Sabana REIT Prices IPO At S$1.05 Per Unit – DJ

Sabana Shari''ah Compliant Industrial Real Estate Investment Trust, or Sabana REIT, has priced its initial public offering at S$1.05 per unit, allowing the company to raise as much as S$664.4 million in gross proceeds, people familiar with the situation said Friday.

The first Shariah-compliant listing in Singapore is planning to sell a total of 632.8 million units in the IPO, with the units listing on the Singapore Exchange likely on Nov. 26, one of the people said.

Of the total offering, 101.8 million were placed to cornerstone investors.

The offering would also be the world''s largest listed Shariah-compliant REIT by total assets. The Singapore-based REIT''s assets are estimated at S$850 million.

The pricing of the units is at the middle of the price range of between S$1 and S$1.10.

The company intends to use the proceeds of the IPO to purchase properties and to pay off debt-related costs.

Daiwa Capital Markets, HSBC and United Overseas Bank are advising Sabana on the deal, while HSBC is also the sole financial adviser.

Sabana – BT

Sabana Reit aims to raise $554m in IPO

Syariah-compliant Reit prices units at $1-1.10

Sabana real estate investment trust (Reit) – Singapore’s first syariah-compliant Reit – is set to offer a rich distribution yield and raise as much as $554 million from its initial public offering, its preliminary prospectus showed yesterday.

The Reit would sell 504 million units, with each unit to be priced within a range from $1 to $1.10 apiece. This excludes the 102 million units that have been subscribed by cornerstone investors, who include FIL Investment Management (Hong Kong), a Bahrain bank and Capital Investment & Brokerage, a subsidiary of a Jordan bank.

The property trust would hold some $850 million worth of 15 industrial properties in Singapore, making it the world’s largest Reit by asset value.

The three syariah-compliant Reits currently available in the region are all listed in Malaysia.

One distinguishing factor of a syariah-compliant Reit is to have at least 95 per cent of the gross revenue coming from businesses that adhere to syariah guidelines, which prohibit links with alcohol, tobacco and pork consumption, for instance.

The Reit manager has projected a distribution yield of 8.02 per cent and 8.05 per cent respectively for 2011 and 2012, based on the maximum offer price of $1.10. By simple comparison, Mapletree Industrial Trust offered a distribution yield of 7.6 per cent for its fiscal 2010.

While high yields are naturally attractive, analysts have warned that yield premium, which also reflects higher risks, may not be sustained for long.

The IPO offer consists a placement of 428 million units to investors that include institutional players, as well as a public offering of 75.5 million units.

Of the units offered to the public, 44.5 million, or nearly 60 per cent of the public offer, will be reserved for subscription by individuals related to Sabana Investment Partners (SIP) – the Reit’s sponsor – who includes management and business associates.

SIP is 51 per cent owned by Freight Links Express Holdings. Blackwood Investment holds 45 per cent, while Tarian Capital Partner controls 4 per cent.

The 31 million units set aside solely for public subscription represent 6.2 per cent of the total 504 million units being sold.

Several of these properties are situated at industrial areas of Loyang, which is near Changi Airport, and Penjuru, which is close to the shipping ports. They include five properties worth $193 million sold by Freight Links, and a facility worth $60 million that was sold by Soilbuild Group.

About 30 per cent of the properties, on a gross floor area basis, are built on the rent-free land sites that was leased from the Urban Redevelopment Authority (URA). Land rent from the URA is paid upfront at the start of the land lease, unlike assets from JTC Corporation, which are subjected to a regular land rent that would be revised annually based on market factors.

The bulk of its forecasted gross revenue for 2011 comes from its high-tech industrial businesses, which makes up 58 per cent of the pie. City Developments, through its unit, is expected to be Sabana Reit’s biggest contributor in revenue terms, making up nearly 40 per cent of the trust’s 2011 forecasted gross revenue.

The trust also expects minimal capital expenditure in 2011 and 2012.

Sabana REIT – BT

Freight Links delivers IPO with a difference

Logistics firm breaking new ground with $600m Islamic Reit due to list by year's end

(SINGAPORE) Freight Links Express Holdings expects to list Singapore's first Shari'ah-compliant real estate investment trust (Reit) worth about $600 million by the end of the year, sources close to the deal told BT yesterday.

The trust – which would hold about $850 million of Singapore industrial properties – is expected to be the world's largest certified Shari'ah-compliant Reit.

The three Shari'ah-compliant Reits now available in the region are all listed in Malaysia. They include Axis Reit, an office property trust that is currently the biggest listed Islamic Reit with a market cap of 812 million ringgit ($341.2 million).

The other two are Al-Hadharah Boustead Reit, which invests in plantation assets, and Al-'Aqar KPJ Reit, which focuses on healthcare assets.

Logistics company Freight Links, which owns 51 per cent of the Reit's manager, Sabana Investment Properties, said in a regulatory filing on Monday that it would subscribe up to 5 per cent of the IPO and invest as much as $30 million.

The other owners of Sabana Investment Properties are Blackwood Investment, which is run by private investors and owns 45 per cent of the trust, and Tarian Capital Partners, which owns 4 per cent.

BT understands that Singapore-incorporated Tarian Capital was formerly called Emirates Tarian, due to its links to Emirates Investments Group (EIG), a Dubai-based company known for glitzy property projects. EIG sold its stake in Emirates Tarian, which was renamed.

EIG, through the former Emirates Tarian, had its fingers in Singapore high-end property projects in recent years, including working with Ritz-Carlton to develop the Ritz-Carlton Residences.

Sabana Investment Properties, which was incorporated late last year, has been looking for warehouses to put into its portfolio since then, a source said.

Freight Links has already sold five properties worth $193 million to the Reit manager. The remaining properties for the trust – known as Sabana Reit – were acquired from various listed and unlisted parties.

These included Sim Lian Group, which said in May that it would sell properties worth $46.3 million to Sabana Reit. Soilbuild Group also sold the trust a warehouse in August for $60 million.

BT understands the listing is aimed at attracting funds from Middle Eastern investors, as few Shari'ah-compliant products are available.

One distinguishing factor of a Shari'ah-compliant Reit versus a conventional one is in having at least 95 per cent of the gross floor area of the properties adhere to Shari'ah laws, which prohibit any links with alcohol, tobacco and pork consumption, for instance.

This means that earnings generated from the 5 per cent of gross floor area of the warehouses not certified to be Shari'ah-compliant cannot be deemed for profit or distributed as dividends, and have to be given to charity.

Varying benchmarks are used by Reits to gauge the level of compliance, given differing schools of thought in Islamic teaching. Malaysia grants compliance if 80 per cent of the gross floor area follows Shari'ah law, sources said.

BT understands Sabana Reit is designed to meet stricter requirements expected in the Gulf region – to draw investors from that area.

The warehouses in the Reit are undergoing the final step in the certification process and are expected to meet compliance standards, BT understands.

The Reit also has to use Shari'ah-compliant banking and insurance products, given the different structure under Islamic finance. Under Shari'ah law, businesses cannot make money from interest fees, for example.

BT understands the upcoming listings of Global Logistic Properties and Mapletree Industrial Trust have helped boost confidence in the Sabana IPO, which has garnered strong interest from Middle Eastern investors. The Reit's roadshow is expected to start in November.

Shares of Freight Links surged 6.7 per cent or half a cent to end at eight cents yesterday in response to Freight Link's announcement made after the end of trading on Monday.

HSBC, Daiwa Capital Markets and UOB are joint book-runners for the Sabana IPO.