IN 2013, WE 5 STEPS DELIVERED ANOTHER TO STEADY AND YEAR OF SUSTAINABLE GROWTH. GROWTH
THE APPROACH
ANNUAL REPORT 2013
SABANA REAL ESTATE INVESTMENT MANAGEMENT PTE. LTD. Contents
Vision and Mission 8 Core Values 9 Letter to Unitholders 10 01 Trust Structure 13
Understanding Sabana REIT 16 What makes Sabana REIT 18 unique? 02 Investment Highlights 20 Our Strategy 21 Financial Highlights 22 Financial Review 24 Investor Relations 26 Unit Performance 28 Awards and Recognition 31
Operations Review 34 Property Portfolio 41 03 Independent Market Study 54
Board of Directors 70 Present Directorships 74 Management Team 76 04 The Manager 78 The Property Manager 80 Growth & Responsibility 82
Corporate Governance 86 Financial Contents 101 Additional Information 160 05 Statistics of Unitholdings 161 Notice of Annual General 164 Meeting Proxy Form Corporate Information 5 STEPS TO STEADY AND SUSTAINABLE GROWTH
The Sabana REIT Approach Annual Report 2013 The 2013 Annual Report of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT” or the “Trust”) is dedicated to our stakeholders: Unitholders; tenants; strategic partners and lenders; HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”); the board of directors and employees of Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”); and Sabana Property Management Pte. Ltd. We are grateful for your continued support. Preface
“Five Steps to Steady and Sustainable Growth – The Sabana REIT Approach” is our report card for 2013. During the year, we continued to build on our strengths, growing our portfolio with good quality properties. We remained guided by our values and actively managed our portfolio. Above all, we continued to deliver what we said we would. To us, that’s the most important value of all.
Sabana Real Estate Investment Management Pte. Ltd. (As Manager of Sabana REIT) 21 March 2014 THE YEAR AT A GLANCE SIGNIFICANT EVENTS
• Delivered distribution per Unit (“DPU”) of 9.28 cents for FY 2012, a 7.0% increase compared to 8.67 cents per Unit achieved in FY 2011. • Participated in the • Awarded “Equity Deal of the 4th World Islamic Year” and “Real Estate Deal Banking Conference of the Year” by the Islamic which was attended Finance News for its S$80.0 by close to 500 million Convertible Sukuk Al international Ijarah (“Convertible Sukuk”), industry leaders and which was the first in the supported by the world to be convertible Monetary Authority into units in a real estate of Singapore investment trust. (“MAS”).
2013 JAN APR JUN
• Held second Annual General Meeting (“AGM”) on 11 April 2013.
• Established a S$500.0 million Multi-currency Islamic Trust Certificates Issuance Programme.
• 1Q 2013 DPU rose by 6.6% y-o-y to 2.41 cents, from 2.26 cents in 1Q 2012. +6.6% +5.7% • 2Q 2013 • Entered into DPU was at a refinancing 2.40 cents, arrangement for 5.7% higher a new three- compared to year revolving 2.27 cents Commodity achieved in Murabaha 2Q 2012. Facility (“CMF”) of up to S$48.0 • Successfully closed a S$40.0 million. million private placement on 13 September 2013. • Successfully renewed one • Completed the acquisition of 508 master lease Chai Chee Lane at a total cost of and converted $68.0 million. This acquisition the remaining brought Sabana REIT’s total asset four master- size past the S$1.2 billion mark. tenanted properties with • Awarded “Most Outstanding Islamic leases expired Real Estate Product” at the 10th on 25 November Kuala Lumpur Islamic Finance 2013, into Forum, to recognise its successful multi-tenanted issuance of the Convertible Sukuk. properties.
JUL AUG SEP OCT NOV
• Standard & Poor’s (“S&P”) reaffirmed investment grade rating (‘BBB-‘ long-term corporate credit rating with a stable outlook) on • DPU of 2.38 cents Sabana REIT. announced for 3Q 2013.
• Passed annual Shari’ah audit on 28 October 2013. CRAFTING ARTISANAL WATCHES
The most precious timepieces are made by master artisans who favour quality and endlessly hone their skills to create watches that can be treasured for many generations to come. STEP 1 BEGIN WITH A VISION
Creating long-lasting value propositions starts with a single-minded vision. For Sabana REIT, the determination to be one of the region’s prominent Shari’ah compliant real estate investment trusts underpins our strategies and investment decisions. SABANA REIT | ANNUAL REPORT 2013
VISION To be a prominent Shari’ah compliant industrial real estate investment trust (“REIT”) with an outstanding portfolio of assets in Asia.
MISSION To seek yield-accretive initiatives to strengthen and grow Sabana REIT’s portfolio and to satisfy our Unitholders by delivering attractive DPU.
8 SABANA REIT | ANNUAL REPORT 2013
CORE VALUES Since our inception, Sabana REIT has been guided by our core values. They define our culture and shape our personality and decision-making process.
FAIRNESS AND EQUALITY. We ensure that our business activities are consistent with the principles of fairness, partnerships and equality.
FOCUS ON VALUE CREATION. We promise to create value for Unitholders by creating success factors and direction for the future.
UNITHOLDERS’ INTEREST FIRST. We strive to build a portfolio of quality assets for our Unitholders.
INTEGRITY. We are committed to the values of responsibility, transparency and professionalism.
PEOPLE. We recognise that our people are our greatest assets. By creating and maintaining an attractive working environment, our people will grow professionally and make a positive impact to both the organisation and society.
9 SABANA REIT | ANNUAL REPORT 2013
LETTER TO UNITHOLDERS A CLEAR , A SOLID PERFORMANCE
Mr Kevin Xayaraj Co-founder, Chief Executive Officer (“CEO”) and Executive Director Mr Steven Lim Kok Hoong Chairman and Independent Non-executive Director
10 SABANA REIT | ANNUAL REPORT 2013
LETTER TO UNITHOLDERS
With a quality asset portfolio, a prudent capital structure and investment approach, and a highly-focused management team, Sabana REIT is poised for steady and sustainable growth.
Dear Unitholders: increased land rent, property tax acquisition pipeline remained and maintenance, which were robust, we chose to focus our We are pleased to report that previously borne by the master resources on acquiring 508 in FY 2013, Sabana REIT’s tenants. Chai Chee Lane, which we third year since listing, the believe fits our growth strategy. Trust was able to continue its For the year under review, the In addition to its strategic upward trajectory. During the Trust registered an annual location which enjoys close year, we increased Sabana growth of S$7.7 million in its proximity to the Pan Island REIT’s gross revenue and net gross revenue, a 9.4% increase Expressway and the Bedok and property income (“NPI”) over from S$81.8 million in FY 2012. Kembangan MRT stations, the the previous year. We expanded Sabana REIT’s NPI for FY 2013 property is equipped with high the Trust’s portfolio size. We increased by 4.6% to S$80.4 technical building specifications delivered higher returns to our million, compared to S$76.9 which are very attractive to Unitholders. And we managed million in FY 2012. high-tech manufacturing and our business well. logistics industrial tenants. We were able to generate a total This is demonstrated by its The last point is what this letter of S$61.8 million of distributable seller Advance Micro Devices and annual report are about. income for Sabana REIT’s (Singapore) Pte Ltd., signing We hope by the time you finish Unitholders, 4.0% higher than a 10-year lease to continue reading, you will be as excited that of FY 2012. DPU for FY 2013 occupying half of the property. about Sabana REIT’s future as was at 9.38 cents for a Unit This has enabled the Trust to we are. base of 692.0 million Units in secure an initial income stream. issue and to be issued as at 31 ANOTHER GROWTH YEAR, YET December 2013. This compared The acquisition of 508 Chai Chee NOT WITHOUT CHALLENGES to 9.28 cents in FY 2012. FY 2013 Lane expanded Sabana REIT’s We continued to grow Sabana distribution yield increased gross floor area (“GFA”) by 7.9% REIT’s NPI in 2013 despite slightly by 1.2% to 8.69%, from or 327,575 square feet (“sq ft”), weaker occupancy levels and 8.59% in FY 2012. from approximately 4.2 million higher property expenses sq ft in FY 2012. Additionally, towards the end of the year. PRUDENT PORTFOLIO GROWTH total asset size in FY 2013 also On 25 November 2013, four out Our approach to growth has crossed S$1.2 billion, from of five master leases signed always been to focus on quality approximately S$1.1 billion in at the time of Sabana REIT’s rather than quantity. Our FY 2012. We will continue to listing expired. As a result, we thinking is long-term, as that’s grow our portfolio selectively, faced higher vacancy and higher the nature of the REIT business. with quality acquisitions, while property expenses arising from In 2013, we continued to grow keeping our leverage, which is at Mr Steven the portfolio in a measured and 36.9% as at 31 December 2013, Lim Kok Hoong sustainable manner. While our below our targeted leverage Chairman and Independent level of 40.0%. Non-executive Director
11 SABANA REIT | ANNUAL REPORT 2013
LETTER TO UNITHOLDERS
BROADENING OUR Product (“GDP”) in 2013 was Last but not least, the FINANCING SOURCES 4.1% higher than that of 2012, in successful conversion of four To partially finance Sabana line with MTI’s growth forecast previously master-tenanted REIT’s purchase of 508 Chai for the year1. Expected growth properties and the renewal Chee Lane, Sabana REIT in manufacturing and externally of one master lease in 2013 successfully launched its first oriented industries and showed the ability of our equity fund raising in the form moderate supply of available management team to overcome of a S$40.0 million private space in 2014 will continue to various challenges and navigate placement on 13 September hold up Singapore’s industrial successfully through the ever- 2013. The exercise met our sector. Some industry analysts changing market conditions. Our objective of keeping our such as DTZ have projected portfolio occupancy remains at leverage within our targeted an upward movement of rents a healthy level of approximately level and further broadened across the industrial space 91.2% as at 31 December 2013. Sabana REIT’s sources of in 20142. Our eyes continue to be fixed on financing. More importantly, it filling current vacancies. attracted a new group of global We expect Sabana REIT, with investors that diversified the its quality portfolio, to continue IN CLOSING… Trust’s investor base. to be resilient. We will continue We would like to thank our to take a selective approach Unitholders, Trustee, strategic In addition, we successfully set in regards to new acquisitions partners, lenders, tenants up a S$500.0 million multi- and will continue to invest and staff. With your help and currency Sukuk Programme across asset types for greater support, we will continue to (the “Sukuk Programme”), diversification and stability. diversify and build the Sabana which will allow Sabana REIT In terms of Sabana REIT’s REIT portfolio. Above all, to issue notes in various capital management, we will we will continue to deliver currencies, amounts and continue to be prudent. As at 31 on our promises. tenors in exchange for capital. December 2013, Sabana REIT Being one of the few Shari’ah has outstanding borrowings Mr Steven Lim Kok Hoong compliant capital structures of S$455.8 million, of which Chairman and Independent set up in Singapore, the Sukuk 93.3% is effectively fixed. This Non-executive Director Programme was highlighted at places the Trust in a favourable the 4th World Islamic Banking position in the face of rising Mr Kevin Xayaraj Conference: Asia Summit interest rates globally. To allow Co-founder, CEO 2013 as one of Singapore’s you, our Unitholders, greater and Executive Director contributions to the global participation in our growth, Islamic finance industry. we will also be introducing a Sabana Real Estate Investment distribution reinvestment plan Management Pte. Ltd. A PROMISING FUTURE (“DRP”) in 2014. This will allow (as Manager of Sabana REIT) Based on figures released by the you to receive distributions in Ministry of Trade and Industry the form of Units instead of cash 21 March 2014 (“MTI”) in February 2014, the and allow the Trust to retain Singapore economy continued capital for future expansion. to grow in 2013. Gross Domestic
SOURCE 1 “MTI maintains 2014 GDP Growth Forecast at 2.0 to 4.0 Per Cent”. www.mti.gov.sg. Ministry of Trade and Industry. 20 February 2014. Web. 20 February 2014.. 2 “Speculative activity in the industrial sector fell in 2013 while rents inched upwards”. www.dtz.com. DTZ. 6 January 2014. Web. 10 January 2014.
12 SABANA REIT | ANNUAL REPORT 2013
TRUST STRUCTURE
INDEPENDENT SABANA SHARI’AH UNITHOLDERS SUKUK COMMITTEE PTE. LTD.
Advises the A wholly-owned Manager on subsidiary for the Shari’ah provision of treasury compliance services matters and issues the Shari’ah Ownership Distributions Certification of Units 100.0%
ownership
Management Trustee services fee
MANAGER1 SABANA REIT TRUSTEE
Management Acts on behalf fees of Unitholders
ownership100.0% 100.0% Ownership Net property ownership of assets income
A wholly-owned subsidiary for the Property provision of treasury management services services SABANA PROPERTY THE PROPERTIES TREASURY MANAGER2 PTE. LTD. Property management fees
1 The Manager is 100.0% owned by Sabana Investment Partners Pte. Ltd. (“SIP”). SIP is 51.0% owned by Vibrant Group Limited (formerly known as Freight Links Express Holdings Limited) (the “Sponsor”), 45.0% owned by Blackwood Investment Pte. Ltd. (“Blackwood”) and 4.0% owned by Atrium Asia Capital Partners Pte. Ltd. (“AACP”) as at 31 December 2013. 2 The Property Manager, Sabana Property Management Pte. Ltd. (“SPM”) is 100.0% owed by SIP, indirectly through the Manager.
13 WORKING WITH HINOKI
The Hinoki wood is known for its resilience and strength. These qualities are the reason generations of Japanese woodworkers have made it the material of choice for royal palaces, sacred temple and shrines. STEP 2
BUILD ON YOUR STRENGTHS
At Sabana REIT, we continue to build long- term value for our Unitholders based on a strong foundation of team work, prudent investing, sound capital management and solid asset management. SABANA REIT | ANNUAL REPORT 2013
CORPORATE PROFILE
UNDERSTANDING SABANA
The world’s largest listed Shari’ah compliant REIT by total assets
Sabana REIT is the first and assets, in line with Shari’ah In 2013, Sabana REIT was only Shari’ah compliant REIT investment principles. As at 31 awarded “Equity Deal of the listed on Singapore Exchange December 2013, Sabana REIT’s Year” and “Real Estate Deal Securities Trading Limited portfolio comprised 22 quality for the Year” at Islamic Finance (“SGX-ST”). As at 31 December industrial properties which are News 2012 Deals of the Year 2013, Sabana REIT continued strategically located across awards. It was also conferred to be the largest listed Shari’ah Singapore, in close proximity the title of “Most Outstanding compliant REIT in the world to expressways and public Islamic Real Estate Product” in terms of both market transportation. at the 10th Kuala Lumpur capitalisation and total Islamic Finance Forum. All asset size of approximately three awards recognised S$746.0 million and Sabana REIT’s successful S$1.2 billion respectively. issuance of the Convertible Sukuk in September 2012. The Sabana REIT owns and invests Convertible Sukuk was the first in income-producing real estate in the world to be convertible used for industrial purposes, into units in a REIT. The awards as well as real estate-related add to the ten earlier regional accolades which Sabana REIT had received since its market debut.
16 SABANA REIT | ANNUAL REPORT 2013
CORPORATE PROFILE
OUR OBJECTIVES
We work for Unitholders - our objective is to Sabana REIT is assigned a Armed with deep knowledge provide Unitholders BBB- ‘long-term corporate and expertise on the Singapore credit rating’ with a stable industrial property market, with regular, stable outlook by S&P. the Manager sets the strategic distributions. direction for Sabana REIT, The Trust is managed by manages its assets, and makes the Manager, Sabana recommendations to the We also aim Real Estate Investment Trustee on issues related to to achieve Management Pte. Ltd. acquisitions, divestment and asset enhancements. long-term growth THE MANAGER in DPU and Net The Manager was incorporated In addition, the Manager in Singapore on 15 March 2010 adheres to guidelines set by Asset Value (“NAV”) and is wholly owned by SIP, of the Independent Shari’ah per Unit, while which the shareholders are the Committee to ensure that maintaining an Sponsor, Blackwood and AACP. Sabana REIT has adopted a standard of Shari’ah compliance appropriate capital that is generally accepted by structure. the GCC1 states in all aspects of its operations.
1 Refers to Cooperation Council for the Arab States of the Gulf.
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WHAT MAKES SABANA REIT UNIQUE?
18 SABANA REIT | ANNUAL REPORT 2013
ANSWER SHARI’AH COMPLIANCE BY GCC STANDARDS
Sabana REIT is the world’s first listed REIT that has adopted the standard of Shari’ah compliance widely accepted among investors in the GCC states. Being Shari’ah compliant by GCC standards, Sabana REIT has been able to tap into more diverse sources of equity funding. Sabana REIT has also been recognised several times as a leader in innovative Islamic financing structures. Nonetheless, Sabana REIT welcomes all investors, regardless of nationality or religion to participate in its growth.
19 SABANA REIT | ANNUAL REPORT 2013 INVESTMENT HIGHLIGHTS
SINGAPORE’S FIRST LISTED REIT WHICH IS CERTIFIED SHARI’AH COMPLIANT BY GCC STANDARDS The Manager adheres to guidelines set by the Independent Shari’ah Committee to ensure that Sabana REIT has adopted a standard of Shari’ah compliance that is generally accepted by the GCC in all aspects of its operations.
SIGNIFICANT1 PORTION OF THE TRUST’S PORTFOLIO LOCATED ON LAND RENT-FREE SITES Approximately 30.0% of the Trust’s properties by GFA are located on land rent-free sites.
2LONG WEIGHTED AVERAGE UNEXPIRED LEASE TERM The Trust’s portfolio has a long weighted unexpired lease term of close to 39.0 years for the underlying land.
HEALTHY CAPITAL STRUCTURE 31 The Trust’s aggregate leverage is at 36.9% , well within the aggregate leverage limit of 60.0% for REITs which have obtained credit ratings2 as set out in the Appendix 6 of the Code on Collective Investment Schemes (the “Property Funds Appendix”) issued by the MAS.
1 As at 31 December 2013. 2 4 According to the Property Funds Appendix, the aggregate leverage of a property fund may exceed 35.0% of the fund’s deposited property only if a credit rating of the property fund from Fitch, Moody’s or S&P is obtained and disclosed to the public.
20 SABANA REIT | ANNUAL REPORT 2013 OUR STRATEGY
ACQUISITION CAPITAL & GROWTH RISK MANAGMENT
We aim to expand our portfolio by acquiring The Manager will employ an appropriate mix of properties that are aligned with Sabana REIT’s debt and equity in financing acquisitions, and investment strategy and Shari’ah investment use the right financial instruments to optimise principles. This will enable our Unitholders to risk-adjusted returns to Unitholders. enjoy attractive income distribution.
ACTIVE ASSET OPPORTUNISTIC MANAGEMENT DEVELOPMENT
We will pro-actively manage the properties The Manager will prudently undertake in our portfolio to improve development activities when appropriate the overall rental yields. opportunities arise.
21 SABANA REIT | ANNUAL REPORT 2013
FINANCIAL HIGHLIGHTS
IN NUMBERS THE FINANCIAL HIGHLIGHTS
We continued to generate excellent year-on-year results.
FINANCIAL FIGURES
S$80.4M S$61.8M (+4.6%) (+4.0%) NET PROPERTY DISTRIBUTABLE INCOME INCOME S$89.5M 9.38 cents 8.69% (+1.1%) (+1.2%)
DPU DISTRIBUTION YIELD
(+9.4%) S$1,236.8M (+6.9%) GROSS REVENUE TOTAL ASSETS
22 SABANA REIT | ANNUAL REPORT 2013
FINANCIAL HIGHLIGHTS
KEY FINANCIAL FIGURES FY2013 FY2012 FY20111 S$’000 Gross revenue 89,485 81,768 76,945 NPI 80,360 76,937 73,074 Distributable income 61,755 59,395 60,603 Annualised DPU (cents) 9.38 9.28 8.67 Annualised distribution yield (%) - Closing price of S$1.08 on 31 December 2013 8.69 8.59 8.03
SELECTED BALANCE SHEET DATA As at 31 As at 31 As at 31 December December December 2013 2012 2011 S$’000 Total assets 1,236,753 1,156,538 1,082,316 Borrowings, at amortised costs 447,392 420,800 359,865 Net assets attributable to Unitholders 756,504 702,857 681,782 Units in issue and to be issued entitled to distribution 691,959 641,523 637,295 (‘000) NAV per Unit (S$) 1.09 1.10 1.07 Adjusted NAV per Unit (S$) 1.07 1.07 1.05 Market capitalisation 746,037 730,159 556,627
BORROWINGS PROFILE As at 31 As at 31 As at 31 December December December 2013 2012 2011 Aggregate leverage2 36.9% 37.6% 34.1% Total borrowings S$455.8 S$432.8 S$364.8 million million million Fixed as % of total borrowings 93.3% 100.0% 96.7% Weighted average all-in financing cost 4.1% 4.3% 4.4% Weighted average tenor of borrowings 2.3 years 3.2 years 2.2 years Profit coverage ratio3 5.0 times 5.4 times 7.4 times Unencumbered investment properties S$177.7 S$108.8 S$46.8 million million million
1 For the period from 26 November 2010 to 31 December 2011. 2 Ratio of total borrowings and deferred payments over deposited property as defined in the Property Funds Appendix. 3 Ratio of net property income over profit expense (excluding amortisation and other fees).
23 SABANA REIT | ANNUAL REPORT 2013
FINANCIAL REVIEW
For FY 2013, Sabana REIT’s performance surpassed that of the previous year. Year-on-year gross revenue and NPI increased by 9.4% and 4.6% respectively, while distributable income rose to S$61.8 million, a 4.0% increase over FY 2012, and DPU increased by 1.1% to 9.38 cents.
PROACTIVE YET PRUDENT S$500.0 million Trust Certificates Issuance CAPITAL MANAGEMENT Multi-currency Programme (the “Sukuk The Manager maintained its Sukuk Programme Programme”), which allows prudent approach in capital In April 2013, the Manager, the issuance of notes in various management in FY2013. Key through a wholly-owned currencies, amounts and tenors. capital management initiatives subsidiary of Sabana REIT, were launched to complement Sabana Sukuk Pte. Ltd., Private placement Sabana REIT’s existing funding successfully established a In September 2013, the sources. These included: Shari’ah compliant S$500.0 Manager successfully concluded million Multi-currency Islamic Sabana REIT’s maiden private
MATURITY PROFILE OF OUTSTANDING BORROWINGS AS AT 31 DECEMBER 2013 (S$ MILLION)
177.6 147.5
100.2
30.5
2014 2015 2016 2017
24 SABANA REIT | ANNUAL REPORT 2013
FINANCIAL REVIEW
MATURITY PROFILE OF OUTSTANDING BORROWINGS AS AT 31 DECEMBER 2013
22.0% 32.0% 2014 2017
7.0% 2016
39.0% 2015
placement of S$40.0 million, Despite the increase in total diversify and expand funding which attracted new global borrowings to S$455.8 million, sources. The DRP provides investors to partially finance the aggregate leverage ratio Unitholders with the option to the acquisition of 508 Chai decreased to 36.9%, while the receive their distribution, either Chee Lane. value of unencumbered assets in the form of Units or cash or increased to S$177.7 million as a combination of both. To the Refinancing at 31 December 2013, from just extent that Unitholders elect In November 2013, the Manager S$108.8 million a year ago. to receive distributions in the refinanced and increased the form of Units, the cash which facility limit of its maturing Profit rate risk management would otherwise be payable by revolving CMF of S$18.0 million To sustain Sabana REIT’s ability way of cash distributions will under a new 3-year revolving to deliver regular and stable be retained to fund its growth CMF of up to S$48.0 million distributions to Unitholders, and expansion. with improved terms. the Manager effectively fixed 93.3% of the outstanding The DRP and the Sukuk These initiatives further borrowings of S$455.8 million Programme, combined with strengthened Sabana REIT’s via a combination of fixed an undrawn revolving CMF financial position, improved rate funding and hedging via of S$17.5 million, provide its capital structure, and individual profit rate swaps for Sabana REIT with additional helped to lower the average the entire tenors of the three financial flexibility to pursue all-in financing cost to 4.1% Term CMF, thus optimising risk- sustainable growth via yield- per annum (“p.a.”) as at adjusted returns by minimising accretive acquisitions, asset 31 December 2013, from the impact of profit rate enhancement initiatives, and 4.3% p.a. in the previous year. volatility. future development projects— Maturity dates of borrowings all while keeping its aggregate were also adjusted and spread FINANCING FLEXIBILITY leverage below its targeted out more evenly from 2014 The Manager will be introducing 40.0% threshold. to 2017. Profit coverage ratio a DRP in 2014 to further remains robust at 5.0x.
25 SABANA REIT | ANNUAL REPORT 2013 INVESTOR RELATIONS Sabana REIT is committed to strengthening its relationship with the investment community through clear and timely communication to enable a transparent and accurate assessment of the Trust’s business and performance.
The investor relations (“IR”) team is easily accessible via phone and emails. They respond to queries or concerns of our stakeholders promptly. To encourage participation by our Unitholders, AGMs are held at locations easily accessible by public transport. Sabana REIT’s 2013 AGM was held in April 2013 at Hilton Singapore. We were pleased with the turnout of 250 Unitholders, who provided us A COMMITMENT TO with many positive suggestions CORPORATE TRANSPARENCY and affirmations about our Sabana REIT believes in performance. providing clear and timely information to its stakeholders. INDEPENDENT COVERAGE Sabana REIT’s quarterly OF SABANA REIT financial results are published The Manager continues within one month from the end to believe that attracting of each quarter. Market sensitive independent coverage of news is also broadcasted Sabana REIT gives the via the SGX-ST website and investment community a posted on www.sabana-reit. greater understanding of our The Manager believes com on the same day of business and performance. that attracting release. Two-way dialogues with key stakeholders—such Our IR team regularly independent coverage as Unitholders, buy- and sell- communicates with analysts of Sabana REIT side analysts, fund managers, and the media via phone calls, gives the investment potential investors, media emails or face-to-face meetings. executives, and the public— In addition, we hold quarterly community a greater provide additional transparency. briefings for analysts the day understanding of our business and performance.
