SINGAPORE (22 July 2021) – The manager of Sabana Shariah-Compliant Industrial Real Estate Investment Trust announced Thursday the REIT’s investment mandate and its business operations will be amended to exclude the requirement to be in compliance with Shariah principles and procedures.
The REIT’s current mandate is to principally invest in line with Shariah investment principles in income-producing industrial real estate in Asia, as well as real estate-related assets.
Pursuant to the amendment, Sabana Shariah-Compliant REIT will be renamed Sabana Industrial Real Estate Investment Trust. Sabana Shariah-Compliant REIT is currently the only Shariah-compliant REIT by constitution listed on the SGX-ST.
These changes will take place on or around 21 October 2021.
The amendment to the Trust Deed is not conditional upon unitholders’ approval as the REIT has been listed for more than three years, the manager said.
Rationale for Change
In its announcement, the REIT’s board of directors said being Shariah compliant has served Sabana well over the past decade. Being Shariah compliant has been invaluable and a differentiating factor for Sabana REIT within Singapore and in the international space of real estate investment trust, as Sabana REIT is “one of the largest Shariah compliant REITs in the world in terms of total asset size since IPO.”
In its continued effort to create long-term value for unitholders, retaining the REIT’s Shariah compliant status, however, is no longer relevant for Sabana, the manager said.
“With the change, Sabana REIT will have access to more diversified funding sources.This can provide further resilience for its balance sheet and financial flexibility to better position Sabana REIT to drive value-accretive acquisitions and organic growth for Unitholders,” the manager said in its announcement.
The manager has also, over the past few years, received consistent feedback from unitholders to consider whether Sabana REIT should retain its Shariah compliance requirement.
Shrinking Shariah Investor Base
The change is also reflective of its evolving investor base since the REIT’s inception.
The total percentage of units held by Shariah investors decreased from approximately 12.3% as at 31 December 2011 to approximately 2% as at 31 March 2021, based on the information available to the manager as at the date of this announcement.
With the change, Sabana REIT can have more flexibility in its investments beyond Shariah-compliant industrial properties and enable it to appeal to a wider pool of investors.
To comply with Shariah principles, the manager currently has to ensure that the total rental income from lessees, tenants and/or sub-tenants engaging in activities prohibited under Shariah guidelines would not exceed 5% per annum of Sabana REIT’s gross revenue. With the change, the manager can potentially attract more tenants in the food and beverage industry (such as chill-out lounges) and in the banking, finance and insurance industries, which it may not otherwise be permitted to lease under Shariah principles.
Pursuant to the change, Sabana REIT will no longer retain a Shariah adviser. Singapore-based Five Pillars Pte Ltd has served as Sabana’s Shariah adviser since 2010. -/-www.halaluniverse.net
