Sunday, September 8, 2013

Sabana REIT

There are a few issues with this REIT, the top two being the renewal of leases and weak sponsor.

Well, there is nothing we can do about the sponsor but I think that has been priced in.

as for renewal of leases, in order not to appear talking in hindsight, I decided to blog about it now. It should not resulted in significant fall in revenue, definitely less than the 7.2 % projected regardless of expiry of leases. There are sub tenants in the leases, so to become multi- tenant are a non issue. It will be an issue if Ye anchor tenant are movin out together with the expiry of master lease, that is highly unlikely too since there is no reason to negotiate till the eleventh hour if this is such the case, there should be confirmation of non-renewal as it takes time to find another tenant.

if negotiation is going on tough, is it going to be bad deal for shareholders or tenants. Half of the leases have no build in positive rent adjustment, while industry rent are beginning to fall, there is no cases of negative renewal of rents from other industry reits, and given the low base of rent 3 years ago, net net sabana should get a better deal.

3 more months and we shall see if I am right


  1. This is a REIT I blog about pretty often and I agree with your assessment.

    If anyone is investing for income, Sabana REIT is a good option but it would be more tantalising if offered at its NAV or lower. ;)

  2. Many people are forecasting a bad turn of events for sabana, May bank research report put the forward yield of sabana and an even lower DPU than 2013. I think they didn't take into account the chai chee acquisition. My gut feel is at current price, yield could go up to 8,7%

    Am I dreaming? I could be, we shall know in a few months time

  3. What is your say now? It continued to fall.. Is it good not to load in more?

  4. I would av. Down if it goes to a dollar or less.

    As I said, I do not think they will repeat such a value-destroying exercise anytime soon.

    The risk is they will do something stupid when they refinance their loans. But given the nature of their financing and the fact that they interest cost is already one of the highest. I doubt they will self-detonate in this way.

    At a dollar, yield will be about 8.8%. I think that is attractive. They have been able to increase sub tenants this far, I will need the next quarter to confirm that operating costs will not escalate and occupancy remain stable or improve. But if it goes below $1, I will take a leap of faith

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