26 SABANA REIT | ANNUAL REPORT 2013
INVESTOR & INVESTOR RELATIONS MEDIA RELATIONS ACTIVITIES FY 2013 We take pride in our professionalism and 1ST QUARTER uncompromising • Analysts’ Results Briefing for 4Q 2012 determination to maintain Financial Results excellence in our work • SGX / Goldman Sachs while upholding the highest Global Market Day 2013-Tokyo standards in organisational • RHB-OSKDMG Singapore transparency. REIT Corporate Day • OCBC Securities CEO Lunchtime Talk • Islamic Finance News after the release of Sabana roadshows in Singapore, Deal of the Year Awards REIT’s quarterly or annual Hong Kong, Tokyo and Kuala 2012 results to answer any queries Lumpur in 2013. they may have. Research houses 2ND QUARTER such as HSBC Global Research, To reach the retail investor • Analysts’ Results UOB Kay Hian, and S&P Capital community, the Manager also Briefing for 1Q 2013 IQ regularly publish research conducts seminars at various Financial Results notes on Sabana REIT. brokerages. In 2013, Sabana • Morgan Stanley REIT held seminars for dealers Convertible Bond ENGAGING INSTITUTIONAL and remisiers at UOB Kay Hian Investor Conference AND RETAIL INVESTORS and OCBC Securities. We also • HSBC 3rd Annual As part of our strategy to sponsored a Securities Investors ASEAN Conference - diversify our investor base, the Association (Singapore) (“SIAS”) ASEAN Tigers Manager participated in more event at the MND Auditorium for • 4th Annual World Islamic than 60 meetings at investor more than 100 SIAS members Banking Conference 2013 conferences and non-deal discussing industrial REITs in 2013. • SIAS Corporate Profile and Investment Seminar
3RD QUARTER • Analysts’ Results Briefing for 2Q 2013 UNITHOLDERS’ ENQUIRIES Financial Results • SGX CIMB Asian Horizon If you would like to find out more about Sabana REIT, Corporate Day Series please contact: 2013 – Hong Kong
4TH QUARTER Sabana Real Estate Investment • Analysts’ Results Management Pte. Ltd. Briefing for 3Q 2013 Financial Results 151 Lorong Chuan #02-03 New Tech Park • Morgan Stanley Twelfth Singapore 556741 Annual Asia Pacific Summit 2013 Phone: (65) 6580 7750 Fax: (65) 6280 4700 • Kuala Lumpur Islamic Email: [email protected] Website: www.sabana-reit.com Finance Forum 2013 • Sabana REIT Update for UOB Kay Hian
27 SABANA REIT | ANNUAL REPORT 2013 UNIT PERFORMANCE
In 2013, Sabana REIT once again topped the list for indicative dividend yields generated by REITs on SGX-ST1. Traded volume in FY 2013 increased by 37.8% over FY 2012. As at 31 December 2013, Sabana REIT’s market capitalisation was S$746.0 million, a 2.2% increase from a year ago. Sabana REIT’s Unit price hit a high of S$1.38 during the year. World events beyond our control, notably uncertainty regarding the Federal Reserve’s bond buying programme and the budget crisis in the US contributed to global market volatility in the second half of 2013. Additionally, there was mounting concerns over rising interest rates that further placed pressure across the Singapore REITs (S-REITs) sector. Sabana REIT’s Unit price closed at S$1.08 on 31 December 2013, 5.7% lower than the beginning of the year. Nonetheless, Sabana REIT continued to perform in line with its peers and also outperformed the FTSE ST Real Estate (RE) Index and FTSE ST REIT Index. For the month of January in 2014, Sabana REIT was trading at an average distribution yield of 8.76%.2
TRADING DATA BY YEAR Unit Price (S$) 2013 2012 2011 Opening 1.145 0.875 0.975 Last done at year-end 1.080 1.140 0.875 Highest 1.380 1.150 1.020 Lowest 1.035 0.875 0.835 Unit price performance3 (%) (5.7) 30.3 (10.3) Trading volume (million units) 411.7 298.9 304.6
SABANA REIT MONTHLY TRADING PERFORMANCE IN 2013 Daily Volume Traded (million Units) 1.5 12
1.4 10
1.3 8
1.2 6
1.1 4 Closing Unit Price S($) Unit Price Closing 1.0 2
0 0 Jul Oct Apr Jan Feb Jun Sep Dec Nov Aug Mar May
Source: ShareInvestor
1 “Indicative dividend yields for REITs average 6.2%”. Singapore Exchange. 14 January 2014. 2 Based on FY 2013 DPU of 9.38 cents and Sabana REIT’s closing prices in January 2014. 3 Performance is calculated based on the opening price on the first trading day of the year, compared with the closing price on the last trading day of the year.
28 SABANA REIT | ANNUAL REPORT 2013
UNIT PERFORMANCE
COMPARATIVE PRICE TRENDS (From 26 November 2010 (date of listing of Sabana REIT on SGX-ST) to 31 December 2013) % Sabana REIT 5.9 Straits Times Index (“STI”) 0.3 FTSE ST Real Estate (RE) Index (-1.6) FTSE ST REIT Index 6.8
150
140
130
120
110
100 Rebased (%)
90
80
70
60 Jul 2013 Jul 2012 Jul 2011 Oct 2013 Oct 2012 Oct 2011 Apr 2013 Apr 2012 Apr 2011 Jan 2013 Jan 2012 Jan 2011 Feb 2013 Feb Feb 2012 Feb Feb 2011 Feb Jun 2013 Jun 2012 Jun 2011 Sep 2013 Sep 2012 Sep 2011 Dec 2013 Dec 2012 Dec 2011 Dec 2010 Nov 2013 Nov Nov 2012 Nov Nov 2011 Nov Aug 2013 Aug 2012 Aug 2011 Mar 2013 Mar 2012 Mar 2011 May 2013 May 2012 May 2011 26 Nov 2010 26 Nov
Sabana REIT STI FTSE ST Real Estate (RE) Index FTSE ST REIT Index
Source: ShareInvestor
29 SABANA REIT | ANNUAL REPORT 2013
UNIT PERFORMANCE
SABANA REIT QUARTERLY DPU PERFORMANCE (From 26 November 2010 (date of listing of Sabana REIT on SGX-ST) to 31 December 2013)
DPU (CENTS) 3.50 3.041 3.00
2.41 2.41 2.38 2.50 2.34 2.40 2.26 2.27 2.18 2.14 2.17 2.19 2.00
1.50
1.00
0.50
0.00 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 Source: ShareInvestor
COMPARATIVE YIELDS (%)
8.0 7.1
Yield per annum 2.6 2.5
0.3
Sabana REIT’s S-REIT Singapore CPF Banks 4Q 2013 Forward Govt Ordinary 12-Month Annualised Yield3 10-year Account5 Fixed Deposits6 Yield2 Bond4
1 From 26 November 2010 to 31 March 2011. 2 Based on Sabana REIT’s closing price of S$1.080 as at 31 December 2013 and Annualized DPU for the period from 1 October 2013 to 31 December 2013. 3 Source: “S-REIT Table”. OCBC Investment Research. 13 January 2014. 4 MAS data as at 31 December 2013. Source: https://secure.sgs.gov.sg/fdanet/SgsBenchmarkIssuePrices.aspx. Monetary Authority of Singapore. Web. 13 January 2014. 5 Prevailing CPF Ordinary Account interest rate for the period from 1 October 2013 to 31 December 2013. Source: http://mycpf.cpf.gov.sg/CPF/News/News-Release/ N_15Aug2013.htm. Central Provident Fund Board. Web. 13 January 2014. 6 Refer to average rates compiled from that quoted by 10 leading banks and finance companies as at December 2013. Source: https://secure.mas.gov.sg/msb/ InterestRatesOfBanksAndFinanceCompanies.aspx. Monetary Authority of Singapore. Web. 13 January 2014.
30 SABANA REIT | ANNUAL REPORT 2013 AWARDS AND RECOGNITION In a span of just three years, Sabana REIT has received 13 regional awards. Our growing list of accolades and recognition from the industry inspires us to set new benchmarks.
2013
JANUARY SEPTEMBER Named “Equity Deal of the Year” and “Real Estate Conferred “Most Outstanding Islamic Real Estate Product” Deal for the Year” for S$80.0 million Convertible to recognise its successful issuance of the Convertible Sukuk al Ijarah by Islamic Finance News’ 2012 Deals Sukuk - the first in the world to be convertible into units of the Year awards. in a REIT.
2012
JANUARY FEBRUARY OCTOBER Received “The Gold Standard Award for Awarded “Best Domestic Securitization” at Voted “Most Innovative Asset Management Corporate Financial Communications” The Asset Triple A Regional Deal Awards Company” and “Best Investor Relations by PublicAffairsAsia, a provider of news, 2011 for the S$132 million by an Asset Management Company” in the features, analysis and intelligence on Islamic securitisation facility that was 2nd Islamic Finance News Islamic Investor practice and policy across the launched in November 2011. Poll, which was participated by recognised Asia Pacific region. investors globally.
2011
FEBRUARY FEBRUARY JULY OCTOBER Clinched the Triple A Award Awarded “IPO Deal of the Recognised by the Emerged as The Most for “Best Islamic Deal Year (2010)” and “Real Estate International Public Relations Outstanding Islamic REIT at in Singapore” and “Most Deal of the Year (2010)” by Association (“IPRA”) for the the KLIFF Islamic Finance Innovative Islamic Deal” by Islamic Finance News, one of Trust’s efforts to raise investor Awards Ceremony, which was The Asset, Asia’s leading the most prestigious awards familiarity with Shari’ah organised in conjunction with issuer and investor-focused that honours the best in the compliant products during its the 8th Kuala Lumpur Islamic financial monthly publication. Islamic finance industry. IPO. IPRA gave Sabana REIT a Finance Forum. “Golden World Award”.
31 CARING FOR OLIVE TREES
High quality olive oil comes from the fruits of well-nurtured olive trees. Olive trees cared for under the right conditions yield good fruits. STEP 3 NURTURE YOUR ASSETS
We continue to nurture our employees to bring the best out of each individual. Over the years, the Manager has built up a team of industrial property professionals who are committed to enhancing value for our Unitholders. SABANA REIT | ANNUAL REPORT 2013 OPERATIONS REVIEW
A TREND TOWARDS DIRECT MANAGEMENT As at 31 December 2013, master-tenanted properties accounted for 59.3% of Sabana REIT’s total net lettable area (“NLA”), down from 95.0% a year ago. Multi-tenanted properties, which accounted for only 5.0% of total NLA at year-end 2012, rose to 40.7% in FY 2013.
These included four master-tenanted properties1 that were successfully converted into multi-tenanted properties in FY 2013, one new acquisition2 and a property3 that was acquired at the time of Sabana REIT’s listing. As at 31 December 2013, Sabana REIT directly managed six of the 22 properties in the portfolio.
LEASE TYPE BY NLA
Master-tenanted
Multi-tenanted
40.7%
59.3%
1 151 Lorong Chuan, 200 Pandan Loop, 8 Commonwealth Lane and 123 Genting Lane, which leases expired on 25 November 2013. 2 508 Chai Chee Lane. 3 9 Tai Seng Drive.
34 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
While master leases with structured rental escalations have provided Sabana REIT with a stable income stream over a fixed period of time, the shift to having more multi-tenanted properties provides greater diversification and opportunities for positive rental reversions. The transition of the four master-tenanted properties to multi-tenanted properties in 2013 went well, demonstrating the Manager’s ability to manage the portfolio in a changing environment.
MEETING THE CHALLENGE In anticipation of the expected transition from master leases to multi-tenanted leases, the Manager established its office at 151 Lorong Chuan (which contributed approximately to one-third of Sabana REIT’s FY 2011 and FY 2012 gross revenue) after the listing of Sabana REIT. This allowed the Manager to work more efficiently with the master tenant on building operations, securing new leases, and lease renewals. From the time of listing to 31 December 2013, the Manager has, either directly or in collaboration with master tenants, secured more than 100 lease transactions (renewals and new tenants) across the entire portfolio.
Sabana REIT officially took over the direct management of 151 Lorong Chuan, 200 Pandan Loop, 8 Commonwealth Lane and 123 Genting Lane on 25 November 2013. Around the same time, the master lease at 3 Kallang Way 2A was renewed for another two years at a 0.9% increase in the average rental rate over the previous year.
The vacant space (by NLA) at the four returned properties totaled 194,634 sq ft (or 5.5% of the total portfolio). That compared positively to 240,635 sq ft (or 7.3% of the total portfolio) of vacant space (by NLA) at the four expiring master-tenanted properties as at 30 June 2013. As at March 2014, the net balance of NLA available for lease was at 184,680 sq ft or 5.2% of the total portfolio. As at 31 December 2013, the weighted average lease term to expiry by sub-tenancy gross rent was at a healthy 32.6 months and portfolio occupancy remained healthy at 91.2%. Intensive lease management programmes are underway and the Manager continues to be proactive in filling up the remaining available space.
LEASE EXPIRY BY NLA (%)
60
50 6.9
40 47.84
30
20 11.4
10 5.6 10.7 9.7 0.6 3.6 3.7 0 2013 2014 2015 2016 Beyond 2016
Multi-tenanted Master Lease
4 Comprises of 11 properties (NLA 1,558,552 sq ft) of which 5 properties (NLA 708,894 sq ft) are currently leased back by the sponsor, SGX-listed Vibrant Group Limited.
35 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
MASTER LEASE EXPIRY MULTI-TENANTED LEASE EXPIRY BY GROSS REVENUE (%) BY GROSS REVENUE (%) (AS AT 31 DECEMBER 2013) (AS AT 31 DECEMBER 2013)
34.6 28.3 72.9
16.3 17.3
15.3 3.5 5.3 6.5 0.0 2014 2015 2016 2017 Beyond 2014 2015 2016 2017 Beyond 2017 2017
OCCUPANCY LEVELS BY TENANCY TYPES (%)
100.0 100 91.2 78.4 75
50
25
0 Total Multi-tenanted Master-tenanted Portfolio Properties Properties
GROWTH STORY CONTINUES IN FY 2013 In addition to ensuring a smooth transition for the five expiring master leases in FY 2013, Sabana REIT continued to expand its portfolio during the year. In September 2013, the Trust acquired 508 Chai Chee Lane, a seven-storey high-tech industrial property with two basement levels, bringing Sabana REIT’s total asset size past S$1.2 billion.
The property is strategically located next to the Pan Island Expressway, approximately two kilometres to the Bedok and Kembangan MRT stations along the East-West MRT line. This strengthens Sabana REIT’s presence in the Eastern part of Singapore. Additionally, the 10-year leaseback of half the property to the local subsidiary of the vendor, Advanced Micro Devices, Inc., an American multinational semiconductor company listed on the New York Stock Exchange, provided an initial income stream. The balance of space will be leased to third party tenants. The Manager is currently reviewing offers by businesses interested to lease the remaining space.
Sabana REIT’s total portfolio value increased by approximately 7.0% as at 31 December 2013 compared to a year ago. Excluding the acquisition of 508 Chai Chee Lane in 3Q 2013, positive mark-to-market revaluations contributed approximately S$11.3 million in total asset value growth.
36 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
INDEPENDENT ASSET VALUATION COMPARISONS Valuation as at Valuation as at 31 December 2013 31 December 2012 (S$’000)5 (S$’000)6 HIGH-TECH INDUSTRIAL 151 Lorong Chuan 341,300 336,500 8 Commonwealth Lane 69,7007 77,000 9 Tai Seng Drive 49,100 46,700 200 Pandan Loop 50,900 48,100 15 Jalan Kilang Barat 37,600 37,100 1 Tuas Avenue 4 30,700 30,000 23 Serangoon North Avenue 5 62,000 61,500 508 Chai Chee Lane 67,760 N.A. CHEMICAL WAREHOUSE & LOGISTICS 33 & 35 Penjuru Lane 84,300 83,400 18 Gul Drive 35,500 35,500 WAREHOUSE & LOGISTICS 34 Penjuru Lane 64,300 63,700 51 Penjuru Road 48,900 47,300 26 Loyang Drive 35,600 34,200 3 Kallang Way 2A 16,200 15,900 218 Pandan Loop 14,700 14,300 3A Joo Koon Circle 42,000 41,800 2 Toh Tuck Link 41,000 40,900 GENERAL INDUSTRIAL 123 Genting Lane 25,700 25,700 30 & 32 Tuas Avenue 8 27,000 26,400 39 Ubi Road 1 32,800 32,500 21 Joo Koon Crescent 21,100 20,900 6 Woodlands Loop 15,100 14,800 Total 1,213,260 1,134,200
A DIVERSIFIED PORTFOLIO FOR GREATER INCOME STABILITY Since Sabana REIT took over in November 2013 the direct management of the four previously master- tenanted properties, no single tenant has contributed more than 27.4% of rental income. The largest tenant is currently (as at February 2014) Vibrant Group Limited, Sabana REIT’s sponsor. As at 31 December 2013, the top ten tenants accounted for 76.7% of Sabana REIT’s rental income, compared to 84.6% in the prior year. Tenant concentration risk also improved, going from just 101 tenants at the time of listing to a total of 152 tenants as at 31 December 2013.
5 Independent valuations as at 31 December 2013 for Sabana REIT’s 22 properties, conducted by Knight Frank Pte Ltd. 6 Independent valuations as at 31 December 2012 for Sabana REIT’s 21 properties, conducted by Knight Frank Pte Ltd. 7 The diminution in the value of 8 Commonwealth Lane is reflective of the market conditions as at the date of valuation.
37 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
TOP TEN TENANTS BY GROSS REVENUE FOR FY 2013 Percentage of No. Tenant Property Gross Rental Revenue (%) 151 Lorong Chuan, New Tech Park, Subsidiaries and jointly Singapore 556741 1 controlled entities of City 27.4 Developments Limited 200 Pandan Loop, Pantech 21, Singapore 128388 33 & 35 Penjuru Lane, Freight Links Express Logisticpark, Singapore 609200/609202 18 Gul Drive, Subsidiaries of Vibrant Group Singapore 629468 Limited (formerly known 51 Penjuru Road, Freight Links Express 2 17.4 as Freight Links Express Logisticentre, Singapore 609143 Holdings Limited) 218 Pandan Loop, Singapore 128408 30 & 32 Tuas Avenue 8, Singapore 639246/639247 SB (Lakeside) 34 Penjuru Lane, Penjuru Logistics Hub, 3 5.8 Investment Pte. Ltd. Singapore 609201 8 Commonwealth Lane, 4 Utraco Greentech Pte. Ltd. 5.6 Singapore 149555 Ban Teck Han 23 Serangoon North Avenue 5, 5 5.1 Enterprise Co Pte Ltd BTH Centre, Singapore 554530 3A Joo Koon Circle, 6 Ringford Pte. Ltd. 3.4 Singapore 629033 Crescendas Logistics 2 Toh Tuck Link, 7 3.3 Solutions Pte. Ltd. Singapore 596225 1 Tuas Avenue 4, 8 Awan Data Centre Pte. Ltd. 3.0 Singapore 639382 15 Jalan Kilang Barat, Frontech 9 Ho Bee Developments Pte Ltd 2.9 Centre, Singapore 159357 Oxley & Hume Builders Pte. 26 Loyang Drive, 10 2.8 Ltd. Singapore 508970
Sabana REIT is well-diversified across four industrial property segments: high-tech industrial, chemical warehouse & logistics, warehouse and logistics, and general industrial. While the Trust’s tenant mix is diversified across various trades and industries, those in the high-tech industrial segment continue to contribute the largest portion of Sabana REIT’s gross revenue, approximately 57.9% as at 31 December 2013. Sabana REIT’s properties sit on well-distributed, long underlying land leases, with an average of 38.9 years by GFA8. The Manager is pleased with the portfolio build-up thus far and will continue to proactively manage the 22 properties within the Trust to generate regular and sustainable income for Sabana REIT’s Unitholders.
8 As at 31 December 2013.
38 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
ASSET BREAKDOWN BY NLA (As at 31 December 2013)
High-tech Industrial
Warehouse 9.3% & Logistics
15.1% General Industrial
46.0% Chemical Warehouse & Logistics
29.6%
GROSS REVENUE BY ASSET TYPE (As at 31 December 2013)
High-tech Industrial
10.2% Warehouse & Logistics 10.3% General Industrial
Chemical 21.6% 57.9% Warehouse & Logistics
39 SABANA REIT | ANNUAL REPORT 2013
OPERATIONS REVIEW
SUB-TENANT DIVERSIFICATION BY NLA (As at 31 December 2013)
1.1% 2.5% 2.6% 16.2% 4.3%
5.9%
3.7%
10.5% 6.7%
3.8% 10.7%
19.4% 12.6%
Logistics Electronics Storage
General Engineering Info Manufacturing Technology Industries F&B Others Chemical R&D
Telecommunication Construction & Healthcare & Data Warehousing Utilities
PERCENTAGE OF UNEXPIRED LAND LEASE TERM BY GFA (As at 31 December 2013)
51.8%
15.9% 12.6% 9.2% 6.5% 4.0% – 2032-2036 2037-2041 2042-2046 2047-2051 2052-2056 2057- 2061 Beyond 2061
40 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
BUILDING A RESILIENT PORTFOLIO Our properties are located in high-tech industrial and logistics hubs across Singapore, close to expressways and public transportation.
HIGH-TECH CHEMICAL WAREHOUSE INDUSTRIAL & LOGISTICS
High specifications industrial Specialised warehouses mixed-use space suitable built to strict legal for businesses such as specifications to multimedia, R&D, data accommodate highly centre operations and regulated chemicals precision engineering. and goods.
WAREHOUSE GENERAL & LOGISTICS INDUSTRIAL
Warehouses equipped Warehouses and with loading and docking manufacturing facilities facilities intended for the equipped with a broad storage and distribution of range of functions for goods and merchandise. mixed usage.
41 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
HIGH-TECH CHEMICAL WAREHOUSE INDUSTRIAL & LOGISTICS
01 151 Lorong Chuan 09 33 & 35 Penjuru Lane 02 8 Commonwealth Lane 10 18 Gul Drive 03 9 Tai Seng Drive 04 200 Pandan Loop 05 15 Jalan Kilang Barat 06 1 Tuas Avenue 4 07 23 Serangoon North Avenue 5 08 508 Chai Chee Lane
22
7 13 1
3 21 19 17 20 16 18 8 6 14 10 11 4 15 9 2 12
5
WAREHOUSE GENERAL & LOGISTICS INDUSTRIAL
11 34 Penjuru Lane 18 123 Genting Lane 12 51 Penjuru Road 19 30 & 32 Tuas Avenue 8 13 26 Loyang Drive 20 39 Ubi Road 1 14 3 Kallang Way 2A 21 21 Joo Koon Crescent 15 218 Pandan Loop 22 6 Woodlands Loop 16 3A Joo Koon Circle 17 2 Toh Tuck Link
42 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
151 LORONG CHUAN A six-storey industrial building with a ground level carpark
Location Gross Rental Income 151 Lorong Chuan, New Tech for FY2013 (S$ million) Park, Singapore 556741 24.8
Purchase Consideration Occupancy Rate (%) (S$ million) 93.8 305.9 Land Lease Expiry Latest Valuation 2055 (As at 31 December 2013) 45 yrs with effect from (“wef”) (S$ million) 26 Nov 2010 341.3 GFA (sq ft) 810,710
8 COMMONWEALTH LANE A four-storey industrial building with a six-storey annex
Location Gross Rental Income 8 Commonwealth Lane, for FY2013 (S$ million) Singapore 149555 5.3
Purchase Consideration Occupancy Rate (%) (S$ million) 68.6 70.3 Land Lease Expiry Latest Valuation 2059 (As at 31 December 2013) 30 + 23 yrs wef 1 Feb 2006 (S$ million) 69.7 GFA (sq ft) 161,815
43 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
9 TAI SENG DRIVE A six-storey industrial building with a basement carpark
Location Gross Rental Income 9 Tai Seng Drive, Geo-Tele for FY2013 (S$ million) Centre, Singapore 535227 5.6
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 46.3 Land Lease Expiry Latest Valuation 2055 (As at 31 December 2013) 30 + 30 yrs wef 1 Jun 1995 (S$ million) 49.1 GFA (sq ft) 218,905
200 PANDAN LOOP An eight-storey industrial building with a basement carpark
Location Gross Rental Income 200 Pandan Loop, Pantech 21, for FY2013 (S$ million) Singapore 128388 3.1
Purchase Consideration Occupancy Rate (%) (S$ million) 54.1 41.5 Land Lease Expiry Latest Valuation 2083 (As at 31 December 2013) 99 yrs wef 27 Jan 1984 (S$ million) 50.9 GFA (sq ft) 180,186
44 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
15 JALAN KILANG BARAT An eight-storey industrial building with a multi-storey carpark at Levels Two and Three
Location Gross Rental Income 15 Jalan Kilang Barat, Frontech for FY2013 (S$ million) Centre, 2.7 Singapore 159357 Occupancy Rate (%) Purchase Consideration 100.0 (S$ million) 34.5 Land Lease Expiry 2060 Latest Valuation 99 yrs wef 1 Jan 1962 (As at 31 December 2013) (S$ million) GFA (sq ft) 37.6 73,928
1 TUAS AVENUE 4 Proposed part three-/part six-storey industrial building currently under additions and alterations works
Artist’s Impression Location Gross Rental Income 1 Tuas Avenue 4, for FY2013 (S$ million) Singapore 639382 2.7
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 28.0 Land Lease Expiry Latest Valuation 2047 (As at 31 December 2013) 30 + 21 yrs 4 mths wef (S$ million) 1 Jan 1996 30.7 GFA (sq ft) 160,361
45 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
23 SERANGOON NORTH AVENUE 5 A five-storey industrial building with a mezzanine level
Location Gross Rental Income 23 Serangoon North Avenue 5, for FY2013 (S$ million) BTH Centre, Singapore 554530 4.6
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 61.0 Land Lease Expiry Latest Valuation 2056 (As at 31 December 2013) 30 + 20 yrs 15 days wef (S$ million) 16 Sep 2006 62.0 GFA (sq ft) 159,384
508 CHAI CHEE LANE A seven-storey industrial building with two basements
Location Occupancy Rate (%) 508 Chai Chee Lane, 53.1 Singapore 469032 Land Lease Expiry Purchase Consideration1 2060 (S$ million) 30 + 29 yrs wef 16 Apr 2001 67.2 Seller Latest Valuation Advanced Micro Devices (As at 31 December 2013) (Singapore) Pte Ltd (S$ million) 67.8 GFA (sq ft) 327,575 Gross Rental Income for FY2013 (S$ million) 2.5 1 Includes purchase price of S$59.5 million and the upfront land premium of approximately S$7.7 million (including applicable stamp duties) for the balance of the first term (approximately 17.5 years) payable to JTC.
