Real Estate Investment Trusts (REITs) are popular among Singaporean investors due to its liquidity, the high dividend yield, and low capital requirements. Most of us won’t have the spare cash to purchase multi-storey industrial buildings even if we wanted to invest in them. While the pandemic has severely impacted the retail, hospitality and commercial sectors and their corresponding REITs, industrial REITs have remained relatively resilient.
One of the 8 industrial REITs in Singapore, Sabana REIT has a diversified portfolio across 4 industrial segments (high-tech industrial, warehouse & logistics, chemical warehouse & logistics, general industrial). This includes industrial properties in areas such as Commonwealth, Serangoon, and even Changi. The Group also recently saw the completion of NTP+ lifestyle mall, which occupancy currently stands at approximately 97.4%.
Last month, Sabana REIT announced the removal of their Shari’ah compliance requirement which will take effect on 21 October 2021. This announcement is significant as Sabana REIT was the first certified Shari’ah compliant REIT in Singapore. The change is expected to increase growth opportunities by attracting more tenants in the food and beverage, banking, finance, and insurance industries, which was previously not permitted pursuant to Shari’ah principles.
As part of the Group’s continued ESG commitment, Sabana REIT is also deploying more holistic environmental strategies. This is reflected in NTP+, Sabana REIT’s first BCA Green Mark certified project with integrated environmental strategies including facade and roof design, energy enhancement, water conservation techniques, waste & recycling and green transportation and access.
For interested investors who are interested in REITs in the industrial sector, here are 5 things to know about Sabana REIT.
Can you share more about the removal of the Shari’ah compliance requirement? How does this affect the REIT?
The Shari’ah compliance requirement has differentiated us in the past, and we are grateful for the ecosystem of support it has given us access to. Our decision was made carefully, following feedback from Unitholders, feasibility studies and analysis of growth opportunities, to accommodate the changing profile of our tenants and enhance flexibility for our next phase of growth. Some immediate and future benefits include:
#1 Enhanced balance sheet resilience for us to gain access to more diversified funding sources.
#2 Diversification of investor base allows us flexibility in investments beyond Shari’ah compliant industrial properties and enable us to appeal to a wider pool of investors.
#3 Greater flexibility in capturing growth opportunities and delivering on Refreshed Strategy through exposure to a larger pool of diversified and potentially higher-rental paying tenants for our properties.
#4 Potential cost savings in the long-run as Shari’ah-related compliance costs will no longer be incurred.
How has the pandemic changed the REIT’s strategy?
The pandemic has underlined the resilience of our Refreshed Strategy and we remain committed to its key pillars, including asset rejuvenations to attract tenants including those from expansionary sectors, and continued proactive lease management. To capitalise on growth trends and navigate uncertainty, we will continue to calibrate our portfolio and tenant mix to find the optimal mix while keeping an eye on prudent liquidity and capital management. Our recent initiative to reintroduce the DRP will not only allow Unitholders to participate in the REIT’s long-term growth but also helps to improve the Sabana REIT’s financial position.
What are some tailwinds and headwinds in the industrial real estate market?
Market watchers expect the likes of electronics, healthcare and logistics clusters to continue driving demand for industrial space. This is in tandem with the sustained rise in e-commerce, food logistics, and medical manufacturing which will require more modern specification facilities. For these reasons, we are continuing with asset rejuvenations and recalibrating our tenant base to be even more resilient. On the flip side, the retail market (to which the REIT has increased exposure through our NTP+ mall) has yet to reach full recovery and we expect any resurgence of COVID-19 will potentially cloud its outlook.
Having a “moat” or a competitive advantage is something many investors look for in companies they invest in. Can you share how Sabana REIT has a strong advantage?
We have a diversified portfolio of 18 properties, where almost 60% are located within 20 minutes’ walk to MRT stations. Underpinned by methodologic and disciplined execution of Refreshed Strategy with a truly experienced team at Sabana REIT – these are the factors that set us apart. It is noteworthy that majority of our properties are designed for high-tech industrial and/or warehouse and logistics use. This puts us in a strong position to attract tenants in growth sectors such as electronics, healthcare and logistics and supply chain management. Some businesses may be looking to shift operations out of the CBD amid the new normal but still within convenient locations, and our high-tech industrial space at New Tech Park is well positioned to meet such demand.
Understanding your tenants is one of the best ways to grow the REIT. What are some things Sabana REIT has learned about its tenants’ changing needs in a post-pandemic world?
We have always been focused on finding the best solutions for our tenants. As Manager, we take a proactive leasing management approach and regularly engages with tenants to solicit feedback and see how best to help them meet their business goals. We create ‘partnerships’ with select tenants to grow within our portfolio. In the post-pandemic world, our approach must be even more nimble to retain and/or attract tenants (and creating more partnerships) with our differentiated advantage in anticipating their needs. We must also continually sharpen our assets’ advantage to capitalise on growth and emerging trends.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 17 August 2021 and have been republished with permission. You can read more on the SGX website.
Don’t Take A 50-50 Chance With A So-So Trading Experience
As a Gold/Diamond client with FSMOne.com, you can let your investments soar higher with flat HK$50 processing fees* for HKEX trades.
This means that whether you make a HK$10,000 or HK$100,000trade, you will only be paying HK$50 in processing fees*. So, the higher your investment amount, the higher your cost savings!
Click here to find out more.
*Excludes exchange-related fees.