Unitholders’ Questions to ESR Group and Quarz Capital

Date: August 3, 2023

Unitholders’ Questions to ESR Group

  1. How would ESR respond to Sabana unitholders who believe that a stronger and larger Sabana REIT could potentially become a credible competitor to ESR-LOGOS, and thus it might be in the interest of ESR Group to maintain the status quo?
  2. In addition, ESR Group does not seem to play an active role in the management of Sabana REIT, nor does it actively contribute to Sabana’s growth, despite identifying as the “sponsor of Sabana REIT.” Given the current circumstances, why is ESR Group not supporting the internalisation of Sabana REIT? This move would eliminate any operational and governance constraints and establish an internal manager to drive the REIT’s growth for the benefit of all unitholders, especially minority shareholders who find themselves caught between the clash of substantial unitholders?
  3. Can ESR Group explain how it might have directly or indirectly helped Sabana REIT lower its finance costs? Has ESR Group been in contact with Sabana’s borrowers to confirm whether borrowing costs will increase and if existing interest rate hedges will be unwound if the manager is removed? Could ESR Group confirm that it will not take any active steps to undermine Sabana REIT if unitholders vote for the internalisation?


Unitholders’ Questions to Quarz Capital

  1. While there are benefits to the internalisation of the manager, there are undoubtedly real risks and uncertainties involved. Is Quarz, who is spearheading the internalisation, both willing and capable of providing financial support to the REIT in order to reassure the bankers who might perceive the internalisation as a risky and uncertain act?
  2. If the internalisation proceeds, what role, if any, will Quarz play in effecting the internalisation? Has the trustee engaged with Quarz since the requisition notice was issued? Likewise, has Quarz engaged with MAS and SGX RegCo?
  3. Has Quarz considered the risks and potential impact if the Sabana external manager fails to fulfill their obligations in the event that unitholders vote to remove them? What would be the worst-case scenario in such a situation, even if there might be potential legal and regulatory consequences against the manager and its directors?
  4. Internalisation is neither tested nor proven in Singapore.  What makes Quarz so confident that by internalizing the management of Sabana Industrial Reit, it will be value-accretive for unitholders, especially under the Singapore Laws the REIT will have to have a board of directors and a CEO?
  5. HSBC Trustee, in its Statement to unitholders, had stated that the implementation process at Sabana, if the resolutions are passed:-


    – will take at least 12 months and potentially significantly longer;
    – and unitholders will have to bear significant additional costs of professional advisors’ fees during the interim period as well as capital and set-up costs to establish the internal manager, in addition to continuing to pay the current Sabana manager professional fees as interim manager.

    In view of the above, please explain Quarz’s position that unitholders will be able to enjoy higher DPU in the next few years?

  1. Sabana’s approximately S$300 million loans with bank lenders are totally unsecured.  Ernst & Young had issued an Emphasis of Matter with Sabana’s 1H FY2023 results, highlighting a material uncertainty that may cast significant doubt on the Reit’s ability to continue as a going concern.


    Please explain the basis of Quarz’s confidence that this will not be a material issue and that unitholders need not be too concerned.

  2. It is heartening to note that Quarz has repeatedly pledged its support to help the Trustee effect the implementation of internalization.


    Please give unitholders additional comfort by outlining the areas that Quarz can help to add value and expedite the process so that unitholders can enjoy the benefits of internalization earlier.


David Gerald
Founder, President and CEO


Re-Watch SIAS Dialogue Session with Sabana Industrial REIT:

Click here to see reply from ESR Group

Click here to see reply from Quarz Capital