46 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
33 & 35 PENJURU LANE Comprising three buildings, including a single storey warehouse with mezzanine floor, a four-storey warehouse and a part single-storey/part three-storey warehouse with a basement
Location Gross Rental Income 33 & 35 Penjuru Lane, Freight for FY2013 (S$ million) Links Express Logisticpark, 6.3 Singapore 609200/609202 Occupancy Rate (%) Purchase Consideration 100.0 (S$ million) 78.9 Land Lease Expiry 2049 Latest Valuation 30 + 31 yrs wef 16 Feb 1988 (As at 31 December 2013) (S$ million) GFA (sq ft) 84.3 286,192
18 GUL DRIVE A part two-/part four-storey warehouse
Location Gross Rental Income 18 Gul Drive, for FY2013 (S$ million) Singapore 629468 2.8
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 34.1 Land Lease Expiry Latest Valuation 2038 (As at 31 December 2013) 13 yrs 10 mths 12 days + (S$ million) 20 yrs wef 1 Nov 2004 35.5 GFA (sq ft) 132,878
47 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
34 PENJURU LANE A five-storey warehouse with ancillary offices
Location Gross Rental Income 34 Penjuru Lane, Penjuru for FY2013 (S$ million) Logistics Hub, 5.2 Singapore 609201 Occupancy Rate (%) Purchase Consideration 100.0 (S$ million) 60.0 Land Lease Expiry 2032 Latest Valuation 30 yrs wef 16 Aug 2002 (As at 31 December 2013) (S$ million) GFA (sq ft) 64.3 414,270
51 PENJURU ROAD A part single/part three-/part four-storey warehouse building with mezzanine floor
Location 51 Penjuru Road, Freight Links Gross Rental Income Express Logisticentre, for FY2013 (S$ million) Singapore 609143 3.4
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 42.5 Land Lease Expiry Latest Valuation 2054 (As at 31 December 2013) 30 + 30 yrs wef 1 Jan 1995 (S$ million) 48.9 GFA (sq ft) 246,376
48 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
26 LOYANG DRIVE A single-storey warehouse building with mezzanine floors
Location Gross Rental Income 26 Loyang Drive, for FY2013 (S$ million) Singapore 508970 2.5
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 32.0 Land Lease Expiry Latest Valuation 2053 (As at 31 December 2013) 30 + 18 yrs 1 Jan 2006 (S$ million) 35.6 GFA (sq ft) 149,166
3 KALLANG WAY 2A A seven-storey building with basement carpark and ancillary offices
Location Gross Rental Income 3 Kallang Way 2A, for FY2013 (S$ million) Fong Tat Building, 1.2 Singapore 347493 Occupancy Rate (%) Purchase Consideration 100.0 (S$ million) 15.0 Land Lease Expiry 2055 Latest Valuation 30 + 30 yrs wef 1 May 1995 (As at 31 December 2013) (S$ million) GFA (sq ft) 16.2 83,646
49 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
218 PANDAN LOOP A single-storey cold room warehouse with mezzanine floor and a two-storey office building
Location Gross Rental Income 218 Pandan Loop, for FY2013 (S$ million) Singapore 128408 1.1
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 13.5 Land Lease Expiry Latest Valuation 2049 (As at 31 December 2013) 30 + 30 yrs wef 16 Sept 1989 (S$ million) 14.7 GFA (sq ft) 50,374
3A JOO KOON CIRCLE A two-storey warehouse building with mezzanine floor and a part three-/part four-storey factory building
Location Gross Rental Income 3A Joo Koon Circle, for FY2013 (S$ million) Singapore 629033 3.0
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 40.3 Land Lease Expiry Latest Valuation 2047 (As at 31 December 2013) 30 + 30 yrs wef 1 Aug 1987 (S$ million) 42.0 GFA (sq ft) 217,899
50 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
2 TOH TUCK LINK A part four-/part six-storey warehouse building with a basement carpark
Location Gross Rental Income 2 Toh Tuck Link, for FY2013 (S$ million) Singapore 596225 2.9
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 40.1 Land Lease Expiry Latest Valuation 2056 (As at 31 December 2013) 30 + 30 yrs wef 16 Dec 1996 (S$ million) 41.0 GFA (sq ft) 181,705
123 GENTING LANE An eight-storey industrial building with ancillary offices
Location Gross Rental Income 123 Genting Lane, Yenom for FY2013 (S$ million) Industrial Building, 2.0 Singapore 349574 Occupancy Rate (%) Purchase Consideration 62.8 (S$ million) 24.5 Land Lease Expiry 2041 Latest Valuation 60 yrs wef 1 Sept 1981 (As at 31 December 2013) (S$ million) GFA (sq ft) 25.7 158,907
51 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
30 & 32 TUAS AVENUE 8 Comprising two original “E8” JTC standard factories with an adjoining four-storey factory with ancillary offices
Location Gross Rental Income 30 & 32 Tuas Avenue 8, for FY2013 (S$ million) Singapore 639246/639247 2.0
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 24.0 Land Lease Expiry Latest Valuation 2056 (As at 31 December 2013) 30 + 30 yrs wef 1 Sept 1996 (S$ million) 27.0 GFA (sq ft) 158,846
39 UBI ROAD 1 An eight-storey industrial building with ancillary offices
Location Gross Rental Income 39 Ubi Road 1, for FY2013 (S$ million) Singapore 408695 2.4
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 32.0 Land Lease Expiry Latest Valuation 2051 (As at 31 December 2013) 30 + 30 yrs wef 1 Jan 1992 (S$ million) 32.8 GFA (sq ft) 135,513
52 SABANA REIT | ANNUAL REPORT 2013
PROPERTY PORTFOLIO
21 JOO KOON CRESCENT A three-storey industrial building with ancillary offices
Location Gross Rental Income 21 Joo Koon Crescent, for FY2013 (S$ million) Singapore 629026 1.5
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 20.3 Land Lease Expiry Latest Valuation 2054 (As at 31 December 2013) 30 + 30 yrs wef 16 Feb 1994 (S$ million) 21.1 GFA (sq ft) 99,575
6 WOODLANDS LOOP A three-storey industrial building with ancillary office and mezzanine extension
Location Gross Rental Income 6 Woodlands Loop, for FY2013 (S$ million) Singapore 738346 1.3
Purchase Consideration Occupancy Rate (%) (S$ million) 100.0 14.8 Land Lease Expiry Latest Valuation 2054 (As at 31 December 2013) 30 + 30 yrs wef 16 Sept 1994 (S$ million) 15.1 GFA (sq ft) 77,544
53 SABANA REIT | ANNUAL REPORT 2013
INDEPENDENT BY DTZ, DEBENHAM TIE LEUNG (SEA) MARKET PTE LTD STUDY
1.0 ECONOMIC OVERVIEW
MODERATE ECONOMIC UPTURN IN 2013, WITH BETTER-THAN-EXPECTED GDP GROWTH OF 3.7% Global growth remained mostly subdued in 2013. Notwithstanding the US budget sequestration and slower growth in Mainland China, this recovery has broadly supported a moderate upturn in Singapore’s economy in 2013.
Advance estimates by the MTI in January 2014 indicate real GDP growth was 3.7% in 2013, compared with 1.3% in 2012. While growth in 2013 was mainly driven by the expansion of the services producing industries, the manufacturing sector also experienced moderate improvement. The government achieved healthy investment commitments in 2013, with 21,400 skilled jobs created and Total Business Expenditure per Annum of $7.8 billion1. Meanwhile, inflation continued to ease from 4.6% in 2012 to 2.4% in 2013, in line with the annual average over the past decade (2.4%).
ECONOMIC GROWTH EXPECTED TO BE ABOUT 2.0% TO 4.0% IN 2014 Notwithstanding the risks of an economic slowdown in Mainland China and further tapering of the US stimulus programme, global economic recovery is expected to gain traction in 2014. Consequently, the government projects GDP growth to be about 2.0% to 4.0% in 2014. Growth is expected to be export-driven, alongside the anticipated pick-up in external demand in trade-related industries such as manufacturing and transport and storage as well as the fruition of key trading pacts e.g., European Union-Singapore Free Trade Agreement and Trans-Pacific Partnership.
Amid the ongoing economic restructuring in Singapore, the government expects a steady level of investment commitments in 2014. The government is optimistic about the growth opportunities from capital- and knowledge-intensive investments in the manufacturing and infocomm clusters.
Meanwhile, headline inflation is projected at about 2.0% to 3.0% in 2014.
1 All currencies are in Singapore dollars.
54 SABANA REIT | ANNUAL REPORT 2013
INDEPENDENT MARKET STUDY
2.0 KEY GOVERNMENT POLICIES AND MEASURES IN 2013
BUDGET 2013 SAW A TIGHTENING OF FOREIGN WORKER POLICIES AND A PRODUCTIVITY DRIVE Key initiatives for businesses in Budget 2013 focused on improving productivity. Property tax refund for vacant properties was also removed, with effect from 1 January 2014.
GOVERNMENT POLICIES MAINLY IMPACTED THE PROPERTY SALES MARKET Most government policies implemented in 2013 were focused on cooling the residential property market. Those relevant to the industrial market were similar, aimed at discouraging speculative activity that could distort prices and raise costs for businesses. This included the imposition of the Seller’s Stamp Duty (“SSD”) on industrial properties and land bought within three years from the date of purchase, with effect from 12 January 2013.
In addition, the Total Debt Servicing Ratio (“TDSR”) framework for all property loans granted by financial institutions to individuals was introduced with effect from 29 June 2013. The framework provides a more robust basis for assessing the debt servicing ability of borrowers applying for property loans, taking into consideration their overall outstanding debt obligations.
CONTINUED EFFORTS TO SAFEGUARD REAL ESTATE RESOURCES FOR INDUSTRIALISTS The government has been pro-active in ensuring that real estate resources are optimally allocated to meet industrialists’ needs. Apart from ensuring an adequate supply of industrial land through the Industrial Government Land Sales (“IGLS”) Programme, releasing sites with shorter tenures and implementing more stringent development-control measures e.g., a cap on minimum size for strata-titled industrial units, recent measures include:
• The Housing Development Board (“HDB”) disallowed new commercial and industrial tenants from assigning their tenancies, with effect from 16 October 2013. Tenants are now required to return their premises to HDB for re-tender if they wish to exit their businesses. For existing tenancies, a three-year window will be given to help them make business adjustments.
• JTC Corporation (“JTC”) revised its Assignment of Lease policy with effect from 15 November 2013, requiring that industrialists and third-party facility providers who own industrial properties on JTC-leased sites occupy the leased premises for a longer period before they may assign (Table 1.1).
Table 1.1: Assignment of Lease Prohibition Period
Type of 3rd-party facility provider Description
Lessees in new build-and-lease contracts During investment period and 5 years thereafter Those who have purchased JTC facilities Leases with ≤ 30 years remaining from the secondary market - Five years from date of assignment
Leases with > 30 years remaining - 10 years from date of assignment All lessees Leases with < five years remaining
Source: JTC, DTZ Consulting & Research, February 2014
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• JTC also increased the Minimum Occupation Period (“MOP”) for new anchor tenants under the 3rd-party Build-and-Lease scheme (Table 1.2).
Table 1.2: Requirements for Anchor Tenants under the 3rd-party Build and Lease Scheme
Type of Anchor Tenant Minimum Occupation Period Minimum GFA
New 3rd-party build- During the investment period and Collectively, to occupy at and-lease programme five years thereafter least 50% GFA and each to occupy minimally 1,500 sq m (16,146 sq ft)
Anchor tenants in new Leases with ≤ 30 years remaining Collectively, to occupy at sale-and-leaseback - Five years from date of least 50% GFA and each programme assignment to occupy minimally 1,500 sq m (16,146 sq ft) Leases with > 30 years remaining - 10 years from date of assignment
Source: JTC, DTZ Consulting & Research, February 2014
DEVELOPMENT OF EXISTING AND NEW INDUSTRIAL CLUSTERS UNDER THE DRAFT MASTER PLAN 2013 The Draft Master Plan 2013 is expected to have a long-term influence on the industrial property market. One of its key objectives was to provide a wide range of jobs and opportunities. Apart from sustaining growth of the city centre, it envisages creating more commercial hubs outside the city centre e.g., the North Coast Innovation Corridor as well as additional industrial clusters. Key plans include the rejuvenation of Sungei Kadut industrial estate, the development of an integrated industrial township at Jalan Bahar/ Wenya/ Tengah and underground business facilities at Gali Batu (Figure 2.1).
Figure 2.1: Commercial and Industrial Clusters by 2030 (Draft Master Plan 2013)
Source: Urban Redevelopment Authority (URA), DTZ Consulting & Research, February 2014
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Meanwhile, JTC launched the plans for 2West, a 700 ha integrated industrial township in the West Region, which includes JTC’s Cleantech Park, Nanyang Technological University, Wenya industrial estate and part of Tengah new town. It is designed to position Singapore as a leading innovation hub in the region centred around three main clusters of world class universities, high value industries and established R&D institutions.
3.0 PRIVATE FACTORY SPACE
3.1 Supply, Demand and Occupancy
SIGNIFICANT FACTORY COMPLETIONS, WITH MAJORITY BEING SINGLE-USER FACTORIES Total private factory stock grew by 4.0% (11.6 million sq ft) from 290.7 million sq ft in 2012 to 302.3 million sq ft in 2013. This was higher compared with the annual stock growth rate of 3.0% (8.6 million sq ft) in 2012.
Majority (6.4 million sq ft, 47%) of the factory completions were single-user factories, followed by multiple-user factories (4.8 million sq ft, 35%). There were also some business park completions, mainly at one-north. Notably, there were more multiple-user factory completions that were strata-titled (Table 3.1).
Table 3.1: Major Private Factory Completions (2013) Planning Estimated Development Location Developer Region NLA (sq ft) Pioneer Centre Soon Lee Street West KNG Realty 389,700 CT Hub Kallang Avenue Central Chiu Teng Group 292,800 Oxley Bizhub 2 Ubi Road Central Oxley Holdings 223,900 Breadtalk HQ Tai Seng Street North East Breadtalk Group 307,800 Singapore Biopolis Road Central Procter & 272,700 Innovation Centre Gamble 8B@Admiralty Admiralty Street North Ascendas Land 271,900 Bartley Biz Centre Kaki Bukit Road 4 East Soon Hock 216,200 Realty North Spring Bizhub Yishun Industrial Street North Soilbuild Group 1.03 million 1/ Yishun Street 23 Holdings The Commerze@ Irving Place Central Oxley Holdings 741,400 Irving
Source: JTC, DTZ Consulting & Research, February 2014
As at end 2013, private factory stock comprised approximately 67% (202.8 million sq ft) single- user factory space, 28% (85.7 million sq ft) multiple-user factory space and 5% (13.7 million sq ft) business park space.
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DEMAND GREW ALONGSIDE THE ECONOMIC PICK-UP Industrialists found it more challenging to expand their businesses and manage their operating costs due to the tightened foreign immigration policies. The government has also been increasingly stringent on unauthorised uses of industrial space to ensure that it is used for qualifying industrial activities. Notwithstanding, demand for private factory space in 2013 (7.8 million sq ft) was relatively stronger than that in 2012 (7.6 million sq ft) (Figure 3.1), driven by the recovery in the manufacturing sector and moderate improvement in economic sentiment (Figure 3.1).
Figure 3.1: Supply, Demand and Occupancy of Island-wide Private Factory Space
‘000 sq ft (NLA)
25,000 93%
92% 20,000 91%
15,000 90% 89% Average Annual Demand between 2003 and 2012: 8.4 million sq ft 10,000 88% Average Annual Supply between 2003 and 2012: 8.0 million sq ft 87% 5,000 86%
0 85% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual Supply (LHS) Annual Demand (LHS) Occupancy (RHS)
Source: JTC, DTZ Consulting & Research, February 2014
FACTORY OCCUPANCY DECLINED TO 91.4%, MOST EVIDENTLY IN THE MULTIPLE-USER FACTORY SEGMENT Although demand was strong, supply was significantly stronger in 2013. Consequently, overall occupancy for private factory space declined by 0.9%-points from 92.3% in 2012 to 91.4% in 2013. The decline in occupancy was most evident in the multiple-user factory segment, which fell by 2.0%-points from 89.1% in 2012 to 87.1% in 2013. Taking into account that many of the multiple- user factories completed in 2013 were strata-titled for sale, this suggests that occupancy of such spaces, which were typically smaller-sized, was relatively slower.
While single-user factory occupancy also fell from 94.7% to 93.8% over the same period, the decline was more moderate at 0.9%-points. On the other hand, business park occupancy rose by 3.9%-points from 78.2% in 2012 to 82.1% in 2013, as most of the projects that completed in 2013 were either owner-occupied or had healthy leasing performance.
3.2 POTENTIAL SUPPLY2
PIPELINE SUPPLY IN THE FACTORY SEGMENT WAS SIMILAR TO THAT IN 2012 According to JTC, about 51.6 million sq ft3 of private factory space is in the pipeline as at Q4 2013, similar to the 51.5 million sq ft in Q4 2012. About 62% (32.2 million sq ft) is under construction, while the remaining 38% (19.4 million sq ft) is being planned. Of the planned supply, about 36% (7.0 million sq ft) has not obtained written or provisional permission (Figure 3.2).
2 All potential supply is in GFA. 3 Includes all private factory space in the pipeline, regardless of size or planning status.
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Figure 3.2: Pipeline Supply of Private Factory Space by Development Status 4
‘000 sq ft 25,000 Under Construction
Planned 20,000
15,000
10,000
5,000
0 2014 2015 2016 2017 2018 >2018
Source: JTC, DTZ Consulting & Research, February 2014
AMPLE SUPPLY EXPECTED IN 2014, ALTHOUGH A SIZEABLE PROPORTION HAS BEEN PRE-COMMITTED A large proportion of the supply pipeline is concentrated in 2014 (22.1 million sq ft, 43%) and 2015 (18.0 million sq ft, 35%). Notwithstanding, based on DTZ estimates, over 60% of the expected completions in 2014 are estimated to be owner-occupied or have already committed tenants. Major private factory developments completing in 2014 are highlighted in Table 3.2.
Table 3.2: Upcoming Major Private Factory Completions (2014) Planning Factory Estimated Development Location Developer Region Type GFA (sq ft) 2014 AZ @ Paya Paya Lebar Central Multiple-user Ascendas 302,000 Lebar Road (Strata for Sale) Land Galaxis Fusionopolis Central Business Park Ascendas 630,000 Place Land and Mitsui Aperia Lavender Central Multiple-user Ascendas 778,000 Street Land Nucleos Biopolis Road Central Business Park Ascendas 491,000 (Biopolis Land Phase 5) Synergy@KB Kaki Bukit East Multiple-user NSS 559,000 Road 4 (Strata for Sale) Properties Premier@ Kaki Bukit East Multiple-user Wee Hur 807,000 Kaki Bukit Avenue 4 (Strata for Sale)
4 Includes the supply from new development and redevelopment projects with provisional and written or provisional permission as well from other categories of supply e.g. (i) projects with Outline Provisional Permission, (ii) developments submitted for planning approval and which are under consideration, (iii) projects on awarded GLS sites for which plans have not been submitted for planning approval, (iv) planned projects in the Government Land Sales programme (which refer to sites on the GLS confirmed list and sites on the GLS reserve list that have been triggered), and (v) planned public developments for which plans have not been submitted to URA for planning approval.
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Planning Factory Estimated Development Location Developer Region Type GFA (sq ft) 2014 Link@AMK Ang Mo Kio North Multiple-user Sim Lian 627,000 Street 62 East (Strata for Sale) Group Primz BizHub Woodlands North Multiple-user OKH 553,000 Avenue 12/ (Strata for Sale) Development Woodlands Drive 64 Pioneer Point Soon Lee West Multiple-user KNG Group 367,000 Street (Strata for Sale) Mead Tuas South West Single-user Mead 376,000 Johnson Avenue 6 Johnson (Singapore) Nutrition Supply Center (Asia Pacific) Ispace Soon Lee West Multiple-user KNG Group 422,000 Street (Strata for Sale)
Source: JTC, DTZ Consulting & Research, February 2014
GOVERNMENT CONTINUES TO ENSURE SUFFICIENT LAND THROUGH THE IGLS PROGRAMME The government made available a total of 20.42 ha of industrial land in its H1 2014 IGLS programme. It comprises eight sites in the Confirmed List and five sites in the Reserve List, majority of which are in Tuas, while two are in Woodlands. The sites offered continued to have shorter tenure of 21 to 30 years, reflecting the government’s stance to ensure affordable and adequate industrial space for industrialists.
3.3 Multiple-user Median Rents
SOME POSITIVE RENTAL GROWTH IN 2013, DESPITE THE CHALLENGING ENVIRONMENT With industrialists facing a more challenging operating environment as well as competition from significant newly completed multiple-user factory spaces, rental growth continued to slow in 2013. Nonetheless, median rentals grew by 3.6%, amid the better-than-expected GDP growth and manufacturing performance towards the end of 2013. This is a more sustainable rate of growth compared with the annual average growth from 2010 to 2012 (12.5%).
According to JTC, monthly median rents for private multiple-user factory space rose from $2.09 per sq ft in Q4 2012 to $2.17 per sq ft in Q4 2013, about 25% above its previous peak of $1.73 per sq ft in Q3 2008 (Figure 3.3).
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Figure 3.3: Median Rents for Private Multiple-user Factory Space
$ per sq ft per month Median Rent of Private Multiple-User Factory Space (LHS) 2.50 40% YOY% Change (RHS)
30% 2.00
20% 1.50
10%
1.00 0
0.50 -10%
0.00 -20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: JTC, DTZ Consulting & Research, February 2014
3.4 Multiple-user Median Prices
BUYING ACTIVITY AND PRICE GROWTH SLOWED DUE TO THE IMPOSITION OF THE SSD AND TDSR Price growth moderated to a more sustainable level in 2013, following the imposition of the SSD on industrial property sales transactions in January 2013 and the TDSR framework on all property loans in June 2013 to curb speculative activity. Strata-titled factory transaction volume in 2013 (2,1815) was slightly more than half the 4,019 transactions recorded in 2012.
Median prices for multiple-user factory space increased by 3.2% from $590 per sq ft in Q4 2012 to $609 per sq ft in Q4 2013, ending the “over-20%” annual growth since 2010 (Figure 3.4).
Figure 3.4: Median Prices for Private Multiple-user Factory Space
$ per sq ft Median Price of Private Multiple-User Factory Space (LHS) 700 YOY% Change (RHS) 40%
600 30%
500 20%
400 10%
300 0
200 -10%
100 -20%
0 -30% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: JTC, DTZ Consulting & Research, February 2014
5 Based on caveats from the URA Real Estate Information System.
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3.5 Investment Sales
Despite uncertainties pertaining to the reduction of the US stimulus programme, industrial REITs were on a lookout to boost their portfolio and were active in 2013 (Table 3.3).
Table 3.3: Major Private Industrial Investment Sales (2013) Price Tenure NLA Price Quarter Property Location Purchaser ($ per (years) (sq ft) ($ m) sq ft) Q1 The Galen Science 66 Ascendas 234,384 126.0 538 Park REIT Road Q1 Precise Two Gul Way 30 Cache 284,381 55.2 194 Logistics Trust Q2 6 Pioneer Pioneer 23 Ascendas 216,290 32.0 148 Walk Walk REIT Q3 West Park Pioneer 30+30 Soilbuild 1.2 313.0 252 BizCentral Crescent Business million Space REIT Q3 508 Chai Chai 46.5 Sabana REIT 327,575 59.5 182 Chee Lane Chee (GFA) Lane Q4 Guang Ming Upper Freehold F&H Fund 69,262 45.8 661 Industrial Paya Management (GFA) Building Lebar Road Q4 Technopark@ Chai 18 Viva Industrial 1.1 193.0 171 Chai Chee Chee REIT million Road
Source: DTZ Consulting & Research, February 2014
4.0 PRIVATE WAREHOUSE SPACE
4.1 Supply, Demand and Occupancy
SIGNIFICANT WAREHOUSE COMPLETIONS IN 2013 Similar to factory space, there was a significant growth in private warehouse stock in 2013; it increased by 4.3% from 78.9 million sq ft in 2012 to 82.3 million sq ft, higher than the growth in 2012 (3.7%). Completions were mainly in the West Region, and were a mix of single-user and multiple-user warehouses (Table 4.1). Annual warehouse supply in 2013 (3.4 million sq ft) was the highest since 2008 (3.9 million sq ft).
