Singapore (17 July 2020) – The managers of SGX-listed ESR-REIT and Sabana Shariah-compliant REIT announced late Thursday that they are proposing to merge. Once approved by shareholders, the new enlarged entity will be the fourth largest REIT by market share and fifth largest in Singapore by asset size.
While the jury is still out on whether the new entity will be Shariah-compliant, the managers have announced that the enlarged entity will have new refinanced debt of S$1.6bn out of total assets of S$4.1bn.
Based on Yasaar Ltd.’s Shariah screening methodology that stipulates a company’s debt to total assets must be less than 33.333% to be in compliant with the Shariah, the new entity will clearly be a non-compliant outfit.
At the moment, Sabana REIT is the only Shariah-compliant REIT by constitution. It will be de-listed from SGX and ceases to exist post-merger. ESR-REIT, on the other hand, is one of the nine REITs components of the FTSE ST Singapore Shariah Index launched in October 2018.
The merger will see ESR-REIT acquiring all units of Sabana REIT (Sabana Units) in exchange for new units in ESR-REIT (Consideration Units). Each Sabana unitholder will receive 94 Consideration Units for every 100 Sabana Units.
Based on the illustrative issue price of S$0.401 per Consideration Unit and the gross exchange ratio of 0.94x, the implied scheme consideration payable to Sabana unitholders is S$0.377 per Sabana unit, and the implied aggregate consideration is approximately S$396.9 million.
Sabana REIT was last traded on SGX at $0.38/unit up $0.02 while ESR-REIT was last traded at $0.405/unit, up $0.015 at 12.41pm Singapore time Friday.
Post-merger the enlarged entity will have 75 assets with a total gross floor area (GFA) of approximately 19.2 million square feet. It is expected to benefit from increased asset base, significantly higher debt headroom and access to more diversified funding sources.
It will have a longer weighted average debt expiry (WADE) profile of 3.2 years at lower costs of funding and a more evenly distributed debt maturity profile over the next five years. It will have a 100% unencumbered $1.6bn debt, including new debt facilities for the refinancing of Sabana REIT’s existing debt.-/-www.halaluniverse.net
