 billion ($936 million), according to the announcement.

“The merger is in line with our strategy to establish ESR-REIT as one of the leading Pan-Asian industrial REITs… and will deepen our presence in Singapore, said Adrian Chui, Chief Executive Officer and Executive Director of the ESR-REIT manager.

Chui added that the greater scale of the enlarged REIT will benefit from enhanced resilience, especially in view of the COVID-19 pandemic.

“The enhanced scale will raise our visibility and enable us to be more competitive within the industrial S-REIT space, while the larger asset and tenant base will put us in a stronger position to undertake initiatives to improve and rejuvenate the portfolio at lower costs with minimised execution risks,” said Donald Han, Chief Executive Officer of the Sabana REIT manager.

In November, activist fund Quarz Capital Management urged the two REITs to merge in a cash and unit transaction, saying it was not convinced by ESR’s argument that it is able to clearly manage Sabana and ESR REITs independently.