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Table 4.1: Major Private Warehouse Completions (2013) Estimated Development Location Planning Region Developer NLA (sq ft) Warehouse Greenwich Drive East Tampines Distrihub 416,600 development Warehouse Gul Way West HTSG as trustee for 467,200 development AACI-REIT Oxley Bizhub Ubi Road 1 Central Oxley Holdings 388,800 Mapletree Benoi Benoi Sector West HSBC Institutional 856,300 Logistics Hub Trust Services as Trustee of Mapletree Logistics Trust Warehouse Banyan Drive West LTH Logistics 588,800 development Singapore Warehouse Wenya Street West Tech-Link Storage 631,300 development Engineering
Source: JTC, DTZ Consulting & Research, February 2014
DEMAND FOR WAREHOUSE SPACE IN 2013 WAS RELATIVELY TEPID, COMPARED WITH THAT IN 2012 Annual demand for private warehouse space was 1.4 million sq ft in 2013, lower than that in 2011 (3.7 million sq ft) and 2012 (1.6 million sq ft). The annual demand in 2013 continued to be lower than the annual average demand over the past decade (2.3 million sq ft) (Figure 4.1).
Figure 4.1: Supply, Demand and Occupancy of Island-wide Private Warehouse Space
‘000 sq ft (NLA)
6,000 96%
94% 5,000
92% 4,000 90%
3,000 88% Average Annual Demand between 2003 and 2012: 2.3 million sq ft 86% 2,000 Average Annual Supply between 2003 and 2012: 2.1 million sq ft 84% 1,000 82%
0 80% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual Supply (LHS) Annual Demand (LHS) Occupancy (RHS)
Source: JTC, DTZ Consulting & Research, February 2014
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While the manufacturing sector was showing signs of recovery, its performance for most of 2013 was relatively weak due to the uneven global economic conditions. Many logistics companies, a key demand driver for warehouse space, have reported that 2013 was a slow year for them due to the weak trade growth and an oversupply of shipping capacity. The lower-cost warehousing alternatives in emerging countries also posed some competition to Singapore’s logistics sector. The weaker demand, coupled with the significant supply in 2013 led to occupancy for private warehouse space falling to 90.8% in Q4 2013, about 2.1% from 92.9% in Q4 2012.
4.2 Potential Supply
EXPECTED COMPLETIONS IN 2014 IS SIGNIFICANT, THOUGH MANY ARE LIKELY TO BE OWNER-OCCUPIED About 17.1 million sq ft6 of private warehouse space is in the pipeline as at Q4 2013, of which 73% (12.5 million sq ft) is under construction (Figure 4.2). Another 27% (4.5 million sq ft) of the supply pipeline is being planned, of which majority (96%) has obtained written or provisional permission. Majority (11.2 million sq ft, 66%) of the projected warehouse completions is expected in 2014, mainly in the West Region. Notwithstanding, many of these expected completions are likely to be owner-occupied.
Figure 4.2: Pipeline Supply of Private Warehouse Space by Development Status7
‘000 sq ft
12,000 Under Construction Planned
10,000
8,000
6,000
4,000
2,000
0 2014 2015 2016 2017 2018 >2018
Source: JTC, DTZ Consulting & Research, February 2014
Table 4.2 highlights the major private warehouse developments scheduled to complete in 2014.
6 Includes all private warehouse space in the pipeline, regardless of size or planning status. 7 Includes the supply from new development and redevelopment projects with provisional and written permission as well from other categories of supply e.g. (i) projects with Outline Provisional Permission, (ii) developments submitted for planning approval and which are under consideration, (iii) projects on awarded GLS sites for which plans have not been submitted for approval, (iv) planned projects in the GLS programme (sites on the Confirmed List and triggered sites on the Reserve List, (v) planned public developments for which plans have not been submitted to URA for planning approval.
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Table 4.2: Upcoming Major Private Warehouse Completions (2014) Planning Estimated Development Location Type Developer Region GFA (sq ft) Warehouse Tampines Road East Warehouse Tee Hai Chem 399,000 development Warehouse Tampines Road East Warehouse Schenker 593,000 development Singapore Link@AMK Ang Mo Kio North Multiple-user Sim Lian 126,000 Street 62 East factory Group (Strata for Sale) Warehouse/ Sungei Kadut North Warehouse Gain City 215,000 shopping Drive Best-Electric development Warehouse Tanjong Kling West Warehouse SH Cogent 1.6 million development Road Logistics Warehouse Benoi Road/ West Warehouse NTUC 1.0 million development Joo Koon Circle Fairprice Co- operative Big Box Jurong East West Warehouse TT 979,000 Street 11 International Cold Hub 2 Jalan Buroh/ West Warehouse CWT Limited 752,000 Fishery Port Road
Source: JTC, DTZ Consulting & Research, February 2014
4.3 MEDIAN RENTS
WAREHOUSE RENTALS SAW MODERATED GROWTH IN 2013 Despite the softer demand for warehouse space in 2013, monthly median rents of private warehouse space grew by 5.5% from $2.03 per sq ft in Q4 2012 to $2.15 per sq ft in Q4 2013 (Figure 4.3). This was in contrast to the 10.3%, 13.4% and 17.7% growth in 2012, 2011 and 2010 respectively, which were partly driven by the run-up in industrial prices and business costs. On a positive note, the moderated rental growth reflects a return to a more sustainable growth trend. As at Q4 2013, monthly median rents for private warehouse space were about 23% above its previous peak of $1.74 per sq ft in Q3 2008.
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Figure 4.3: Median Rents of Private Warehouse Space
$ per sq ft per month Median Rent of Private Warehouse Space (LHS) 2.502.5 YOY% Change (RHS) 35% 30%
2.002.0 25% 20% 15% 1.501.5 10% 5% 1.001.0 0% -5% 0.500.5 -10% -15%
0.000 -20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: JTC, DTZ Consulting & Research, February 2014
4.4 Median Prices
SIMILAR TO THE FACTORY SEGMENT, WAREHOUSE PRICES WERE AFFECTED BY THE SSD AND TDSR Price growth for warehouse space fell to 2.7% in 2013, from the high of 32.2% in 2012, following the imposition of the measures to rein in industrial real estate costs. Median prices for private warehouse space rose from $840 per sq ft in Q4 2012 to $863 per sq ft in Q4 2013 (Figure 4.4).
Figure 4.4: Median Prices of Private Warehouse Space
$ per sq ft Median Price of Private Warehouse Space (LHS) 1,000 YOY% Change (RHS) 40% 900 30% 800
700 20% 600
500 10%
400 0 300
200 -10% 100
0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: JTC, DTZ Consulting & Research, February 2014
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5.0 OUTLOOK
INDUSTRIAL RENTS ARE PROJECTED TO GROW IN 2014 While there is significant new factory supply in 2014, a sizeable proportion is for owner- occupation or has healthy pre-commitment rates, which helps ameliorate the supply pressure. According to the MTI, the manufacturing sector expects a positive business situation in H1 2014, with the biomedical and precision engineering clusters showing the strongest optimism. Notwithstanding, the operating environment for industrialists remains challenging, in view of rising business costs and uneven global growth prospects. As such, rents for private multiple-user factory space are expected to show similar rental performance to that in 2013.
On the other hand, the rental outlook for private warehouse space is expected to be more positive as prospects in the logistics industry are expected to pick up. This is brought about by the rising Asian consumerism and maturation of regional trade blocs. Interest in ASEAN as a regional trade hub is also accelerating, as the ASEAN Economic Community nears its fruition in 2015. Rental growth for warehouse space is thus expected to be more positive, compared with that for factory space.
PRICE GROWTH TO MODERATE IN 2014 AND ANY INCREASE IS EXPECTED TO BE IN LINE WITH INFLATION As at Q4 2013, multiple-user factory and warehouse median prices have risen to 60% to 70% above their previous peaks in Q3 2008. With the imposition of the SSD on industrial property sales transactions and the TDSR framework expected to stay, as well as the gradual US budget sequestration over 2014, industrial prices are expected to increase more gradually.
Our outlook on the rents and prices of private multiple-user factories and private warehouses for end-2014 is highlighted in Table 5.1.
Table 5.1: Median Rental and Price Growth Forecast (% Change End-2014) Segment Median Rents Median Prices Private Multiple-user Factory 3% to 4% 2% to 3% Private Warehouse 3% to 4% 2% to 3%
Source: JTC, DTZ Consulting & Research, February 2014
Limiting Conditions
Where it is stated in the report that information has been supplied to DTZ in the preparation of this report by the sources listed, this information is believed to be reliable and DTZ will accept no responsibility if this should be otherwise. All other information stated without being attributed directly to another party is obtained from DTZ’s searches of records, examination of documents or enquiries with relevant government authorities.
The forward-looking statements in this report are based on DTZ’s expectations and forecasts for the future. These statements should be regarded as DTZ’s assessment of the future, based on certain assumptions about variables which are subject to changing conditions. Changes in any of these variables may significantly affect DTZ’s forecasts.
Utmost care and due diligence has been taken in the preparation of this report. DTZ believe that the contents are accurate and our professional opinion and advice are based on prevailing market conditions as at the date of the report. As market conditions do change, DTZ reserve the right to update their opinion and forecasts based on the latest market conditions.
DTZ gives no assurance that the forecasts and forward-looking statements in this report will be achieved and undue reliance should not be placed on them.
DTZ Debenham Tie Leung (SEA) Pte Ltd or persons involved in the preparation of this report disclaims all responsibility and will accept no liability to any other party. Neither the whole nor any part, nor reference thereto may be published in any document, statement or circular, nor in any communications with third parties, without our prior written consent of the form or context in which it will appear.
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STEP 4 STAY TRUE TO YOUR VALUES We are guided by our core values. They define our culture and shape our personality and decision-making process. SABANA REIT | ANNUAL REPORT 2013
BOARD OF DIRECTORS
Left to Right: Mr Henry Chua Tiong Hock, Mr Steven Lim Kok Hoong, Ms Ng Shin Ein, Mr Kevin Xayaraj, Mr Yong Kok Hoon
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BOARD OF DIRECTORS
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MR STEVEN LIM KOK HOONG MR YONG KOK HOON With a robust background in Chairman and Independent Independent Non-executive accounting, auditing, finance Non-executive Director Director and, advisory services, Mr Yong played pivotal roles in Mr Lim was appointed as the Mr Yong was appointed as an M&A transactions, strategic Chairman and Independent Independent Non-executive investments and corporate Non-executive Director of the Director of the Manager on functions in InnoTek Limited Manager on 1 November 2010. 1 November 2010. He is also to unlock shareholder value. He is a member of the Audit the Chairman of the Audit He is also the key driver for its Committee and the Nominating Committee and the Nominating strategic direction, operation and Remuneration Committee. and Remuneration Committee. excellent, corporate governance compliance, and risk Mr Lim’s rich expertise in the Mr Yong is presently Managing management & controls. fields of real estate, finance Director of InnoTek Limited, a and accounting has made him technology group listed on the Mr Yong also served as a highly sought-after for high- main board of the SGX-ST. He member of the financial level management. Besides his is also the Chairman and CEO statements review committee appointment at the Manager, Mr of Mansfield Manufacturing Co. and was a member of the China Lim also sits as an independent Ltd, a Hong Kong incorporated Committee of the Institute director on the boards of several precision engineering group of Singapore Chartered publicly listed companies in with manufacturing facilities in Accountants. He holds a Master Singapore. Dongguan, Suzhou and Wuhan, of Business Administration in the People’s Republic of degree from the International For over 30 years in his public China. Management Centre, Europe. accountancy career, Mr Lim held top positions in a number Mr Yong is a Chartered MR KEVIN XAYARAJ of well-known accounting firms. Accountant (Singapore) and Co-founder, CEO For example, at Ernst & Young a Fellow of the Association of and Executive Director in Singapore, he served as Audit Chartered Certified Accountants Partner for various clients and (UK). He started his accounting Mr Xayaraj is the Co-founder, assisted in managing the firm. and auditing career with CEO and Executive Director He also worked for 12 years as KPMG LLP and subsequently of the Manager. Since the the Managing Partner at Arthur spent more than 10 years in successful listing of Sabana Andersen and 11 years as the Ernst & Young until 1994; and REIT in November 2010, Area Managing Partner Asia thereafter, as Partner in Moore Mr Xayaraj has led the Pacific for Audit & Business Stephens, an international Manager to achieve the goals Advisory Services. accounting firm. In his foray into set for the Trust at the time of the corporate world, Mr Yong listing. He also develops and Mr Lim holds a Bachelor of took on the position of Group implements key strategies, as Commerce degree from the Financial Controller in the listed well as manages the overall University of Western Australia. FMCG group, QAF Ltd, between operations of the Manager. He is a member of the Institute 1996 and 1999. Since 1999, Mr Mr Xayaraj has more than of Chartered Accountants in Yong has been with InnoTek 22 years of experience in real Australia and the Institute Limited, and held key leadership estate investment, development of Singapore Chartered roles which span over 15 and asset management in many Accountants. years, serving initially as CFO, property markets. Executive Director and currently as Managing Director. Before joining the Manager, Mr Xayaraj was Director, Real Estate Investments of AACP from October 2009 to August
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BOARD OF DIRECTORS
2010. From January 2009 to MR HENRY CHUA TIONG HOCK MS NG SHIN EIN August 2009, Mr Xayaraj worked Non-executive Director Non-executive Director as Senior Manager, Marketing at Cambridge Industrial Property Mr Chua was appointed as Ms Ng Shin Ein was appointed Management Pte. Ltd. Mr Non-executive Director of as Non-executive Director of the Xayaraj was with Cambridge the Manager on 1 November Manager on 1 November 2010. Industrial Trust Management 2010. He is a member of the She is also a member of the Limited from December 2005 Nominating and Remuneration Audit Committee. to December 2008 as Assistant Committee. Vice President (Investment). She is the Regional Managing From January 2004 to December For more than 20 years, Mr Director of Blue Ocean 2005, he was involved in the Chua has worked with Vibrant Associates Pte. Ltd., a firm business development and asset Group Limited, an international focused on private investments management at Ascendas Land and integrated logistics services in Asia. Prior to this, Ms Ng was (Singapore) Pte Ltd. Mr Xayaraj provider, which he served with the SGX-ST, where she was Vice President, Research in numerous vocations of was responsible for developing and Finance at Pacific Star management and operations. Singapore’s capital market by Asset Management Pte. Ltd. bringing foreign companies to from January 2003 to December Mr Chua is currently Executive list in Singapore. Additionally, 2003 and was Assistant Director and Chief Corporate she was part of the Singapore Manager, Project & Financial Development Officer of Exchange’s Initial Public Analysis at Pacific Star Property Vibrant Group Limited and Offering Approval Committee. Management Pte Ltd from July is responsible for corporate 2002 to December 2002. development, investment and Ms Ng started her career as properties within the Group. a corporate lawyer in Messrs Mr Xayaraj also held other Mr Chua is concurrently a non- Lee & Lee, pursuant to her positions such as Senior executive director of Freight admission as an advocate and Manager (Research) with Management Holdings Berhad, solicitor of the Singapore’s Jones Lang LaSalle Property an associate company of Vibrant Supreme Court. Whilst in Consultants Pte Ltd from Group Limited, which is listed on legal practice, she advised on January 2002 to April 2002, Bursa Malaysia. Mr Chua also joint ventures, mergers and Equities Research Analyst with holds the position of Executive acquisitions and fund raising OUB Securities Pte Ltd from Director in a number of other exercises. Ms Ng sits on the July 1999 to March 2001, UOB subsidiaries in Vibrant Group boards of NTUC Fairprice Investment Research Pte Ltd Limited located in Singapore Cooperative, Yanlord Land Group from December 1997 to July and overseas. Limited, First Resources Limited 1999 and Tsang & Ong Research and Eu Yan Sang International (Pte) Ltd from January 1997 to Mr Chua holds a Bachelor of Ltd. Additionally, she is an December 1997, and Property Arts degree from the University adjunct research fellow focused Analyst/Valuer at Stewart, of Singapore, a Diploma in on Philanthropy and social Young, Hillesheim & Atlin Ltd in Personnel Management from enterprises with the Business Toronto (Canada) from February the Singapore Institute of School of National University 1988 to December 1994. Management and Singapore of Singapore. Institute of Personnel Mr Xayaraj holds a Bachelor Management and a Diploma Ms Ng holds a Bachelor of Laws of Applied Science (Honours) in Business Administration degree from the Queen Mary degree from the University from the National University and Westfield College, University of Windsor and a Master of of Singapore. of London and a Post Graduate Business Administration from Diploma in Singapore Law the Imperial College, University from the National University of London. of Singapore.
73 SABANA REIT | ANNUAL REPORT 2013 PRESENT DIRECTORSHIPS
As at 31 December 2013, the directorships held by the Directors of the Manager are as follows:
MR STEVEN LIM KOK HOONG Amtek Engineering Ltd B2C Network Pte Ltd Genting Singapore PLC Global Logistic Properties Limited Grande Rue Investment Pte Ltd Hoe Leong Corporation Ltd Lami Ltd Olura Sarl Parkway Trust Management Limited (Chairman) Sabana Real Estate Investment Management Pte. Ltd. Timberlay SA Thala SA Visionary Investment Holdings Pte Ltd YSL Starville Investment Holdings Pte Ltd
MR YONG KOK HOON Dongguan Mansfield Metal Forming Company, Ltd Exerion Precision Technology Holding B.V Feng Chuan Tooling Company Limited Feng Chuan Tooling (Dongguan) Company Limited Go Smart Development Limited InnoTek Limited Lens Tool & Die (H.K) Limited Magix Mechatronics Company Limited Magix Mechatronics (Dongguan) Company Limited Mansfield Industrial Company Limited Mansfield Manufacturing Company Limited Mansfield Manufacturing (Dalian) Company Limited Mansfield Manufacturing (Wuhan) Company Limited Mansfield (Suzhou) Manufacturing Co Ltd Sabana Real Estate Investment Management Pte. Ltd. Sun Mansfield Manufacturing (Dongguan) Company, Ltd
MR KEVIN XAYARAJ Blackwood Investment Pte. Ltd. Sabana Investment Partners Pte. Ltd. Sabana Property Management Pte. Ltd. Sabana Real Estate Investment Management Pte. Ltd.
74 SABANA REIT | ANNUAL REPORT 2013
PRESENT DIRECTORSHIP
MR HENRY CHUA TIONG HOCK Busan Cross Dock Co., Ltd Chemode Global Pte Ltd CNS Land Sdn. Bhd Crystal Freight Services Distripark Pte Ltd Crystal Freight Services Pte Ltd Crystal Shipping Line (H.K) Limited Far East Continental Shipping Line Limited FLE Shipping Line Pte Ltd Flex Integrated Marketing Pte Ltd Freight Link M & S (H.K) Limited Freight Links Express (M) Sdn Bhd Freight Links Express (Penang) Sdn Bhd Freight Links Express (Thailand) Co., Ltd Freight Links Express Air Systems Pte Ltd Freight Links Express Airfreight Pte Ltd Freight Links Express Archivers Pte Ltd Freight Links Express Districentre Pte Ltd Freight Links Express Distrihub Pte Ltd Freight Links Express Distripark Pte Ltd Freight Links E-Logistics Technopark Pte Ltd Freight Links Express Holdings Limited Freight Links Express International Ltd Freight Links Express Logisticentre Pte Ltd Freight Links Express Logisticpark Pte Ltd Freight Links Express Pte Ltd Freight Links Fabpark Pte. Ltd. Freight Links Logistics Pte. Ltd. Freight Links Properties Pte. Ltd. Freight Management Holdings Berhad Fudao Petrochemicals Group Pte. Ltd. Harbour Investors, Inc Lee Thong Hung Trading & Transport Sdn Bhd LTH Distripark Pte Ltd LTH Logistics (Malaysia) Sdn Bhd LTH Logistics (Singapore) Pte Ltd Piow Hong (Philippines) Inc. Piow Hong Pte Ltd Singapore Enterprises Private Limited Sabana Real Estate Investment Management Pte. Ltd. Sabana Property Management Pte. Ltd. Sabana Investment Partners Pte. Ltd. Sinmachem Sdn Bhd Vibrant Group Limited
MS NG SHIN EIN Blue Ocean Associates Pte. Ltd. Eu Yan Sang International Ltd First Resources Limited NTUC Fairprice Co-operative Ltd. Sabana Real Estate Investment Management Pte. Ltd. UPP Holdings Ltd Working Capital Partners, Ltd Yanlord Land Group Limited
75 SABANA REIT | ANNUAL REPORT 2013
MANAGEMENT TEAM
Left to Right: Mr Bobby Tay Chiew Sheng, Mr Kevin Xayaraj, Ms Tan Chiew Kian, Mr Aw Wei Been
MR KEVIN XAYARAJ MR BOBBY TAY CHIEW SHENG worked with Cambridge Co-founder, CEO and Co-founder, Chief Strategy Industrial Trust Management Executive Director Officer and Head of Investor Limited as the manager of the Relations investor relations department (Please refer to the description from August 2007 to September under the section on “Board of Mr Tay is Co-founder, Chief 2009. Mr Tay was Manager of Directors”, page 70) Strategy Officer and Head Investor Relations at Aztech of Investor Relations of the Group Ltd from April 2007 to Manager. August 2007 and Manager of Magnecomp International Prior to joining the Manager, Limited from April 2004 to Mr Tay was Director, Business April 2007, where he handled Development at AACP. He media, investor and analyst
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MANAGEMENT TEAM
relations for the company. In of a business park cum high- and the management team to all, Mr Tay has more than nine specification scientific facility. formulate strategic plans for years of experience in the field Sabana REIT. Prior to joining the of investor relations. Before his From 2007 to 2009, Mr Aw Manager, Ms Tan held foray into the investor relations served as a Senior Manager key accounting and finance field, Mr Tay was working as for Investment at Cambridge positions in a number of an operations executive for Industrial Trust Management listed institutions. the People’s Action Party at its Limited, where he sourced and headquarters from January 2000 negotiated industrial real estate From February 2008 to March to April 2004. sale and leaseback deals. From 2011, Ms Tan was the Chief 2005 to 2007, Mr Aw was with Financial Officer of Singapore Mr Tay serves as President of Jurong Consultants Pte Ltd, Medical Group Limited, where Gulf Asia Shari’ah Compliant a wholly-owned subsidiary of she was responsible for the Investment Association, a non- JTC Corporation, where he was Group’s finance, tax, treasury, profit organisation he founded the principal planner in the audit, investments and other with a group of Islamic Finance planning department. The role matters that relate to the professionals. This organisation saw him leading and co-leading Group’s listing on SGX-ST. seeks to promote awareness consultancy projects out of From 2006 to 2008, she was and understanding of Islamic Singapore, in master planning Chief Financial Officer of Toll Finance and to forge stronger of industrial parks and related Logistics (Asia) Ltd (formerly synergies between the Gulf and areas. known as Sembawang Kimtrans Asia on Islamic Finance. Ltd), Southeast Asia’s leading Mr Aw began his career in integrated logistics service Mr Tay holds a Bachelor 1995 with JTC Corporation, a provider, where she held a of Commerce degree in statutory board that controls similar portfolio. Ms Tan started Management from the University the development and marketing her accounting career at JTC of Western Sydney and a Master of major industrial estates Corporation as Accountant and of Business Systems degree in Singapore. There, he built took on the role as Finance from Monash University. up his experience in lease Manager for CapitaLand management, land and building Commercial Limited from MR AW WEI BEEN development and the marketing 2001 to 2005. Chief Operating Officer and of industrial facilities. Mr Head of Asset Management Aw was at JTC Corporation Ms Tan holds a Master of from May 1995 until February Business Administration Mr Aw is the Chief Operating 2005 and held the position from Nanyang Technological Officer and Head of Asset of Manager before he left University and a CIMA Diploma Management of the Manager. the company. in Islamic Finance. She is a He has about 19 years of Chartered Accountant and experience working in the Mr Aw graduated with a Accredited Tax Practitioner real estate industry. Bachelor of Science (Honours) (Income Tax) of Singapore, degree in Estate Management and member of the Institute Prior to joining the Manager from the National University of of Singapore Chartered in 2010, Mr Aw was Head of Singapore and holds a Master of Accountants and Singapore Asset Management at AACP. Science in Real Estate from the Institute of Accredited Tax This was preceded by his role National University of Singapore. Professionals Limited. at the Agency for Science, Technology and Research MS TAN CHIEW KIAN (“A*STAR”), where he served as Chief Financial Officer Head, Infrastructure Planning and Facilities Management. At Ms Tan is the Chief Financial A*STAR, Mr Aw was responsible Officer of the Manager. She for the development planning works closely with the CEO
77 SABANA REIT | ANNUAL REPORT 2013
THE MANAGER
Left to Right: Kevin Xayaraj, Co-founder, CEO and Executive Director; Jennifer Lim, Senior Accountant; Chan Yong Han, Compliance Officer; Aw Wei Been, Chief Operating Officer & Head of Asset Management; Allen Luo, Executive (Asset Management); Siti Hawa Binte Ahmad, Senior Executive (Asset Management); Grace Chen, Manager (Investor Relations).
78 SABANA REIT | ANNUAL REPORT 2013
THE MANAGER
Left to Right: Colin Tan, Manager (Asset Management); Tan Chiew Kian, Chief Financial Officer; Bobby Tay Chiew Sheng, Co-founder, Chief Strategy Officer and Head of Investor Relations; Charlotte Goh, Senior Executive (Asset Management); Geneieve Koh, Admin Executive; Liu Qingbin, Senior Finance Manager; Lim Tze Wei, Assistant Vice President (Asset Management); Angel Goh, Assistant Manager (Human Resource).
79 SABANA REIT | ANNUAL REPORT 2013
THE PROPERTY MANAGER
Left to Right: Mohamad Shahril, Technical Officer; Carin Tan, Accounts Executive; Myint Than, Senior Property Executive; Alethea D Tavarro, Property Executive; Albert Tan, Technician; Yvonne Lee, Admin Executive; Max Yip, Property Executive; How Pui, Ric, Assistant General Manager.
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THE PROPERTY MANAGER
facilities management approximately 400,000 sq commercial development field, spanning across the ft in leasable area. He also spanning across a portfolio industrial, the commercial, held the appointment of of more than 10 properties as well as the retail property Property Manager at New with over 90 employees. sectors. His experience in Tech Park, which is now one these fields totals 15 years. of the properties in Sabana Mr How was a quantity REIT’s portfolio. surveyor with Davis Langdon Before his appointment & Seah Pte. Ltd. from at SPM, Mr How was From 2003 to 2006, Mr How 1997 to 1998 and later, as Property Manager for City worked for Keppel FMO Pte a Property Officer with CB Developments Limited Ltd. His first three years was Richard Ellis Pte. Ltd. from (“CDL”) and its subsidiaries, spent managing Singapore 2002 to 2003. He began his MR HOW PUI, RIC Branbury Investment Post Centre, which is career as a Property Officer Assistant General Manager Limited. In his four-and- a mixed development with Far East Organization a-half years with CDL, he that comprises retail, Pte. Ltd. in 1996. Mr How heads SPM, the was involved and had set up commercial and industrial Property Manager of Sabana the property and facilities uses. In his fourth year, Mr How holds a Bachelor of REIT. Prior to joining SPM, management system he was appointed as Area Science (Honours) degree in Mr How had held various for two new commercial Manager where he managed Building Management from roles in the property and developments spanning Keppel Land’s group of the National University of Singapore.
Left to Right: Loh Yee Hui, Senior Finance Manager; Eric Ng, Property Manager; Andy Yap, Assistant Property Manager; Lee Wen Nei, Manager (Leasing); Gordon Liau, Property Executive; Cecelia Aw, Accounts Executive; Syaiful Mirza Bin Zullkifli, Property Executive; Alvin Teo, Property Executive.
81 SABANA REIT | ANNUAL REPORT 2013 GROWTH && RESPONSIBILITY
Sabana REIT strongly believes in contributing to society. That makes our growth more meaningful.
SASCO Community Project Fund Since its listing, Sabana REIT has helped numerous charitable organisations and causes using its non-Shari’ah income. In 2013, Sabana REIT allocated 100% of its non-Shari’ah income (S$130,760) to the following beneficiaries:
1Q 2013: • Singapore Red Cross Society (“SRC”) – S$16,423 in cash to sponsor a humanitarian project in the Philippines.
• MENDAKI Social Enterprise Network Services – S$16,423 in cash to support its school-based student care centre that helps latch-key children and students with learning difficulties.
2Q 2013: • Lions Befrienders Service Association (Singapore) - S$15,000 Lions Befrienders Service Association (Singapore) worth of T-shirts for the senior beneficiaries of the association.
• Ananias Centre – S$15,156 in cash to sponsor the after-school care enrolment fees for needy students.
3Q 2013 • “Save Neira Ng” project – S$28,754 in cash to help the family of Ng Wei Qi pay the medical costs for their four-month old baby girl Neira who suffered from two brain tumours.1
4Q 2013 Ananias Centre • Singapore Amalgamated Services Co-operative Organisation Limited (SASCO) Community Project Fund – S$19,502 in cash to sponsor a number of SASCO’s projects that benefit children and elderly from financially-challenged families.
1 Sadly, Neira Ng passed away a few weeks after the donation was made. The amount remaining after paying Neira Ng’s hospital bills is awaiting disbursement to a similar case as this annual report went to press.
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GROWTH & RESPONSIBILITY
Sabana REIT is committed to making a difference in the communities where it operates.
• Singapore Kadayanallur Meals with Love SRC before they are deployed Muslim League (“SKML”) – SRC’s “Meals with Love” project at the park. Each patrol session S$19,502 in cash to finance helps needy Singaporean lasts four hours on a Saturday. SKML’s In-Care Befriender families. The project allocates So far, three of our employees program, which trains a budget of S$3,000 over a have successfully passed their volunteers to help prepare 12-month period for a family Basic First Aid (course fees fully inmates for integration back of four. In 2013, the Manager sponsored by the Manager) and into the society after their contributed a total of S$12,000 are awaiting deployment by the release. to help four families. Every SRC for their volunteer duties. month, members of our staff GETTING EVERYONE INVOLVED buy and deliver groceries and In all, the Manager has In support of the Trust’s vouchers to the four families contributed more than 700 commitment to serving the assigned to us. corporate hours to volunteer community, the Manager activities in 2013. established a dedicated First Aiders on Wheels team in April 2013, charged Volunteers for SRC’s “First with planning and leading Aiders on Wheels” provide first company-wide volunteer aid to visitors of East Coast projects. In 2013, the Park. Volunteers are trained and Manager funded two certified in basic first aid by the on-going, company-wide projects on behalf of the SRC:
Meals with Love First Aiders on Wheels
83 TIMELY DIVING FOR NATURAL PEARLS STRATEGY
To successfully seek out the fine pearls, pearl divers need to possess sound judgement and experience in order to navigate unpredictable water and EXECUTION weather conditions. STEP 5 TIMELY STRATEGY EXECUTION
Our team possesses the experience and right knowledge to execute strategies to achieve the best for Unitholders in a dynamic industrial REIT landscape. SABANA REIT | ANNUAL REPORT 2013
CORPORATE GOVERNANCE STATEMENT
INTRODUCTION
The Manager’s main responsibility is to manage the assets and liabilities of the Trust for the benefit of its Unitholders. The Manager sets the strategic direction of the Trust and gives recommendations to HSBC Institutional Trust Services (Singapore) Limited, as trustee of the Trust, on the acquisition, divestment and enhancement of the assets of the Trust in accordance with its stated investment strategy. The Manager is also responsible for the risk management of the Trust.
The Manager and its officers are licensed under the Securities and Futures Act, Chapter 289 (“SFA”) to carry out REIT management activities with effect from 2 November 2010. It holds a Capital Markets Services (“CMS”) Licence issued by the MAS.
The Manager is committed to upholding high standards of corporate governance, which are essential to sustaining the Trust’s business and performance. This report describes the Manager’s corporate governance framework and practices in compliance with the principles and guidelines of the Code of Corporate Governance 2012 (the “2012 Code”). The Manager confirms that it has adhered to the principles and guidelines as set out in the 2012 Code where applicable. Any deviations from the 2012 Code are explained.
BOARD MATTERS
THE BOARD’S CONDUCT OF AFFAIRS
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.
The Board provides entrepreneurial leadership, sets the strategic direction and ensures that the necessary financial and human resources are in place for the Manager to meet its objectives. It also sets the values and standards for the Manager and the Trust, to ensure that obligations to its stakeholders are understood and met, with the ultimate aim of safeguarding and enhancing Unitholder’s value.
As at 31 December 2013, the Board members are:
Independent Directors Mr Steven Lim Kok Hoong (Chairman) Mr Yong Kok Hoon
Non-executive Directors Mr Henry Chua Tiong Hock Ms Ng Shin Ein
Executive Director Kevin Xayaraj (Chief Executive Officer)
The profiles of the Directors are set out on pages 70 to 75 of this Annual Report.
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The Board provides oversight and assumes overall responsibility for the corporate governance of the Manager, including establishing goals for management and monitoring the achievement of these goals. The Board has established an oversight framework for the Manager and the Trust, including a system of internal controls which enables risks to be assessed and managed.
In order for the Board to efficiently provide oversight, it delegates specific areas of responsibilities to its Board Committees; namely, the Nominating and Remuneration Committee (“NRC”) and Audit Committee (“AC”). Each Board Committee is governed by terms of reference which have been approved by the Board.
The Manager has adopted a framework of delegated authorisations in its Delegation of Authority (“DOA”) approved by the Board. The DOA sets out the level of authorisation and their respective approval limits for a range of transactions, including but not limited to acquisitions, divestments, operating and capital expenditures. Transactions and matters which require the Board’s approval, such as annual budgets, financial statements, funding and investment proposals, opening and closing of bank accounts, are clearly set out in the DOA.
The Board meets at least once every quarter to discuss and review the financial performance of the Trust, including any significant acquisitions and disposals, funding strategy and hedging activities, and to approve the release of the quarterly, and full year financial results. Additional meetings are convened as and when warranted by particular circumstances requiring the Board’s attention. The Articles of Association of the Manager provide for Directors’ participation in meetings by way of telephone or video conferencing or other methods of simultaneous communication by electronic or telegraphic means.
The Manager issues formal letters upon appointment of new Directors, setting out their relevant duties and obligations, to acquaint them with their responsibilities as Directors of the Manager.
Newly appointed Directors are provided with information relating to the Trust’s business, strategic directions, corporate governance policies and procedures. Training may be provided for first-time Directors in areas such as accounting, legal and industry-specific knowledge where appropriate. The costs of arranging and funding the training of the Directors will be borne by the Manager.
The Board is also regularly updated on new developments in laws and regulations or changes in regulatory requirements and financial reporting standards which are relevant to or may affect the Manager or the Trust. The Manager encourages and sponsors its Directors to attend training courses, so as to stay abreast of changes to the financial, legal and regulatory requirements and the business environment.
BOARD COMPOSITION AND GUIDANCE
Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
The composition of the Board is determined using the following principles:
1. Chairman should be a Non-executive Director; 2. At least one-third of the Board should comprise Independent Directors; and 3. The Board should be of appropriate size and mix of experience in business, finance, law and management skills critical to the Trust’s business and that each Director brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.
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CORPORATE GOVERNANCE
The Board currently consists of five Directors, two of whom are non-executive and independent, that is, they have no relationship with the Manager, its related companies, its 10% shareholders, or their officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director’s independent business judgment with a view to the best interest of the Trust, and they are able to exercise objective judgment on corporate affairs independently from the management and its 10% shareholders.
The NRC reviews the size and composition of the Board on an annual basis, and considers the present Board size and composition as appropriate for the current scope and nature of the Trust’s operations. As Non-executive Directors and Independent Directors make up more than half of the Board, no individual or group is able to dominate the Board’s decision making process. The diversity of skills, experience and core competencies of the members in areas such as accounting, finance, legal, property, and business development enables balanced and well-considered decisions to be made.
Based on the NRC’s recommendations, the Board is satisfied that there is a strong and independent element on the Board.
As part of the regulatory requirements for CMS licence holders, MAS provides prior approval for any change of the CEO or of any Board member.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Principle 3: There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
The roles of the Chairman and the CEO are separate, to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The Chairman, Mr Steven Lim Kok Hoong, and the CEO, Mr Kevin Xayaraj, are not related to each other, nor is there any business relationship between them.
The Chairman leads the Board to ensure its effectiveness by promoting a culture of openness and debate at the Board on key issues pertinent to the business and operations of the Trust and the Manager. He encourages effective contribution from all Directors and facilitates constructive relations with the Board and between the Board and management. He ensures the Directors receive complete, adequate and timely information and promotes effective communication with Unitholders on the performance of the Trust. He also spearheads the Manager’s drive to achieve and maintain high standards of corporate governance.
The CEO has full executive responsibilities over the business direction and operational decisions in managing the Trust. He is responsible for the day-to-day management of the Manager and the Trust and is accountable to the Board for the execution of the Board’s adopted strategies and policies.
BOARD MEMBERSHIP AND PERFORMANCE
Principle 4: There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.
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Principle 5: There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
The NRC comprises the following Directors:
Mr Yong Kok Hoon (Chairman) (lndependent Director) Mr Steven Lim Kok Hoong (lndependent Director) Mr Henry Chua Tiong Hock (Non-executive Director)
The NRC is guided by written Terms of Reference which sets out the authorities and duties of this Committee.
The NRC reviews and makes recommendations to the Board on all nominations for appointments and re-appointments to the Board and the Board Committees. It also leads the process for the search, identification, evaluation and selection of suitable candidates for new directorships. In doing so, where necessary or appropriate, the NRC may tap on its networking contacts and/or engage professional headhunters to assist with identifying and shortlisting candidates. Furthermore, the NRC also reviews and makes recommendation to the Board on matters relating to the professional development and succession plans for senior management and members of the Board.
The Board has implemented a process which is carried out by the NRC for assessing the effectiveness of the Board as a whole and its Board Committees and for assessing the contribution by the Chairman and each individual Director to the effectiveness of the Board. All Directors are required to assess the performance of the Board and its Committees using evaluation forms covering Board composition, Board information, Board process, internal control and risk management, Board accountability, CEO/top management and standards of conduct. The NRC also determines, among other things, whether Directors who hold multiple board representations are able to and have been adequately carrying out his or her duties. Feedback and comments received from the Directors are collated, analysed and reviewed by the NRC.
The Board ensures that the Directors give sufficient time and attention to the affairs of the Manager and the Trust. As a general rule, each Director should hold no more than seven listed company board appointments. Based on the reviews by the NRC, the Board is of the view that the Board and its Committees operate effectively and each Director is contributing to the overall effectiveness of the Board.
ACCESS TO INFORMATION
Principle 6: In order to fulfil their responsibilities, directors should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis so as to enable them to make informed decisions to discharge their duties and responsibilities.
Management endeavours to provide the Board with complete, adequate and timely information prior to board meetings and on an on-going basis to allow the Board to make informed decisions to discharge its duties and responsibilities.
Board meetings for each year are scheduled in advance to facilitate Directors’ individual arrangements in respect of on-going commitments. Prior to each meeting, Board papers on matters to be discussed with detailed explanatory information are circulated in advance so that such matters may be considered thoroughly and fully, prior to the making of any decision. Explanatory information may also be in the form of briefings to the Directors or formal presentations by staff in attendance at Board meetings or by external professionals.
89 SABANA REIT | ANNUAL REPORT 2013
CORPORATE GOVERNANCE
The number of Board meetings and Board committees meetings held during the year from 1 January 2013 to 31 December 2013 and Directors’ attendance are as follows:
Attendance of the Directors for FY2013
Nominating and Audit Committee Name of Directors Board Meetings Remuneration Meetings Committee Meetings No. of No. of No. of Attendance Attendance Attendance meetings meetings meetings Mr Steven Lim 6 6 4 4 2 2 Kok Hoong Mr Yong Kok Hoon 6 6 4 4 2 2 Mr Kevin Xayaraj 6 6 N.A. N.A. N.A. N.A. Mr Henry Chua 6 6 N.A. N.A. 2 2 Tiong Hock Ms Ng Shin Ein 6 6 4 4 N.A. N.A.
The Board has access to management and the Company Secretary at all times. The Company Secretary (or representative) attends all Board meetings and ensures that all Board procedures and the requirements of the Companies Act, Cap. 50 and the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”) are followed. The appointment and removal of the Company Secretary is a matter for the Board as a whole.
Directors may seek and obtain independent professional advice in the furtherance of their duties, if necessary. Any expenses and costs associated thereto will be borne by the Manager.
REMUNERATION MATTERS
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
LEVEL AND MIX OF REMUNERATION
Principle 8: The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate (a) the directors to provide good stewardship of the company, and (b) key management personnel to successfully manage the company. However, companies should avoid paying more than is necessary for this purpose.
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DISCLOSURE ON REMUNERATION
Principle 9: Every company should provide clear disclosure of its remuneration policies, level and mix of remuneration, and the procedure for setting remuneration, in the company’s Annual Report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key management personnel, and performance.
The NRC, which has an independent majority, serves the crucial role of ensuring that a formal and transparent procedure is established for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. The NRC determines remuneration packages and service terms of individual Directors and the CEO. It also reviews and recommends to the Board, the framework for salary reviews, performance bonus and incentives for the other key management personnel, taking into consideration the performance of the corporate and that of the individual employee. No Director decides his own fees. There are currently no option schemes or other long-term incentive schemes for Directors and employees.
Remunerations of the Directors and employees of the Manager are not paid out of the deposited property of the Trust, but remunerated directly by the Manager from the fees it receives. The Manager’s report on each individual Director’s and the key management personnel’s remuneration paid and payable from 1 January 2013 to 31 December 2013, is as follows:
Director’s Other Salary Bonus Total Remuneration fee Benefits S$’000 S$’000 S$’000 S$’000 S$’000 Directors
Mr Kevin Xayaraj (CEO) 396.0 183.0 - 12.0 591.0
Mr Steven Lim Kok Hoong - - 85.0 - 85.0 (Chairman)
Mr Yong Kok Hoon - - 90.0 - 90.0
Mr Henry Chua Tiong Hock - - 55.0 - 55.0
Ms Ng Shin Ein - - 55.0 - 55.0
Other Salary Bonus Total Remuneration Bands Benefits % % % % Key management personnel
S$250,000 – S$500,000
Mr Bobby Tay Chiew Sheng 82.5 13.8 3.7 100.0
Mr Aw Wei Been 73.2 23.6 3.2 100.0
Ms Tan Chiew Kian 73.7 25.5 0.8 100.0
Note: Remuneration is based on amount paid and payable, based on the Trust’s financial year from 1 January 2013 to 31 December 2013. Bonus consists of AWS and performance bonus. Mobile and transport allowances are classified under Other Benefits. There were no other key management personnel.
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CORPORATE GOVERNANCE
ACCOUNTABILITY AND AUDIT
ACCOUNTABILITY
Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.
The Manager prepares the financial statements in accordance with the Singapore Financial Reporting Standards prescribed by the Accounting Standards Council. Quarterly results are released to Unitholders within 45 days of the reporting period while full year results are released to Unitholders within 60 days of the financial year end. In presenting the financial reports, the Board aims to provide a balanced and understandable assessment of the Trust’s performance, position and prospects.
RISK MANAGEMENT AND INTERNAL CONTROLS
Principle 11: The Board is responsible for the governance of risk. The Board should ensure that Management maintains a sound system of risk management and internal controls to safeguard shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives.
The Board, through the AC, reviews the adequacy of the Manager’s risk management framework and ensures that robust risk management and internal controls are in place to safeguard the interests of the Unitholders. The Manager benchmarks its risk management practices against the Risk Governance Guide For Listed Boards for best standards.
The AC, through the assistance of internal and external auditors, reviews and reports to the Board on the adequacy of the Manager’s system of controls, including financial, operational and compliance controls put in place by the management as part of the framework.
The Manager has adopted an enterprise-wide risk management (“ERM”) framework to enhance its risk management capabilities. Through a structured risk identification process and the use of a risk register, the key financial, operational and compliance risks identified by the management are documented and presented against the response strategies and control measures put in place to mitigate those risks. To enhance risk mitigation, the ERM framework is integrated with the internal auditor’s annual work plan.
The following section presents a brief summary of the Trust’s exposure to financial, operational and compliance risks and the key measures in addressing these risks.
Financial Risk
In managing the Trust, the Manager adheres to all applicable financial covenants set by lenders as well as the aggregate leverage limit imposed by MAS in the Property Funds Appendix. To minimise financial risks, the Manager reviews the capital management policy of the Trust regularly and provides periodic updates to the Directors. All major capital market initiatives require the prior approval of the Board.
By employing an appropriate mix of debt and equity to finance property acquisitions, maintaining a certain level of cash for working capital and employing available Shari’ah compliant derivatives to hedge risk exposure, the Manager strikes a strategic balance between safeguarding the going concern ability and optimal capital structure of the Trust with maximising Unitholders’ value.
On 21 August 2013, credit rating agency S&P affirmed the Trust’s ‘BBB-‘ long-term corporate credit rating and maintained its stable outlook on the Trust. A credit rating allows the Trust to have an aggregate leverage up to 60% of its deposited property, as stipulated within the Property Funds Appendix by MAS. The Trust has complied with the aggregate leverage limit throughout the year.
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Operational Risk
The Manager has put in place a manual of standard operating procedures designed to identify, monitor, report and manage the operational risks associated with the day-to-day management of the Trust. The manual of standard operating procedures covers key risk areas such as investments and acquisitions, property and lease management, interested party transactions, finance and accounting, compliance, and information technology controls, and is periodically reviewed to stay relevant and effective.
The Manager recognizes that there is a significant amount of risk inherent in making property investment decisions. Accordingly, the Manager sets out clear procedures when making such decisions. For instance, an investment and risk management committee (comprising key members of the management, the investment officer and the compliance officer) was set up to ensure comprehensive due diligence is carried out in relation to each proposed investment. All property purchases require the prior approval of the Board.
Control self-assessments in key areas of operations are conducted by the management on a regular basis. Internal auditors are also engaged to perform independent reviews of the adequacy and effectiveness of the risk management processes and internal controls (see Principle 13). The Manager also has a Business Continuity Plan and a comprehensive insurance coverage in accordance with industry standards.
Compliance Risk
The Trust is subject to various rules and regulations stipulated by SGX-ST and other regulatory bodies. Any changes to the rules and regulations may affect the Trust’s business.
The Manager holds a CMS licence and its key officers hold representatives’ licences issued by MAS under the SFA. Failure to comply with the regulations imposed by MAS may result in the licences being revoked or not renewed, adversely affecting the Trust’s operations.
The Manager has policies and procedures for ensuring compliance with the applicable provisions of the SFA and all other relevant legislations, the Listing Manual of the SGX-ST, the Code on Collective Investment Schemes issued by the MAS including Property Funds Appendix, the Manager’s obligations under the Trust Deed, Singapore Financial Reporting Standard, any tax ruling and the relevant contracts.
To mitigate non-compliance, the compliance officer regularly consults the regulatory bodies and works closely with the auditors, legal counsel, Company Secretary, senior management and AC to ensure adherence to all stipulated rules and regulations.
Board’s Opinion on Internal Controls
Based on the internal controls and risk management framework established and maintained by the management, work performed by the internal and external auditors, the assurance from the CEO and Chief Financial Officer (“CFO”) that the financial records have been properly maintained, that the financial statements give a true and fair view of the Trust’s operations and finances, and the assurance from the CEO and CFO regarding the effectiveness of the Manager’s risk management and internal control systems, the Board, with the concurrence of the AC, is of the view that the Trust’s financial, operational, compliance and information technology controls, and risk management systems were adequate as at 31 December 2013.
In this regard, the Board notes that the system of internal controls and risk management provide a reasonable but not absolute assurance that the Trust will not be severely affected by any event that could be reasonably foreseen. Neither can any system of internal controls and risk management provide absolute assurance against the occurrence of material errors, poor judgment, human error, losses, fraud or other irregularities.
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AUDIT COMMITTEE
Principle 12: The Board should establish an AC with written terms of reference which clearly set out its authority and duties.
The AC assists the Board in fulfilling responsibilities relating to corporate governance and interested party transactions.
The AC is governed by written terms of reference defining its authority and duties, with explicit authority to investigate any matter within its terms of reference. The AC has full access to and co-operation by management and full discretion to invite any Director or employee of the Manager to attend its meetings.
Currently, the AC members are:
Mr Yong Kok Hoon (Chairman) (Independent Director) Mr Steven Lim Kok Hoong (lndependent Director) Ms Ng Shin Ein (Non-executive Director)
The main duties of the AC include reviewing and monitoring the effectiveness of the Manager’s internal controls relating to financial, operational, compliance and risk management processes. The AC receives regular updates by external auditors to keep abreast of changes to accounting standards and issues which may have a direct impact on financial statements. The AC meets with internal and external auditors without the presence of management at least once a year.
The AC meets at least once every quarter and the key activities included:
• Reviewing and recommending to the Board for approval, the quarterly and full year financial results and related SGX announcements;
• Reviewing Related Party Transactions and any donations of income derived from non-Shari’ah compliant sources or non-core activities to charities;
• Reviewing and approving the internal and external audit plans to ensure adequacy of the audit scope;
• Reviewing and evaluating with internal and external auditors, the adequacy and effectiveness of internal control systems, including financial, operational and compliance controls, and risk management policies and framework;
• Reviewing the internal and external audit reports and monitoring the timely and proper implementation of any corrective or improvement measures;
• Reviewing the nature and extent of non-audit services performed by the external auditors;
• Reviewing the independence and objectivity of the external auditors, and recommending to the Board on their re-appointment; and
• Reviewing whistle-blowing arrangements put in place by management.
The Board is of the view that all the members of the AC are suitably qualified with finance and legal backgrounds to assist the Board in the areas of internal controls, financial and accounting matters, compliance and risk management, including oversight over management in the design, implementation and monitoring of risk management and internal control systems.
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External Auditors
The AC makes recommendation to the Board on the appointment/re-appointment of the external auditors, taking into consideration the scope, results of the audit, as well as the cost effectiveness, independence and objectivity of the external auditors.
During the year, the AC has conducted a review of all non-audit services provided by the external auditors to Sabana REIT and its subsidiaries and is satisfied that the extent of such services will not prejudice the independence and objectivity of the external auditors. The amount paid and payable to external auditors for audit and non-audit services fees are approximately S$180,000 and S$118,000, respectively, for the financial year under review.
The AC, with the concurrence of the Board, has recommended the re-appointment of KPMG LLP as the external auditors. The re-appointment of the external auditors will be subjected to approval by way of an ordinary resolution of Unitholders at the third Annual General Meeting, to be held on 11 April 2014.
In appointing the audit firms for the Trust and its subsidiaries, the Board is satisfied that the Trust has complied with the requirements of Rules 712 and 715 of the Listing Manual of the SGX-ST.
Whistle-blowing Policy
The AC has established procedures to provide employees of the Manager and the tenants and vendors of the Trust with well-defined and accessible channels to report on suspected fraud, corruption, dishonest practices or other similar matters relating to the Trust or the Manager, and for the independent investigation of any reports and appropriate follow-up action.
The aim of the whistle-blowing policy is to encourage the reporting of such matters in good faith, with the confidence that making such reports will be treated fairly, and to the extent possible, be protected from reprisal. Where appropriate, an independent third party may be appointed to assist in the investigation.
There were no reports of whistle-blowing received for the year.
INTERNAL AUDIT
Principle 13: The company should establish an effective internal audit function that is adequately resourced and independent of the activities it audits.
The internal audit function of the Manager is outsourced to PricewaterhouseCoopers LLP (“PWC”). The internal auditors are guided by the International Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors, and report directly to the AC on audit matters.
The internal auditors conduct audit reviews based on the internal audit plan approved by the AC, and report their findings and recommendations to management who would respond on the actions to be taken. The internal auditors submit internal audit reports at least twice yearly to the AC. The AC is of the view that the internal auditors have adequate resources to perform its functions.
SHAREHOLDER RIGHTS AND RESPONSIBILITIES
SHAREHOLDER RIGHTS
Principle 14: Companies should treat all shareholders fairly and equitably, and should recognise, protect and facilitate the exercise of shareholders’ rights, and continually review and update such governance arrangements.
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COMMUNICATION WITH UNITHOLDERS
Principle 15: Companies should actively engage their shareholders and put in place an investor relations policy to promote regular, effective and fair communication with shareholders.
The Manager is committed to regular, effective and fair communication with Unitholders. It has a dedicated Investor Relations (“IR”) team which regularly communicates with the Unitholders and attends to their queries and concerns.
The Manager’s disclosure policy requires the timely and full disclosure of all material information relating to the Trust by way of public releases or announcement through the SGX-ST via SGXNET at first instance and subsequently, by way of release on the website at www.sabana-reit.com. The Manager clearly communicates its current policy of distributing 100% of its distributable income to Unitholders.
The Manager conducts regular briefings for analysts which will generally coincide with the release of the Trust’s quarterly results. The IR team utilises its website as a means of providing information to the Unitholders and the broader investment community. News releases, investor presentations and quarterly and full year financial results are available on the website immediately after they have been released to the market.
More details on investor relations activities and efforts are found on pages 26 - 27 of this Annual Report.
CONDUCT OF SHAREHOLDER MEETINGS
Principle 16: Companies should encourage greater shareholder participation at general meetings of shareholders, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
The Manager welcomes active Unitholder participation at the annual general meeting (“AGM”). It believes that AGMs serve as an opportune forum for Unitholders to meet the Board and senior management and to communicate their views.
The Manager has implemented the system of voting by poll at its AGMs. Results of each resolution put to vote at the AGM are announced with details of percentages in favour and against. Separate resolutions are proposed for substantially separate issues at the meetings. Unitholders may also appoint up to two proxies to attend and vote in his/her stead.
The Chairman of the Board, the respective Chairman of the Board Committees, management and the external auditors are present to address Unitholders’ queries at the AGMs.
DEALING IN SECURITIES
The Manager’s Code of Best Practices on Securities Transactions encourages Directors and employees to hold Units but forbids them to:
• Trade during the blackout period, which commences one month before the announcement of property valuations, quarterly or annual results to the public and ending on the day of announcement or other specified date.
• Trade at any time in possession of price sensitive information.
• Communicate price sensitive information to any person as imposed by insider trading laws.
• Trade in Units on short-term considerations.
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Directors are also required to disclose their dealings in Units to the Manager within two business days after such acquisition or occurrence. Announcements via SGXNET will be made.
In addition, the Manager will comply with any relevant disclosure requirements under the SFA. The Manager has also undertaken that it will not deal in the Units during the period commencing one month before the public announcement of the Trust’s annual results, quarterly results and (where applicable) property valuations, and ending on the date of announcement of the relevant results, or the case may be, property valuations.
DEALING WITH CONFLICTS OF INTEREST
The following procedures are established by the Manager to deal with potential conflicts of interest issues:
• The Manager is dedicated to Sabana REIT and will not manage other REITs which invest in similar properties as Sabana REIT.
• All executive officers will be working exclusively for the Manager and will not hold other executive positions in other firms;
• At least a third of Directors must be independent. All resolutions in writing of the Directors in relation to matters concerning the Trust must be approved by a majority of the Directors who are not involved in the conflict, including at least two Independent Directors;
• In respect of matters in which Vibrant Group Limited (the “Sponsor”) and/or its subsidiaries have an interest, direct or indirect, any nominees appointed by the Sponsor and/or its subsidiaries to the Board to represent their interest will abstain from voting. In such matters, the quorum must comprise a majority of the Independent Directors and must exclude the nominee Directors of the Sponsor and/ or its subsidiaries.
• It is also provided in the Trust Deed that if the Manager is required to decide whether or not to take any action against any person in relation to any breach of any agreement entered into by the Trustee for and on behalf of the Trust with a related party of the Manager, the Manager shall be obliged to consult a reputable law firm (acceptable to the Trustee) which shall provide legal advice on the matter. If the said law firm is of the opinion that the Trustee has a prima facie case against the party allegedly in breach under such agreement, the Manager shall be obliged to take appropriate action in relation to such agreement. The Directors shall have a duty to ensure that the Manager so complies. Notwithstanding the foregoing, the Manager shall inform the Trustee as soon as it becomes aware of any breach of any agreement entered into by the Trustee for and on behalf of the Trust with a related party of the Manager and the Trustee may take any action it deems necessary to protect the rights of Unitholders and/or which is in the interest of Unitholders. Any decision by the Manager not to take action against a related party of the Manager shall not constitute a waiver of the Trustee’s right to take such action as it deems fit against such related party.
There are no material contracts entered into by Sabana REIT or any of its subsidiaries that involve the interests of the CEO, any Director or any controlling Unitholder, except as disclosed in this annual report.
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DEALING WITH RELATED PARTIES
The Manager has established procedures to ensure that all Related Party Transactions will be undertaken on an arm’s length basis and on normal commercial terms, which are generally no more favourable than those extended to unrelated third parties. Thus, the interests of the Trust and the Unitholders will not be prejudiced. All Related Party Transactions will be subjected to regular periodic reviews by the AC:
• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding S$100,000.00 in value but below 3% of the value of Sabana REIT’s net tangible assets will be subject to review by the AC at regular intervals;
• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 3% but below 5% of the value of Sabana REIT’s net tangible assets will be subject to review and prior approval of the AC and immediately announced on SGX-ST. Such approval shall only be given if the transactions are on normal commercial terms and are consistent with similar types of transactions made by the Trustee (as trustee of the Trust) with third parties which are unrelated to the Manager;
• Transactions (either individually or as part of a series or if aggregated with other transactions involving the same interested person during the same financial year) equal to or exceeding 5% of the value of Sabana REIT’s net tangible assets will be reviewed and approved prior to such transactions being entered into, on the basis described in the preceding paragraph, by the AC which may, as it deems fit, request advice on the transactions from independent advisers, including the obtaining of valuations from independent professional valuers. Furthermore, under the Listing Manual of the SGX-ST and the Property Funds Appendix, such transactions would have to be approved by the Unitholders at a meeting of Unitholders duly convened and held in accordance with the provisions of the Trust Deed; and
• Aggregate value of Related Party Transactions entered into during the financial year under review will be disclosed in the Annual Report. See page 160 for the disclosure.
As a general rule, the Manager must demonstrate to its AC that such transactions satisfy the foregoing criteria, which may entail obtaining (where practicable) quotations from parties unrelated to the Manager; or obtaining two or more valuations from independent professional valuers (in accordance with the Property Funds Appendix).
For Related Party Transactions entered into or to be entered into by the Trustee, the Trustee is required to consider the terms of such transactions to satisfy itself that such transactions are conducted on an arm’s length basis and on normal commercial terms, are not prejudicial to the interests of the Trust and the Unitholders, and are in accordance with all applicable requirements of the Property Funds Appendix and/or the Listing Manual of the SGX-ST relating to the transaction in question.
Further, the Trustee has the ultimate discretion under the Trust Deed to decide whether or not to enter into Related Party Transactions. If the Trustee is to sign any Related Party Transaction contract, the Trustee will review the contract to ensure that it complies with the requirements relating to Related Party Transactions as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts.
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The Manager will maintain a register to record and will incorporate into its internal audit plan a review, of all Related Party Transactions which are entered into by the Trust. The AC shall review the internal audit reports to ascertain that the guidelines and procedures established to monitor Related Party Transactions have been complied with. In addition, the Trustee will also have the right to review such audit reports to ascertain that the Property Funds Appendix have been complied with. The AC will periodically review all Related Party Transactions to ensure compliance with the Manager’s internal control procedures and with the relevant provisions of the Property Funds Appendix and/or the Listing Manual of the SGX-ST. The review will include the examination of the nature of the transactions and the supporting documents or such other data deemed necessary by the AC.
If a member of the AC has an interest in a transaction, he is required to abstain from participating in the review and approval process in relation to that transaction.
DEALING WITH SHARI’AH COMPLIANCE
Shari’ah compliance means adherence to the tenets of Islamic law, which places due consideration upon ethics and social responsibility. The Manager ensures total non-Shari’ah compliant rental income do not exceed 5% per annum of the gross revenue of the Trust’s portfolio of properties. As part of the due cleansing procedure, donation of non-compliant income is made to charitable causes (without tax benefits) on a quarterly basis. For 2013, the non-compliant income came to approximately 0.15% of gross revenue.
Five Pillars Pte. Ltd. (“Five Pillars”), based in Singapore, was appointed by the Manager to act as the Shari’ah Adviser. Five Pillars serves as a conduit between the Independent Shari’ah Committee (“ISC”) and the compliance officer of the Manager, liaising frequently on Shari’ah matters throughout the year.
The ISC comprises eminent scholars and experts. They are:
• Dr Mohamed Ali Elgari (Professor at King Abdulaziz University in Saudi Arabia); • Professor Dr. Obiyathulla Ismath Bacha (Professor at the International Centre for Education in Islamic Finance in Malaysia); and • Dr. Ashraf bin Mohammed Hashim (Associate Professor at International Islamic University Malaysia)
The Trust follows the standards promulgated by the Auditing and Accounting Organisation of the Islamic Financial Institutions and/or the Islamic Financial Services Board. To assess on-going compliance of the Trust, the Shari’ah Adviser, on behalf of and working closely with the ISC:
• Prior to the issuance of the Shari’ah certificate for annual status, inspect and verify the properties and activities of the Trust. A representative of Five Pillars will visit the individual properties in the portfolio to ensure businesses on the premises are compliant and agree with the leasing contracts signed. For 2013, the Trust successfully passed the inspection. The Trust’s purchase of the asset at 508 Chai Chee Lane, Singapore 469032 underwent a similar inspection prior to the completion of the acquisition.
• For new funding, consent will be obtained on inception. Shari’ah certification and other supporting documents from the issuing or arranger bank will be vetted and approved by the ISC. For 2013, the Trust did not utilise interest-based borrowing or other non-Shari’ah compliant financing.
On completion of the annual audit, the ISC will sign off and issue the certificate which will be delivered by the Shari’ah Adviser to the Manager. The Trust has successfully renewed its annual Shari’ah certificate, valid till 31 December 2014. The certificate is displayed on the Trust’s website www.sabana-reit.com. The total amount of fees incurred for Shari’ah advisory services for the financial year ended 31 December 2013 is approximately S$90,000.
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Under Shari’ah principles, provisions are made for remedial actions. In the event of a breach or deviation, the Manager must disclose as soon as practicable to the Shari’ah Adviser and ISC with the necessary details and supporting documents. Rectification as advised is applied to the particular activity within an agreed time frame before any distributions are made to Unitholders.
UTILISATION OF PRIVATE PLACEMENT PROCEEDS
In September 2013, the Manager carried out a placement exercise for the Trust by issuing 40.0 million new Units at an issue price of S$1.00 per unit to raise gross proceeds of S$40.0 million. The gross proceeds were fully utilised and materially in accordance with the intended applications:
Applications S$’ million Partial funding for the acquisition of 508 Chai Chee Lane, Singapore 469032 39.4 Fees and expenses incurred for the private placement 0.6 Total 40.0
100 Financial Contents
Report of the Trustee 102 Statement by the Manager 103 Independent Auditors’ Report 104 Statements of Financial Position 105 Statements of Total Return 106 Distribution Statements 107 Statements of Movements in 109 Unitholders’ Funds Portfolio Statement 110 Consolidated Statement of Cash Flows 115 Notes to the Financial Statements 117 SABANA REIT | ANNUAL REPORT 2013
REPORT OF THE TRUSTEE
HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”) is under a duty to take into custody and hold the assets of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) and its subsidiaries (the “Group”) in trust for the holders (“Unitholders”) of units in the Trust (the “Units”). In accordance with the Securities and Futures Act, Chapter 289, of Singapore, its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”) for compliance with the limitations imposed on the investment and borrowing powers as set out in the trust deed dated 29 October 2010 (as amended) (the “Trust Deed”) between the Manager and the Trustee in each annual accounting period and report thereon to Unitholders in an annual report.
To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Trust during the period covered by these financial statements, set out on pages 105 to 159 in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed.
For and on behalf of the Trustee, HSBC Institutional Trust Services (Singapore) Limited
Antony Wade Lewis Director
Singapore 28 February 2014
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STATEMENT BY THE MANAGER
In the opinion of the directors of Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”), the accompanying financial statements set out on pages 105 to 159 comprising the statements of financial position, statements of total return, distribution statements and statements of movements in Unitholders’ funds of the Group and the Trust, portfolio statement and statement of cash flows of the Group and notes to the financial statements are drawn up so as to present fairly, in all material respects, the financial position of the Group and the Trust as at 31 December 2013, the total return, distributable income and movements in Unitholders’ funds of the Group and the Trust and cash flows of the Group for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants and the provisions of the Trust Deed. At the date of this statement, there are reasonable grounds to believe that the Group and the Trust will be able to meet their financial obligations as and when they materialise.
For and on behalf of the Manager, Sabana Real Estate Investment Management Pte. Ltd.
Kevin Xayaraj Director and Chief Executive Officer
Singapore 28 February 2014
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INDEPENDENT AUDITORS’ REPORT
Unitholders of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (Constituted in the Republic of Singapore pursuant to a trust deed dated 29 October 2010 (as amended))
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) and its subsidiaries (the “Group”), which comprise the statements of financial position of the Group and the Trust and portfolio statement of the Group as at 31 December 2013, the statements of total return, distribution statements and statement of movements in Unitholders’ funds of the Group and the Trust and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 105 to 159.
Manager’s responsibility for the financial statements
The Manager of the Trust is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants, and for such internal control as the Manager of the Trust determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Trust’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager of the Trust, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Trust present fairly, in all material respects, the financial position of the Group and the Trust as at 31 December 2013 and the total return, distributable income, movements in Unitholders’ funds of the Group and the Trust and cash flows of the Group for the year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants.
KPMG LLP Public Accountants and Chartered Accountants
Singapore 28 February 2014
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STATEMENTS OF FINANCIAL POSITION As at 31 December 2013
Group Trust Note 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Non-current assets Investment properties 4 1,211,430 1,130,943 1,211,430 1,130,943 Intangible assets 5 1,830 3,257 1,830 3,257 Subsidiaries 6 – – * * 1,213,260 1,134,200 1,213,260 1,134,200
Current assets Trade and other receivables 7 6,409 3,373 6,407 3,369 Cash and cash equivalents 8 17,084 18,965 17,078 18,962 23,493 22,338 23,485 22,331
Total assets 1,236,753 1,156,538 1,236,745 1,156,531
Current liabilities Trade and other payables 9 18,869 16,420 18,864 16,415 Borrowings 10 130,376 – 130,376 – Derivative liabilities 12 3,479 1,466 717 – 152,724 17,886 149,957 16,415
Non-current liabilities Trade and other payables 9 6,626 7,706 6,626 7,706 Borrowings 10 317,016 420,800 318,848 423,288 Derivative liabilities 12 3,883 7,289 3,883 7,289 327,525 435,795 329,357 438,283
Total liabilities 480,249 453,681 479,314 454,698
Net assets 756,504 702,857 757,431 701,833
Represented by:
Unitholders’ funds 756,504 702,857 757,431 701,833
Units issued and to be issued (’000) 13 691,959 641,523 691,959 641,523
* Less than $1,000
The accompanying notes form an integral part of these financial statements.
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STATEMENTS OF TOTAL RETURN For the year ended 31 December 2013
Group Trust Note 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Gross revenue 16 89,485 81,768 89,485 81,768 Property expenses 17 (9,125) (4,831) (9,125) (4,831) Net property income 80,360 76,937 80,360 76,937
Finance income 61 197 61 197 Finance costs (20,310) (17,254) (19,861) (17,132) Net finance costs 18 (20,249) (17,057) (19,800) (16,935)
Amortisation of intangible assets (1,427) (1,331) (1,427) (1,331)
Manager’s fees 19 (5,868) (5,491) (5,868) (5,491) Trustee’s fees (488) (447) (488) (447) Donation of non-Shari’ah compliant income 20 (131) (147) (131) (147) Other trust expenses 21 (1,415) (1,783) (1,427) (1,786) Loss on conversion of Convertible Sukuk (1,228) – (1,010) – (9,130) (7,868) (8,924) (7,871)
Net income 49,554 50,681 50,209 50,800 Net change in fair value of financial derivatives 1,393 (1,553) 2,689 (2,696) Net change in fair value of investment properties 12,441 25,316 12,441 25,316 Total return for the year before taxation and distribution 63,388 74,444 65,339 73,420 Tax expense 22 * * – – Total return for the year after taxation and before distribution 63,388 74,444 65,339 73,420
Earnings per Unit (cents) Basic 23 9.64 11.66 9.94 11.50 Diluted 23 9.64 11.34 9.71 11.34
* Less than $1,000
The accompanying notes form an integral part of these financial statements.
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DISTRIBUTION STATEMENTS For the year ended 31 December 2013
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Income available for distribution to Unitholders at beginning of the year 15,500 13,867 15,500 13,867 Total return for the year after taxation and before distribution 63,388 74,444 65,339 73,420
Non-tax deductible/(chargeable) items: Manager’s fees paid/payable in Units 4,694 4,393 4,694 4,393 Amortisation of intangible assets 1,427 1,331 1,427 1,331 Amortisation of transaction costs 3,940 2,677 3,502 2,556 Trustee’s fees 488 447 488 447 Donation of non-Shari’ah compliant income 131 147 131 147 Net change in fair value of financial derivatives (1,393) 1,553 (2,689) 2,696 Net change in fair value of investment properties (12,441) (25,316) (12,441) (25,316) Loss on conversion of Convertible Sukuk 1,228 – 1,010 – Effects of recognising rental income on a straight line basis over the lease term (571) (1,728) (571) (1,728) Other items 864 1,447 865 1,449 Net effect of non-tax chargeable items (1,633) (15,049) (3,584) (14,025) Income available for distribution to Unitholders 77,255 73,262 77,255 73,262
The accompanying notes form an integral part of these financial statements.
107 SABANA REIT | ANNUAL REPORT 2013
DISTRIBUTION STATEMENTS (CONTINUED) For the year ended 31 December 2013
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Distribution of 0.18 cents per Unit for the period 24 September 2013 to 30 September 2013 (533) – (533) – Distribution of 2.20 cents per Unit for the period 1 July 2013 to 23 September 2013 (15,004) – (15,004) – Distribution of 2.40 cents per Unit for the period 1 April 2013 to 30 June 2013 (15,593) – (15,593) – Distribution of 2.41 cents per Unit for the period 1 January 2013 to 31 March 2013 (15,482) – (15,482) – Distribution of 2.41 cents per Unit for the period 1 October 2012 to 31 December 2012 (15,461) – (15,461) – Distribution of 2.34 cents per Unit for the period 1 July 2012 to 30 September 2012 – (14,987) – (14,987) Distribution of 2.27 cents per Unit for the period 1 April 2012 to 30 June 2012 – (14,518) – (14,518) Distribution of 2.26 cents per Unit for the period 1 January 2012 to 31 March 2012 – (14,428) – (14,428) Distribution of 2.17 cents per Unit for the period 1 October 2011 to 31 December 2011 – (13,829) – (13,829) (62,073) (57,762) (62,073) (57,762) Income available for distribution to Unitholders at end of the year 15,182 15,500 15,182 15,500
Number of Units entitled to distributions (’000) (Note 13) 691,959 641,523 691,959 641,523
Distribution per Unit (cents) 9.38 9.28 9.38 9.28
The accompanying notes form an integral part of these financial statements.
108 SABANA REIT | ANNUAL REPORT 2013
STATEMENTS OF MOVEMENTS IN UNITHOLDERS’ FUNDS For the year ended 31 December 2013
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Unitholders’ funds at beginning of the year 702,857 681,782 701,833 681,782
Operations Total return after taxation and before distribution 63,388 74,444 65,339 73,420 Net increase in net assets resulting from operations 766,245 756,226 767,172 755,202
Unitholders’ transactions Issue of new Units: - Private placement 40,000 – 40,000 – - Manager’s fees paid in Units 3,447 3,230 3,447 3,230 - Manager’s fees payable in Units 1,247 1,163 1,247 1,163 - Conversion of Convertible Sukuk 8,271 – 8,271 – Issue expenses (633) – (633) – Distributions to Unitholders (62,073) (57,762) (62,073) (57,762) Net decrease in net assets resulting from Unitholders’ transactions (9,741) (53,369) (9,741) (53,369) Unitholders’ funds at end of the year 756,504 702,857 757,431 701,833
The accompanying notes form an integral part of these financial statements.
109 SABANA REIT | ANNUAL REPORT 2013
PORTFOLIO STATEMENT As at 31 December 2013
GROUP
Description of property Type Leasehold term Location Committed occupancy Carrying values % of total net assets rate as at as at as at 31 31 31 31 31 31 December December December December December December 2013 2012 2013 2012 2013 2012 % % $’000 $’000 % %
New Tech Park (11) High-tech industrial 45 years wef 151 Lorong Chuan 94 100 341,300 336,500 45.1 47.9 Listing Date
8 Commonwealth Lane (11) High-tech industrial 30 years wef 8 Commonwealth Lane 69 100 69,700 77,000 9.2 11.0 1 February 2006 (2)
Geo-Tele Centre (11) High-tech industrial 30 years wef 9 Tai Seng Drive 100 98 47,574(1) 44,066(1) 6.3 6.3 1 June 1995 (3)
Pantech 21 (11) High-tech industrial 99 years wef 200 Pandan Loop 54 100 50,900 48,100 6.7 6.8 27 January 1984
Frontech Centre (11) High-tech industrial 99 years wef 15 Jalan Kilang Barat 100 100 37,600 37,100 5.0 5.3 1 January 1962
1 Tuas Avenue 4 (11) High-tech industrial 30 years wef 1 Tuas Avenue 4 100 100 30,700 30,000 4.1 4.3 1 January 1996 (4)
BTH Centre High-tech industrial 30 years wef 23 Serangoon North 100 100 62,000 61,500 8.2 8.7 16 September 2006 (5) Avenue 5
508 Chai Chee Lane High-tech industrial 30 years wef 508 Chai Chee Lane 53 – 67,760 – 9.0 – 16 April 2001 (6)
Freight Links Express Chemical warehouse 30 years wef 33 & 35 Penjuru Lane 100 100 84,300 83,400 11.1 11.9 Logisticpark (11) & logistics 16 February 1988 (7)
18 Gul Drive (11) Chemical warehouse 13 years 10 months 18 Gul Drive 100 100 35,500 35,500 4.7 5.0 & logistics 12 days wef 1 November 2004 (8)
Penjuru Logistics Hub (11) Warehouse & logistics 30 years wef 34 Penjuru Lane 100 100 64,300 63,700 8.5 9.0 16 August 2002
Freight Links Express Warehouse & logistics 30 years wef 51 Penjuru Road 100 100 48,900 47,300 6.5 6.7 Logisticentre (11) 1 January 1995 (3)
26 Loyang Drive (11) Warehouse & logistics 30 years wef 26 Loyang Drive 100 100 35,600 34,200 4.7 4.9 1 January 2006 (9)
Balance carried forward 976,134 898,366 129.1 127.8
The accompanying notes form an integral part of these financial statements. 110 SABANA REIT | ANNUAL REPORT 2013
PORTFOLIO STATEMENT As at 31 December 2013
GROUP
Description of property Type Leasehold term Location Committed occupancy Carrying values % of total net assets rate as at as at as at 31 31 31 31 31 31 December December December December December December 2013 2012 2013 2012 2013 2012 % % $’000 $’000 % %
New Tech Park (11) High-tech industrial 45 years wef 151 Lorong Chuan 94 100 341,300 336,500 45.1 47.9 Listing Date
8 Commonwealth Lane (11) High-tech industrial 30 years wef 8 Commonwealth Lane 69 100 69,700 77,000 9.2 11.0 1 February 2006 (2)
Geo-Tele Centre (11) High-tech industrial 30 years wef 9 Tai Seng Drive 100 98 47,574(1) 44,066(1) 6.3 6.3 1 June 1995 (3)
Pantech 21 (11) High-tech industrial 99 years wef 200 Pandan Loop 54 100 50,900 48,100 6.7 6.8 27 January 1984
Frontech Centre (11) High-tech industrial 99 years wef 15 Jalan Kilang Barat 100 100 37,600 37,100 5.0 5.3 1 January 1962
1 Tuas Avenue 4 (11) High-tech industrial 30 years wef 1 Tuas Avenue 4 100 100 30,700 30,000 4.1 4.3 1 January 1996 (4)
BTH Centre High-tech industrial 30 years wef 23 Serangoon North 100 100 62,000 61,500 8.2 8.7 16 September 2006 (5) Avenue 5
508 Chai Chee Lane High-tech industrial 30 years wef 508 Chai Chee Lane 53 – 67,760 – 9.0 – 16 April 2001 (6)
Freight Links Express Chemical warehouse 30 years wef 33 & 35 Penjuru Lane 100 100 84,300 83,400 11.1 11.9 Logisticpark (11) & logistics 16 February 1988 (7)
18 Gul Drive (11) Chemical warehouse 13 years 10 months 18 Gul Drive 100 100 35,500 35,500 4.7 5.0 & logistics 12 days wef 1 November 2004 (8)
Penjuru Logistics Hub (11) Warehouse & logistics 30 years wef 34 Penjuru Lane 100 100 64,300 63,700 8.5 9.0 16 August 2002
Freight Links Express Warehouse & logistics 30 years wef 51 Penjuru Road 100 100 48,900 47,300 6.5 6.7 Logisticentre (11) 1 January 1995 (3)
26 Loyang Drive (11) Warehouse & logistics 30 years wef 26 Loyang Drive 100 100 35,600 34,200 4.7 4.9 1 January 2006 (9)
Balance carried forward 976,134 898,366 129.1 127.8
111 SABANA REIT | ANNUAL REPORT 2013
PORTFOLIO STATEMENT (CONTINUED) As at 31 December 2013
GROUP (CONTINUED)
Description of property Type Leasehold term Location Committed occupancy Carrying values % of total net assets rate as at as at as at 31 31 31 31 31 31 December December December December December December 2013 2012 2013 2012 2013 2012 % % $’000 $’000 % %
Balance brought forward 976,134 898,366 129.1 127.8
Fong Tat Building (11) Warehouse & logistics 30 years wef 3 Kallang Way 2A 100 100 16,200 15,900 2.1 2.3 1 May 1995 (3)
218 Pandan Loop (11) Warehouse & logistics 30 years wef 218 Pandan Loop 100 100 14,700 14,300 1.9 2.0 16 September 1989 (3)
3A Joo Koon Circle Warehouse & logistics 30 years wef 3A Joo Koon Circle 100 100 42,000 41,800 5.5 5.9 1 August 1987 (3)
2 Toh Tuck Link Warehouse & logistics 30 years wef 2 Toh Tuck Link 100 100 41,000 40,900 5.4 5.8 16 December 1996 (3)
Yenom Industrial Building (11) General Industrial 60 years wef 123 Genting Lane 63 100 25,700 25,700 3.4 3.7 1 September 1981
30 & 32 Tuas General Industrial 30 years wef 30 & 32 Tuas Avenue 8 100 100 27,000 26,400 3.6 3.8 Avenue 8 (11) 1 September 1996 (3)
21 Joo Koon Crescent General Industrial 30 years wef 21 Joo Koon Crescent 100 100 21,100 20,900 2.8 3.0 16 February 1994 (3)
39 Ubi Road 1 General Industrial 30 years wef 39 Ubi Road 1 100 100 32,800 32,500 4.3 4.6 1 January 1992 (3)
6 Woodlands Loop General Industrial 30 years wef 6 Woodlands Loop 100 100 14,796(10) 14,177(10) 2.0 2.0 16 September 1994 (3)
Investment properties, at valuation 1,211,430 1,130,943 160.1 160.9
Other assets and liabilities (net) (454,926) (428,086) (60.1) (60.9)
Net assets 756,504 702,857 100.0 100.0
The accompanying notes form an integral part of these financial statements.
112 SABANA REIT | ANNUAL REPORT 2013
PORTFOLIO STATEMENT (CONTINUED) As at 31 December 2013
GROUP (CONTINUED)
Description of property Type Leasehold term Location Committed occupancy Carrying values % of total net assets rate as at as at as at 31 31 31 31 31 31 December December December December December December 2013 2012 2013 2012 2013 2012 % % $’000 $’000 % %
Balance brought forward 976,134 898,366 129.1 127.8
Fong Tat Building (11) Warehouse & logistics 30 years wef 3 Kallang Way 2A 100 100 16,200 15,900 2.1 2.3 1 May 1995 (3)
218 Pandan Loop (11) Warehouse & logistics 30 years wef 218 Pandan Loop 100 100 14,700 14,300 1.9 2.0 16 September 1989 (3)
3A Joo Koon Circle Warehouse & logistics 30 years wef 3A Joo Koon Circle 100 100 42,000 41,800 5.5 5.9 1 August 1987 (3)
2 Toh Tuck Link Warehouse & logistics 30 years wef 2 Toh Tuck Link 100 100 41,000 40,900 5.4 5.8 16 December 1996 (3)
Yenom Industrial Building (11) General Industrial 60 years wef 123 Genting Lane 63 100 25,700 25,700 3.4 3.7 1 September 1981
30 & 32 Tuas General Industrial 30 years wef 30 & 32 Tuas Avenue 8 100 100 27,000 26,400 3.6 3.8 Avenue 8 (11) 1 September 1996 (3)
21 Joo Koon Crescent General Industrial 30 years wef 21 Joo Koon Crescent 100 100 21,100 20,900 2.8 3.0 16 February 1994 (3)
39 Ubi Road 1 General Industrial 30 years wef 39 Ubi Road 1 100 100 32,800 32,500 4.3 4.6 1 January 1992 (3)
6 Woodlands Loop General Industrial 30 years wef 6 Woodlands Loop 100 100 14,796(10) 14,177(10) 2.0 2.0 16 September 1994 (3)
Investment properties, at valuation 1,211,430 1,130,943 160.1 160.9
Other assets and liabilities (net) (454,926) (428,086) (60.1) (60.9)
Net assets 756,504 702,857 100.0 100.0
113 SABANA REIT | ANNUAL REPORT 2013
PORTFOLIO STATEMENT (CONTINUED) As at 31 December 2013
GROUP (CONTINUED)
(1) The valuation of 9 Tai Seng Drive excludes the present value of income support component of $1.5 million (2012: $2.7 million). (2) The Trust has an option to renew the land lease term for a further term of 23 years upon expiry. (3) The Trust has an option to renew the land lease term for a further term of 30 years upon expiry. (4) The Trust has an option to renew the land lease term for a further term of 21 years and 4 months upon expiry. (5) The Trust has an option to renew the land lease for a further term of 20 years and 15 days upon expiry. (6) The Trust has an option to renew the land lease term for a further term of 29 years upon expiry. (7) The Trust has an option to renew the land lease term for a further term of 31 years upon expiry. (8) The Trust has an option to renew the land lease term for a further term of 20 years upon expiry. (9) The Trust has an option to renew the land lease term for a further term of 18 years upon expiry. (10) The valuation of 6 Woodlands Loop excludes the present value of income support component of $0.3 million (2012: $0.6 million). (11) Initial IPO properties acquired on 26 November 2010 (“Listing Date”).
The carrying amounts of the investment properties as at 31 December 2013 were based on independent valuations undertaken by Knight Frank Pte Ltd as at 31 December 2013 (2012: Knight Frank Pte Ltd). Valuations are determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers at least once a year, in accordance with the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore.
Investment properties comprise properties used for the purpose of high-tech industrial, chemical warehouse and logistics, warehouse and logistics and general industrial use. Generally, the leases contain an initial non-cancellable period of three to five years. Subsequent renewals are negotiated with the lessee. With the exception of 9 Tai Seng Drive, 151 Lorong Chuan, 8 Commonwealth Lane, 200 Pandan Loop, 123 Genting Lane and 508 Chai Chee Lane, which are leased on individual lease agreements, all other investment properties are leased on master lease agreements.
The accompanying notes form an integral part of these financial statements.
114 SABANA REIT | ANNUAL REPORT 2013
CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2013
Group Note 2013 2012 $’000 $’000
Cash flows from operating activities Total return for the year after taxation and before distribution 63,388 74,444 Adjustments for: Amortisation of intangible assets 1,427 1,331 Manager’s fees paid/payable in Units A(i) 4,694 4,393 Net change in fair value of financial derivatives (1,393) 1,553 Net change in fair value of investment properties (12,441) (25,316) Loss on conversion of Convertible Sukuk A(ii) 1,228 – Net financecosts 20,249 17,057 77,152 73,462 Change in trade and other receivables (3,036) (1,354) Change in trade and other payables 1,025 (13,132) Cash generated from operations 75,141 58,976 Ta’widh (compensation on late payment of rent) received 14 41 Net cash from operating activities 75,155 59,017
Cash flows from investing activities Capital expenditure on investment properties (81) – Purchase of investment properties (67,965) (61,740) Profit income received from Islamic financial institutions 47 156 Net cash used in investing activities (67,999) (61,584)
Cash flows from financing activities Proceeds from issue of new Units B 40,000 – Proceeds from borrowings B 60,500 258,563 Proceeds from issue of Convertible Sukuk B – 80,000 Repayment of borrowings (30,000) (270,563) Issue expenses paid (633) – Transaction costs paid (684) (7,133) Finance costs paid (16,147) (13,395) Distributions paid (62,073) (57,762) Net cash used in financing activities (9,037) (10,290)
Net decrease in cash and cash equivalents (1,881) (12,857) Cash and cash equivalents at beginning of the year 18,965 31,822 Cash and cash equivalents at end of the year 17,084 18,965
The accompanying notes form an integral part of these financial statements.
115 SABANA REIT | ANNUAL REPORT 2013
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) For the year ended 31 December 2013
(A) SIGNIFICANT NON-CASH TRANSACTIONS
There were the following significant non-cash transactions:
(i) This comprises 4,151,455 (2012: 4,227,464) Units, of which 2,966,848 (2012: 3,195,006) Units were issued and another 1,184,607 (2012: 1,032,458) Units will be issued to the Manager by the Group, amounting to $4,694,000 (2012: $4,393,000) at various Unit prices in satisfaction of Manager’s fee payable in respect of the year ended 31 December 2013.
(ii) During the year, certain Sukukholders (“Converting Sukukholders”) had exercised their options to convert an aggregate principal amount of $7.5 million (2012: $Nil) of the Convertible Sukuk. As a result, the Trust elected to issue 6,285,090 (2012: Nil) Units at the then conversion price of $1.1933 to the Converting Sukukholders.
(B) USE OF PROCEEDS
The proceeds from issue of new Units and new borrowings were used substantially for the purchase of investment properties, payment of issue expenses and transaction costs and repayment of borrowings.
The accompanying notes form an integral part of these financial statements.
116 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
These notes form an integral part of the financial statements.
The financial statements were authorised for issue by the Manager and the Trustee on 28 February 2014.
1 GENERAL
Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (the “Trust”) is a Singapore-domiciled unit trust constituted pursuant to the trust deed dated 29 October 2010 (as amended) (the “Trust Deed”) between Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”). The Trust Deed is governed by the laws of the Republic of Singapore. The Trustee is under a duty to take into custody and hold the assets of the Trust held by it or through its subsidiaries (collectively the “Group”) in trust for the holders (“Unitholders”) of units in the Trust (the “Units”).
The Trust was a dormant private trust from the date of constitution until its acquisition of properties on 26 November 2010 (the “Initial Properties”). It was formally admitted to the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 26 November 2010 and was included in the Central Provident Fund (“CPF”) Investment Scheme on 26 November 2010.
The financial statements of the Group as at and for the year ended 31 December 2013 comprise the Trust and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).
The principal activity of the Trust is to invest in income producing real estate used for industrial purposes in Asia, as well as real estate-related outlets, in line with Shari’ah investment principles. The principal activities of the subsidiaries are set out on Note 6 of the financial statements.
The Trust has entered into several service agreements in relation to the management of the Trust and its property operations. The fee structures of these services are as follows:
1.1 PROPERTY MANAGER’S FEES
The Property Manager is entitled under the Property Management Agreement to the following management fees on each property of the Group located in Singapore under its management:
• a property management fee of 2.0% per annum of gross revenue of each property; and
• a lease management fee of 1.0% per annum of gross revenue of each property.
No lease management fee is payable in relation to the Initial Properties for the first three years of the initial contracted lease.
The property management fee and the lease management fee are payable to the Property Manager in the form of cash.
117 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
1 GENERAL (CONTINUED)
1.2 MANAGER’S FEES
Pursuant to the Trust Deed, the Manager is entitled to the following manager’s fees:
• a base fee not exceeding the rate of 0.5% per annum of the value of the gross assets of the Group (“Deposited Property”); and
• a performance fee equal to 0.5% per annum (or such lower percentage as may be determined by the Manager in its absolute discretion) of the Group’s Net Property Income in the relevant financial year, provided that the Group achieves an annual growth in distribution per Unit (“DPU”) of at least 10.0% over the previous financial year (calculated after accounting for the performance fee (if any) for that financial year and after adjusting, at the discretion of the Manager, for any new Units arising from the conversion or exercise of any instruments convertible into Units which are outstanding at the time of calculation, and any rights or bonus issue, consolidation, subdivision or buy-back of Units).
The Manager may, at its sole discretion, elect to receive the base fee and performance fee in cash or Units or a combination of cash and Units.
1.3 TRUSTEE’S FEES
Pursuant to the Trust Deed, the Trustee’s fee shall not exceed 0.25% per annum of the value of the Deposited Property (subject to a minimum of $25,000 per month), excluding out-of-pocket expenses and goods and services tax (“GST”).
The actual fee payable will be determined between the Manager and the Trustee from time to time.
1.4 ACQUISITION FEES
Pursuant to the Trust Deed, the Manager is entitled to acquisition fees of 1.0% (or such lower percentage as may be determined by the Manager), of each of the following:
• the acquisition price of any real estate purchased, whether directly or indirectly through one or more Special Purpose Vehicles (“SPVs”) by the Trust;
• the underlying value of any real estate which is taken into account when computing the acquisition price payable for the equity interests of any holding directly or indirectly the real estate, purchased whether directly or indirectly through one or more SPVs, by the Trust; and
• the acquisition price of any investment purchased by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities in any property corporation or other SPV owning or acquiring real estate or any debt securities which are secured directly or indirectly by the rental income from real estate.
The Manager may, at its sole discretion, elect to receive the acquisition fee in cash or Units or a combination of cash and Units. In respect of any acquisition of real estate assets from interested parties, such a fee should be in the form of Units issued by the Trust at prevailing market price(s). Such Units should not be sold within one year from the date of their issuance.
118 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
1 GENERAL (CONTINUED)
1.5 DIVESTMENT FEES
Pursuant to the Trust Deed, the Manager is entitled to divestment fees of 0.5% (or such lower percentage as may be determined by the Manager) of each of the following:
• the sale price of real estate sold or divested, whether directly or indirectly through one or more SPVs by the Trust;
• the underlying value of any real estate which is taken into account when computing the sale price for the equity interests of any holding directly or indirectly the real estate, divested whether directly or indirectly through one or more SPVs, by the Trust; and
• the sale price of any investment sold by the Trust, whether directly or indirectly through one or more SPVs, in any debt securities in any property corporation or other SPV owning or acquiring real estate or any debt securities which are secured directly or indirectly by the rental income from real estate.
The Manager may, at its sole discretion, elect to receive the divestment fee in cash or Units or a combination of cash and Units. In respect of any divestment of real estate assets to interested parties, such a fee should be in the form of Units issued by the Trust at prevailing market price(s). Such Units should not be sold within one year from the date of their issuance.
2 BASIS OF PREPARATION
2.1 STATEMENT OF COMPLIANCE
The financial statements have been prepared in accordance with the Statement of Recommended Accounting Practice (“RAP”) 7 (2012) “Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants (“ISCA”), and the applicable requirements of the Code on Collective Investment Schemes (the “CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed. RAP 7 (2012) requires the accounting policies to generally comply with the recognition and measurement principles of Singapore Financial Reporting Standards (“FRS”).
2.2 BASIS OF MEASUREMENT
The financial statements have been prepared on a historical cost basis except for the investment properties and financial derivatives which are stated at fair value and otherwise as described below.
2.3 FUNCTIONAL AND PRESENTATION CURRENCY
These financial statements are presented in Singapore dollars which is the Trust’s functional currency. All financial information presented in Singapore dollars have been rounded to the nearest thousand, unless otherwise stated.
119 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
2 BASIS OF PREPARATION (CONTINUED)
2.4 USE OF ESTIMATES AND JUDGEMENTS
The preparation of the financial statements in conformity with RAP 7 (2012) requires the Manager to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following notes:
• Note 4 – Valuation of investment properties • Note 15 – Valuation of financial instruments
2.5 CHANGES IN ACCOUNTING POLICIES
Fair value measurement
FRS 113 Fair Value Measurement establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other FRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other FRSs, including FRS 107 Financial Instruments: Disclosures.
From 1 January 2013, the Group adopted FRS 113 Fair Value Measurement which replaces the existing guidance on fair value measurement in different FRSs with a single definition of fair value. The standard also establishes a framework for measuring fair values and sets out the disclosure requirements for fair value measurements. The adoption of the standard does not have a significant impact on the financial statements.
3 SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities.
120 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.1 BASIS OF CONSOLIDATION
(i) Business combinations
Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business Combinations as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the Statement of Total Return.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
(iii) Loss of control
Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the Statement of Total Return. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
(v) Subsidiaries in the separate financial statements
Investments in subsidiaries are stated in the Trust’s Statement of Financial Position at cost less accumulated impairment losses.
121 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3.2 FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated to the respective functional currencies of the Group’s entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective profit rate and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in the Statement of Total Return.
3.3 INVESTMENT PROPERTIES
Investment properties are properties held either to earn rental income or capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.
Investment properties are accounted for as non-current assets and are stated at initial cost on acquisition which includes expenditure that is directly attributable to the acquisition of the investment properties, and at fair value thereafter. Fair value is determined in accordance with the Trust Deed, which requires the investment properties to be valued by independent registered valuers in such manner and frequency required under the Property Funds Appendix of the CIS Code issued by the MAS (“Property Funds Appendix”).
Fair value changes are recognised in the Statement of Total Return. When an investment property is disposed of, the resulting gain or loss is recognised in the Statement of Total Return as the difference between net disposal proceeds and the carrying amount of the property.
Subsequent expenditure relating to investment properties that have already been recognised is added to the carrying amount of the assets when it is probable that future economic benefits, in excess of originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
Investment properties are not depreciated. The properties are subject to continuing maintenance and are regularly revalued on the basis described above. For taxation purpose, the Group may claim capital allowances on assets that qualify as plant and machinery under the Income Tax Act.
122 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.4 INTANGIBLE ASSETS
Intangible assets represent the unamortised income support receivable by the Group in accordance with the purchase agreement entered into with the vendors of 9 Tai Seng Drive and 6 Woodlands Loop.
These intangible assets have finite useful lives and are measured at cost less accumulated amortisation and accumulated impairment losses.
These intangible assets are amortised in the Statement of Total Return on a systematic basis over their estimated useful lives of 3 years to 5 years. Intangible assets are tested for impairment as described in Note 3.6.
3.5 FINANCIAL INSTRUMENTS
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective profit rate method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents and trade and other receivables.
Cash and cash equivalents comprise cash at bank and short-term deposits with financial institutions that are subject to an insignificant risk of changes in their fair value.
123 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.5 FINANCIAL INSTRUMENTS (CONTINUED)
(ii) Non-derivative financial liabilities
The Group initially recognise debt securities issued and suboridinate liabilities on the date that they are originated. All other financial liabilities are initially recognised on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective profit rate method.
Other financial liabilities comprise borrowings and trade and other payables.
(iii) Derivative financial instruments
The Group holds derivative financial instruments to economically hedge its profit rate risk exposure.
Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in the Statement of Total Return as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
Separable embedded derivatives
Changes in the fair value of separated embedded derivatives are recognised immediately in the Statement of Total Return.
Other non-trading derivatives
Changes in the fair value of the derivative hedging instruments that do not qualify for hedge accounting are recognised immediately in the Statement of Total Return.
124 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.5 FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Convertible Sukuk
The Convertible Sukuk (“Convertible Sukuk”) comprises a liability for the profit rate and principal amount and an embedded derivative liability. The embedded derivative liability is recognised at fair value at inception. The carrying amount of the Convertible Sukuk at initial recognition is the difference between the gross proceeds from the Convertible Sukuk and the fair value of the derivative liability. Any directly attributable transaction costs are allocated to the debt component of the Convertible Sukuk and embedded derivative liability in proportion to their initial carrying amounts.
Subsequent to initial recognition, the debt component of the Convertible Sukuk is measured at amortised cost using the effective profit rate method. The embedded derivative liability is measured at fair value through the Statement of Total Return.
3.6 IMPAIRMENT
(i) Non-derivative financial assets
A financial asset not carried at fair value through Statement of Total Return is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
Loans and receivables
The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s original effective profit rate. Losses are recognised in the Statement of Total Return and reflected in an allowance account against loans and receivables. Profit income on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the Statement of Total Return.
125 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.6 IMPAIRMENT (CONTINUED)
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than investment properties, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU.
Impairment losses are recognised in the Statement of Total Return. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.7 ISSUE EXPENSES
Issue expenses relate to expenses incurred in connection with the issue of Units. Such expenses are deducted directly against Unitholders’ funds.
3.8 REVENUE RECOGNITION
Rental income from operating leases
Rental income receivable under operating leases from investment properties is recognised in the Statement of Total Return on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives granted are recognised as an integral part of total rental to be received. Contingent rentals are recognised as income in the accounting period on a receipt basis. No contingent rentals are recognised if there are uncertainties due to the possible return of amounts received.
126 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.9 EXPENSES
(i) Property expenses
Property expenses consist of property management fee (using the applicable formula stipulated in Note 1.1), lease management fee and reimbursable expenses payable to the Property Manager and other property expenses in relation to the investment properties.
Property expenses are recognised as and when incurred and recorded on an accrual basis.
(ii) Manager’s fees
Manager’s fees are recognised as and when services are rendered and recorded on an accrual basis using the applicable formula stipulated in Note 1.2.
(iii) Trustee’s fees
Trustee’s fees are recognised as and when services are rendered and recorded on an accrual basis using the applicable formula stipulated in Note 1.3.
3.10 FINANCE INCOME AND FINANCE COSTS
Finance income comprises mainly profit income. Profit income is recognised as it accrues in the Statement of Total Return using the effective profit rate method.
Finance costs comprise profit expense on borrowings and profit rate swaps, amortisation of transaction costs incurred on borrowings and brokerage and agent fees. All borrowing costs are recognised in the Statement of Total Return using the effective profit rate method.
3.11 TAX
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in the Statement of Total Return except to the extent that it relates to a business combination, or items directly related to Unitholders’ funds, in which case it is recognised in Unitholders’ funds.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and
• temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future.
127 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.11 TAX (CONTINUED)
The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
The Inland Revenue Authority of Singapore (“IRAS”) has issued a tax ruling on the taxation of the Trust for income earned and expenditure incurred after its listing on the SGX-ST. Subject to meeting the terms and conditions of the tax ruling issued by IRAS, the Trustee is not subject to tax on the taxable income of the Trust, which includes profit distributions from liquid Islamic debt securities such as Sukuk that the Trust may invest in, provided that at least 90% of the taxable income of the Trust is distributed within the year in which the income is derived (the “tax transparency treatment”). Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently 17%) from the distributions made to Unitholders that are made out of the taxable income of the Trust, except:
(i) where the beneficial owners are individuals (whether resident or non-resident) who receive such distributions as investment income (excluding income received through a partnership) or Qualifying Unitholders, the Trustee and the Manager will make the distributions to such Unitholders without deducting any income tax; or
(ii) where the beneficial owners are Qualifying Foreign Non-Individual Unitholders, the Trustee and the Manager will deduct Singapore income tax at the reduced rate of 10% for distributions made up to 31 March 2015, unless concession is extended.
A Qualifying Unitholder is a Unitholder who is:
• A Singapore-incorporated company which is a tax resident in Singapore;
• A body of persons, other than a company or a partnership, registered or constituted in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association); and
128 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3.11 TAX (CONTINUED)
• A Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from the Trust.
A Qualifying Foreign Non-Individual Unitholder is one who is not a resident of Singapore for income tax purposes and:
• who does not have a permanent establishment in Singapore; or
• who carries on any operation in Singapore through a permanent establishment in Singapore where the funds used to acquire the Units are not obtained from that operation in Singapore.
The above tax transparency ruling does not apply to gains or profits from sale of real estate properties, if considered to be trading gains derived from a trade or business carried on by the Trust. Tax on such gains or profits will be assessed, in accordance with section 10(1)(a) of the Income Tax Act, Chapter 134 of Singapore and collected from the Trustee. Where the gains or profits are capital gains, they are not subject to tax and the Trustee and the Manager may distribute the capital gains without tax being deducted at source.
3.12 EARNINGS PER UNIT
The Group presents basic and diluted earnings per Unit (“EPU”) data for its Units. Basic EPU is calculated by dividing the total return attributable to Unitholders of the Group by the weighted average number of ordinary Units outstanding during the year. Diluted EPU is determined by adjusting the total return attributable to Unitholders and the weighted average number of Units outstanding for the effects of all dilutive potential Units.
3.13 SEGMENT REPORTING
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Manager’s CEO (the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Manager’s CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
3.14 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these financial statements. The initial application of these new standards, amendments to standards and interpretations are not expected to have a significant effect on the financial statements of the Group and the Trust.
129 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
4 INVESTMENT PROPERTIES
Group and Trust 2013 2012 $’000 $’000
At 1 January 1,130,943 1,043,887 Purchase of investment properties 67,965 61,740 Capital expenditure on investment properties 81 – Net change in fair value of investment properties 12,441 25,316 At 31 December 1,211,430 1,130,943
Investment properties are stated at fair value based on valuations performed by independent professional valuers having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and willing seller in an arm’s length transaction wherein the parties had each acted knowledgeably prudently and without compulsion.
In determining the fair value, the valuer has used valuation techniques which involve certain estimates. In relying on the valuation reports, the Manager has exercised its judgement and is satisfied that the valuation methods and estimates are reflective of current market conditions. The valuation reports are prepared in accordance with recognised appraisal and valuation standards. The estimates underlying the valuation techniques in the next financial year may differ from current estimates, which may result in valuations that may be materially different from the valuations as at the reporting date.
The valuer has considered the capitalisation approach and/or discounted cash flow method in arriving at the open market value as at the reporting date. The capitalisation approach capitalises an income stream into a present value using single-year capitalisation rates, the income stream used is adjusted to market rentals currently being achieved within comparable investment properties and recent leasing transactions achieved within the investment properties. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with an internal rate of return (”Discount rate”) to arrive at the market value. The discounted cash flow method requires the valuer to assume a rental growth rate indicative of market and the selection of a Discount rate consistent with current market requirements.
Fair value hierarchy
The tables below analyses investment properties carried at fair value. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical investment properties that the Group can access at the measurement date.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the investment properties, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
• Level 3: unobservable inputs for the investment properties.
130 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
4 INVESTMENT PROPERTIES (CONTINUED)
Fair value hierarchy (continued)
Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000
Group and Trust
31 December 2013 Investment properties – – 1,211,430 1,211,430
31 December 2012 Investment properties – – 1,130,943 1,130,943
During the financial year ended 31 December 2013 and 31 December 2012, there were no transfers from Level 1, Level 2 or Level 3, or vice versa.
The following table shows the key unobservable inputs used in the valuation models for investment properties:
Type Key unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement
Industrial properties for • Investment property yields The estimated fair value of leasing when prices for (from 5.0% to 8.0% investment properties comparable buildings are depending on the location) would increase if not available • Discount rate (8.25%) • the indicative investment • Capitalisation rates property yields were (6.15% to 7.5%) higher • the Discount rates and capitalisation rates were lower
Key unobservable inputs correspond to:
• Investment property yields derived from comparable transactions.
• Discount rates, based on the risk-free rate for 10 year bonds issued by the government in the relevant market, adjusted for a risk premium to reflect the increased risk of investing in investment properties.
• Capitalisation rates derived from an analysis of yields reflected in sales of comparable property types.
Security
As at 31 December 2013, investment properties of the Group and the Trust with an aggregate carrying amount of $1,034,074,000 (2012: $1,022,766,000) are pledged as security to secure certain borrowing facilities (see Note 10).
131 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
5 INTANGIBLE ASSETS
Total $’000
Group and Trust
Cost At 1 January 2012, 31 December 2012 and 31 December 2013 6,057
Accumulated amortisation At 1 January 2012 1,469 Amortisation for the year 1,331 At 31 December 2012 2,800 Amortisation for the year 1,427 At 31 December 2013 4,227
Carrying amounts At 1 January 2012 4,588 At 31 December 2012 3,257 At 31 December 2013 1,830
Intangible assets represent the unamortised income support receivable by the Group and the Trust in accordance with the purchase agreements entered into with the vendors of 9 Tai Seng Drive and 6 Woodlands Loop.
6 SUBSIDIARIES
Trust 2013 2012 $’000 $’000
Equity investments at cost * *
* Less than $1,000
Details of the subsidiaries of the Group are as follows:
Name of Principal Country of Effective equity interest subsidiary activities incorporation held by the Group 31 31 December December 2013 2012
Sabana Treasury Pte. Ltd. (1) Provision of Singapore 100% 100% treasury services Sabana Sukuk Pte. Ltd. (1) Provision of Singapore 100% – treasury services
(1) Audited by KPMG LLP Singapore
132 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
7 TRADE AND OTHER RECEIVABLES
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Trade receivables 483 145 483 145 Other receivables 5,235 2,819 5,235 2,819 Deposits 299 73 299 73 Loans and receivables 6,017 3,037 6,017 3,037 Prepayments 392 336 390 332 6,409 3,373 6,407 3,369
No impairment losses are recognised on trade and other receivables. The Group and the Trust’s exposure to credit risk related to trade and other receivables, excluding prepayments, is disclosed in Note 15.
8 CASH AND CASH EQUIVALENTS
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Bank balances 7,084 2,457 7,078 2,454 Fixed deposits 10,000 16,508 10,000 16,508 17,084 18,965 17,078 18,962
The weighted average effective profit rate relating to cash and cash equivalents at the reporting date for the Group and the Trust is 0.48% (2012: 0.60%) per annum.
133 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
9 TRADE AND OTHER PAYABLES
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Amount due to related parties, trade 674 577 686 577 Trade payables 2,818 4,240 2,818 4,240 Security deposits 12,164 6,952 12,164 6,952 Rental received in advance 301 5,048 301 5,048 Retention sums 921 1,801 921 1,801 Finance costs payable to: - non-related parties 2,162 2,180 1,297 1,213 - a subsidiary – – 865 967 Accrued operating expenses 4,128 1,638 4,127 1,633 Others 2,327 1,690 2,311 1,690 25,495 24,126 25,490 24,121
Current 18,869 16,420 18,864 16,415 Non-current 6,626 7,706 6,626 7,706 25,495 24,126 25,490 24,121
Outstanding balances with related parties are unsecured.
The Group and the Trust’s exposure to liquidity risk related to trade and other payables is disclosed in Note 15.
10 BORROWINGS
Group Trust Note 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Secured borrowings Commodity Murabaha Facilities - Term 10(a) 352,837 352,837 352,837 352,837 - Revolving 10(a) 30,500 – 30,500 – Less: Unamortised capitalised transaction costs (5,623) (8,200) (5,623) (8,200) 377,714 344,637 377,714 344,637 Unsecured borrowings Convertible Sukuk – debt component 11 69,678 76,163 – –
Loan from a subsidiary 10(b) – – 72,500 80,000 Less: Unamortised capitalised transaction costs – – (990) (1,349) – – 71,510 78,651
447,392 420,800 449,224 423,288
Current 130,376 – 130,376 – Non-current 317,016 420,800 318,848 423,288 447,392 420,800 449,224 423,288
134 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
10 BORROWINGS (CONTINUED)
Terms and debt repayment schedule
Terms and conditions of outstanding borrowings are as follows:
Nominal Year of Face Carrying Group Currency profit rate maturity value amount % $’000 $’000
2013 Term Commodity Murabaha Facility C SGD *SOR+2.50% 2014 100,274 99,876 Term Commodity Murabaha Facility E SGD *SOR+2.35% 2015 177,563 174,867 Revolving Commodity Murabaha Facility D SGD *SOR+2.35% 2016 30,500 30,500 Term Commodity Murabaha Facility F SGD *SOR+2.50% 2017 75,000 72,471 Convertible Sukuk – Debt Component SGD 4.50% 2017 72,500 69,678
2012 Term Commodity Murabaha Facility C SGD *SOR+2.50% 2014 100,274 99,445 Term Commodity Murabaha Facility E SGD *SOR+2.35% 2015 177,563 173,326 Term Commodity Murabaha Facility F SGD *SOR+2.50% 2017 75,000 71,866 Convertible Sukuk – Debt Component SGD 4.50% 2017 80,000 76,163
Trust
2013 Term Commodity Murabaha Facility C SGD *SOR+2.50% 2014 100,274 99,876 Term Commodity Murabaha Facility E SGD *SOR+2.35% 2015 177,563 174,867 Revolving Commodity Murabaha Facility D SGD *SOR+2.35% 2016 30,500 30,500 Term Commodity Murabaha Facility F SGD *SOR+2.50% 2017 75,000 72,471 Loan from a subsidiary SGD 4.50% 2017 72,500 71,510
2012 Term Commodity Murabaha Facility C SGD *SOR+2.50% 2014 100,274 99,445 Term Commodity Murabaha Facility E SGD *SOR+2.35% 2015 177,563 173,326 Term Commodity Murabaha Facility F SGD *SOR+2.50% 2017 75,000 71,866 Loan from a subsidiary SGD 4.50% 2017 80,000 78,651
* Swap Offer Rate 135 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
10 BORROWINGS (CONTINUED)
The Group and the Trust’s exposure to liquidity and profit rate risks related to borrowings is disclosed in Note 15.
(a) The $383.3 million (2012: $352.8 million) Commodity Murabaha Facilities from various institutional banks are secured by, inter alia:
• A first ranking legal mortgage over all the investment properties except for 39 Ubi Road 1, 6 Woodlands Loop, 23 Serangoon North Avenue 5 and 508 Chai Chee Lane (collectively, the “Securitised Properties”) (or, where title to the Securitised Properties have not been issued, an assignment of building agreement coupled with a mortgage in escrow);
• Assignment of insurance, assignment of proceeds and assignment of Property Management Agreements relating to the Securitised Properties; and
• A fixed and floating charge over the other assets of the Trust relating to the Securitised Properties.
(b) The loan from a subsidiary is unsecured and profit bearing.
11 CONVERTIBLE SUKUK – DEBT COMPONENT
Group 2013 2012 $’000 $’000
Carrying amount of debt component at beginning of the year 76,163 – Proceeds from issuance of Convertible Sukuk – 80,000 Transaction costs – (1,416) Net proceeds 76,163 78,584 Amounts classified as derivative liabilities at inception – (2,609) Profit accretion, including amortisation of transaction costs 679 188 Extinguishment of debt component arising from conversion of Convertible Sukuk (7,164) – Carrying amount of debt component at end of the year 69,678 76,163
On 24 September 2012, a wholly-owned subsidiary of the Trust, Sabana Treasury Pte. Ltd. (the “Issuer”), issued a $80.0 million in aggregate principal amount of unsecured Convertible Sukuk (the “Convertible Sukuk”) due on 24 September 2017 of 4.50% per annum. The Convertible Sukuk are convertible by Sukukholders into Units of Sabana REIT at any time on or after 9 November 2012 up to the close of business on the seventh day prior to 24 September 2017. As at 31 December 2013, the conversion price per Unit (“Conversion Price”) is $1.1642 (2012: $1.1933). The Trust has the option to pay cash in lieu of issuing new Units on conversion of any Convertible Sukuk.
The Convertible Sukuk, may be redeemed, in whole or in part, at the option of the Sukukholders on 24 September 2015 (the “Put Option Date”) at the principal amount outstanding together with any accrued and unpaid profit to the Put Option Date.
136 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
11 CONVERTIBLE SUKUK – DEBT COMPONENT (CONTINUED)
The Convertible Sukuk may be redeemed, after 24 September 2015, at the option of the Issuer, in whole but not in part, at 100% of the principal amount of the Convertible Sukuk outstanding, plus any accrued but unpaid profit, if the closing price of the Units for any 20 consecutive trading days is at least 130% of the Conversion Price in effect on such trading day.
The Convertible Sukuk may also be redeemed at any time prior to 24 September 2017, at the option of the Issuer, in whole but not in part, at 100% of the principal amount of the Convertible Sukuk outstanding, plus any accrued but unpaid profit, if at any time at least 90% of the principal amount of the Convertible Sukuk originally issued have already been converted, redeemed or purchased and cancelled.
During the year, Converting Sukukholders had exercised their options to convert an aggregate principal amount of $7.5 million (2012: $Nil) of the Convertible Sukuk. As a result, the Trust elected to issue 6,285,090 (2012: Nil) Units at the then conversion price of $1.1933 to the Converting Sukukholders.
As at 31 December 2013, the effective profit rate for the Convertible Sukuk – debt component is approximately 5.65% (2012: 5.65%) per annum.
12 DERIVATIVE LIABILITIES Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Profit rate swaps at fair value through Statement of Total Return 4,600 7,289 4,600 7,289 Embedded derivatives relating to Convertible Sukuk at fair value through Statement of Total Return 2,762 1,466 – – 7,362 8,755 4,600 7,289
Current 3,479 1,466 717 – Non-current 3,883 7,289 3,883 7,289 7,362 8,755 4,600 7,289
Derivative liabilities as a percentage of net assets 0.97% 1.25% 0.61% 1.04%
The Group uses profit rate swaps to manage its exposure to profit rate movements on its floating rate bearing Commodity Murabaha Facilities by swapping the profit rates on a proportion of these term loans from floating rates to fixed rates.
Profit rate swaps with a total notional amount of $352.8 million (2012: $352.8 million) had been entered into at the reporting date to provide fixed rate funding for terms of 3 – 5 years (2012: 3 – 5 years) at a weighted average profit rate of 3.56% (2012: 3.56%) per annum.
137 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
13 UNITS IN ISSUE
Group and Trust 2013 2012 $’000 $’000
Units in issue: At beginning of the year 640,490 636,145 Units issued: - Private placement 40,000 – - Manager’s fees paid in Units 4,000 4,345 - Conversion of Convertible Sukuk 6,285 – 690,775 640,490 Units to be in issued: - Manager’s fees payable in Units 1,184 1,033 Total Units issued and to be issued at end of the year 691,959 641,523
Each Unit in the Trust represents an undivided interest in the Trust. The rights and interests of Unitholders are contained in the Trust Deed and include the right to:
• receive income and other distributions attributable to the Units held;
• participate in the termination of the Trust by receiving a share of all net cash proceeds derived from the realisation of the assets of the Trust and available for purposes of such distribution less any liabilities, in accordance with their proportionate interests in the Trust. However, a Unitholder has no equitable or proprietary interest in the underlying assets of the Trust and is not entitled to the transfer to it of any assets (or part thereof) or of any estate or interest in any asset (or part thereof) of the Trust; and
• attend all Unitholders’ meetings. The Trustee or the Manager may (and the Manager shall at the request in writing of not less than 50 Unitholders or one-tenth in number of the Unitholders, whichever is the lesser) at any time convene a meeting of Unitholders in accordance with the provisions of the Trust Deed.
The Unitholders cannot give any directions to the Manager or the Trustee (whether at a meeting of Unitholders or otherwise) if it would require the Trustee or the Manager to do or omit doing anything which may result in:
• the Trust ceasing to comply with the Listing Manual issued by SGX-ST or the Property Funds Appendix; or
• the exercise of any discretion expressly conferred on the Trustee or the Manager by the Trust Deed or the determination of any matter for which the agreement of either or both the Trustee and the Manager is required under the Trust Deed.
A Unitholder’s liability is limited to the amount paid or payable for any Units. The provisions of the Trust Deed provide that no Unitholders will be personally liable to indemnify the Trustee or any creditor of the Trustee in the event that liabilities of the Trust exceed its assets.
138 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
14 NET ASSET VALUE PER UNIT
Group Trust 2013 2012 2013 2012
Net asset value per Unit ($) 1.09 1.10 1.09 1.09
$’000 $’000 $’000 $’000 Net asset value per Unit is based on: Net assets 756,504 702,857 757,431 701,833
’000 ’000 ’000 ’000 Total Units issued and to be issued at 31 December (Note 13) 691,959 641,523 691,959 641,523
15 FINANCIAL RISK MANAGEMENT
15.1 CAPITAL MANAGEMENT
The Group reviews its capital management policy regularly so as to optimise the Group’s funding structure. The Group also monitors its exposures to various risk elements and externally imposed requirements by closely adhering to clearly established management policies and procedures. The primary objective of the Group’s capital management is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximise Unitholder’s value. In order to maintain or achieve an optimal capital structure, the Group will endeavour to employ an appropriate mix of debt and equity in financing acquisitions and assets enhancements, and utilise profit rate and currency hedging strategies where appropriate. The Manager reviews this policy on a continuous basis.
The Group is subject to the aggregate leverage limit as defined in the Property Funds Appendix. The CIS Code stipulates that the total borrowings and deferred payments (together the “Aggregate Leverage”) of a property fund should not exceed 35.0% of its Deposited Property except that the Aggregate Leverage of a property fund may exceed 35.0% of its Deposited Property (up to a maximum of 60.0%) if a credit rating of the property fund from Fitch Inc., Moody’s or Standard and Poor’s is obtained and disclosed to the public.
The property fund should continue to maintain and disclose a credit rating so long as its Aggregate Leverage exceeds 35.0% of its Deposited Property. For this financial year, Standard and Poor’s has maintained a long term corporate credit rating of “BBB-” and “axA-” ASEAN scale rating with a stable outlook for the Group. The Group has complied with the Aggregate Leverage limit during the financial year. There were no changes in the Group’s approach to capital management during the financial year.
As at the reporting date, the gross amounts of borrowings and retention sums as a percentage of the Group’s Deposited Property is 36.9% (2012: 37.6%).
139 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.2 RISK MANAGEMENT FRAMEWORK
The Group’s activities expose it to market risk (including profit rate risk), credit risk and liquidity risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.
Risk management is integral to the whole business of the Group. The Manager has implemented a system of controls in place to create an acceptable balance between the benefits derived from managing risks and the cost of managing those risks. The Manager also monitors the Group’s risk management process closely to ensure an appropriate balance between control and business objectives is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s strategic direction.
The Audit Committee of the Manager assists the Board in overseeing how the Manager monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the Group’s exposure to those risks. The Audit Committee is assisted in its oversight role by an internal audit function which is outsourced to an independent professional firm (“Internal Audit”). Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
15.3 CREDIT RISK
Credit risk is the risk of financial loss to the Group resulting from the failure of a tenant or counterparty of the Group, to settle its financial and contractual obligations, as and when they fall due.
The carrying amount of financial assets in the Statement of Financial Position represents the Group and the Trust’s maximum exposure to credit risk. The maximum exposure to credit risk at the reporting date was:
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Loans and receivables 6,017 3,037 6,017 3,037 Cash and cash equivalents 17,084 18,965 17,078 18,962 23,101 22,002 23,095 21,999
The Manager has an established process to evaluate the creditworthiness of its tenants and prospective tenants to minimise potential credit risk. Credit evaluations are performed by the Property Manager before lease agreements are entered into with prospective tenants. Security in the form of bankers’ guarantees, insurance bonds or cash security deposits are obtained prior to the commencement of the lease. As such, the Manager believes that no impairment allowance is necessary in respect of the loans and receivables as these amounts mainly arise from tenants who have good payment records and have placed sufficient security with the Group in the form of bankers’ guarantees or cash security deposits.
140 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.3 CREDIT RISK (CONTINUED)
The Group establishes an allowance account for impairment that represents its estimate of incurred losses in respect of loans and receivables. The main component of this allowance is estimated losses that relate to specific tenants or counterparties. The allowance account is used to provide for impairment losses. Subsequently when the Group is satisfied that no recovery of such losses is possible, the financial asset is considered irrecoverable and the amount charged to the allowance account is then written off against the carrying amount of the impaired financial asset.
The ageing of trade receivables that were not impaired at the reporting date was:
Group and Trust 2013 2012 $’000 $’000
Not past due 13 8 Past due 1 - 30 days 425 137 Past due 31 - 60 days 45 – 483 145
The Group believes that all amounts which are past due are collectible, based on historic payment behaviour and the retention of sufficient security in the form of bankers’ guarantees or cash security deposits from tenants, and hence no impairment allowance is necessary in respect of trade receivables not past due or past due by up to 60 days.
Cash and fixed deposits are placed with financial institutions which are regulated. The Group limits its credit risk exposure by dealing with counterparties that have sound credit ratings. Given these high credit ratings, management does not expect any counterparty to fail to meet its obligations.
15.4 LIQUIDITY RISK
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. In addition, the Manager also monitors and observes the CIS Code issued by the MAS concerning limits on total borrowings.
141 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.4 LIQUIDITY RISK (CONTINUED)
The following are the expected contractual undiscounted cash flows of financial liabilities, including estimated profit payments and excluding the impact of netting agreements:
<------Cash flows ------> Carrying Contractual Within Within 1 to More than amount cash flows 1 year 5 years 5 years $’000 $’000 $’000 $’000 $’000
31 December 2013
Group Non-derivative liabilities Commodity Murabaha Facilities 377,714 (403,037) (110,074) (292,963) – Convertible Sukuk – debt component 69,678 (84,683) (3,263) (81,420) – Trade and other payables* 25,194 (25,194) (18,568) (3,853) (2,773) 472,586 (512,914) (131,905) (378,236) (2,773)
Derivative financial liabilities Profit rate swaps (net-settled) 4,600 (7,597) (3,201) (4,396) –
Trust Non-derivative liabilities Commodity Murabaha Facilities 377,714 (403,037) (110,074) (292,963) – Loan from a subsidiary 71,510 (84,683) (3,263) (81,420) – Trade and other payables* 25,189 (25,189) (18,563) (3,853) (2,773) 474,413 (512,909) (131,900) (378,236) (2,773)
Derivative financial liabilities Profit rate swaps (net-settled) 4,600 (7,597) (3,201) (4,396) –
* Trade and other payables exclude rental received in advance
142 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.4 LIQUIDITY RISK (CONTINUED)
<------Cash flows ------> Carrying Contractual Within Within 1 to More than amount cash flows 1 year 5 years 5 years $’000 $’000 $’000 $’000 $’000
31 December 2012
Group Non-derivative liabilities Commodity Murabaha Facilities 344,637 (380,991) (9,803) (371,188) – Convertible Sukuk – debt component 76,163 (97,053) (3,600) (93,453) – Trade and other payables* 19,078 (19,078) (11,372) (7,706) – 439,878 (497,122) (24,775) (472,347) –
Derivative financial liabilities Profit rate swaps (net-settled) 7,289 (9,370) (2,755) (6,615) –
Trust Non-derivative liabilities Commodity Murabaha Facilities 344,637 (380,991) (9,803) (371,188) – Loan from a subsidiary 78,651 (97,053) (3,600) (93,453) – Trade and other payables* 19,073 (19,073) (11,367) (7,706) – 442,361 (497,117) (24,770) (472,347) –
Derivative financial liabilities Profit rate swaps (net-settled) 7,289 (9,370) (2,755) (6,615) –
* Trade and other payables exclude rental received in advance
The maturity analyses show the contractual undiscounted cash flows of the Group and the Trust’s financial liabilities on the basis of their earliest possible contractual maturity. For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these instruments. The amounts are compiled on a net basis for derivatives that are net-settled.
It is not expected that the cash flows included in the maturity analysis of the Group and the Trust could occur significantly earlier, or at significantly different amounts.
15.5 MARKET RISK
Market risk is the risk that changes in market prices, such as profit rates, foreign exchange rates and equity prices will affect the Group’s total return or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The Group does not have any exposure to foreign exchange rates and equity prices risks.
143 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.6 PROFIT RATE RISK
The Group’s exposure to fluctuations in profit rates relates primarily to borrowings. Profit rate risk is managed on an on-going basis with the primary objective of limiting the extent to which net profit expense could be affected by adverse movements in profit rates.
As at the reporting date, the Group had entered into profit rates swaps with total contracted notional amounts of $352.8 million (2012: $352.8 million) whereby the Group had agreed with counterparties to exchange, at specified intervals, the difference between the floating rate pegged to the Singapore dollar SOR and fixed rate profit amounts calculated by reference to the contracted notional amounts of the borrowings.
Profit rate profile
As at the reporting date, the profit rate profile of profit-bearing financial instruments was:
Group Trust Nominal amount Nominal amount 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Fixed rate instruments Financial liabilities (72,500) (80,000) (72,500) (80,000)
Variable rate instruments Financial liabilities (383,337) (352,837) (383,337) (352,837) Profit rate swaps 352,837 (352,837) 352,837 352,837 (30,500) – (30,500) –
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial liabilities at fair value through Statement of Total Return and the Group does not designate profit rate swaps as hedging instruments under a fair value hedge accounting model. Therefore a change in profit rates at the reporting date would not affect the Statement of Total Return.
144 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.6 PROFIT RATE RISK (CONTINUED)
Cash flow sensitivity analysis for variable rate instruments
A change of 50 basis points (“bp”) in profit rate at the reporting date would (decrease)/increase total return after taxation and Unitholders’ funds by the amounts shown below. The analysis assumes that all variables remain constant. The analysis is performed on the same basis for 2012.
Total return Unitholders’ after taxation funds 50 bp 50 bp 50 bp 50 bp increase decrease increase decrease $’000 $’000 $’000 $’000
Group and Trust
31 December 2013 Financial liabilities (153) 153 (153) 153
31 December 2012 Financial liabilities – – – –
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follows:
Other financial liabilities Designated within the Total at fair Loans and scope of carrying Total fair Note value receivables FRS 39 amount value $’000 $’000 $’000 $’000 $’000
Group
31 December 2013 Trade and other receivables 7 – 6,017 – 6,017 6,017 Cash and cash equivalents 8 – 17,084 – 17,084 17,084 – 23,101 – 23,101 23,101
145 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
Fair values versus carrying amounts (continued)
Other financial liabilities Designated within the Total at fair Loans and scope of carrying Total fair Note value receivables FRS 39 amount value $’000 $’000 $’000 $’000 $’000
Group
31 December 2013 Trade and other payables, excluding security deposits, retention sums and rental received in advance 9 – – 12,109 12,109 12,109 Security deposits 9 – – 12,164 12,164 10,782 Retention sums 9 – – 921 921 921 Borrowings 10 – – 447,392 447,392 455,974 Derivative liabilities 12 7,362 – – 7,362 7,362 7,362 – 472,586 479,948 487,148
31 December 2012 Trade and other receivables 7 – 3,037 – 3,037 3,037 Cash and cash equivalents 8 – 18,965 – 18,965 18,965 – 22,002 – 22,002 22,002
Trade and other payables, excluding security deposits, retention sums and rental received in advance 9 – – 10,325 10,325 10,273 Security deposits 9 – – 6,952 6,952 6,520 Retention sums 9 – – 1,801 1,801 1,801 Borrowings 10 – – 420,800 420,800 433,372 Derivative liabilities 12 8,755 – – 8,755 8,755 8,755 – 439,878 448,633 460,721
146 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
Fair values versus carrying amounts (continued)
Other financial liabilities Designated within the Total at fair Loans and scope of carrying Total fair Note value receivables FRS 39 amount value $’000 $’000 $’000 $’000 $’000
Trust
31 December 2013 Trade and other receivables 7 – 6,017 – 6,017 6,017 Cash and cash equivalents 8 – 17,078 – 17,078 17,078 – 23,095 – 23,095 23,095
Trade and other payables, excluding security deposits, retention sums and rental received in advance 9 – – 12,104 12,104 12,104 Security deposits 9 – – 12,164 12,164 10,782 Retention sums 9 – – 921 921 921 Borrowings 10 – – 449,224 449,224 458,735 Derivative liabilities 12 4,600 – – 4,600 4,600 4,600 – 474,413 479,013 487,142
31 December 2012 Trade and other receivables 7 – 3,037 – 3,037 3,037 Cash and cash equivalents 8 – 18,962 – 18,962 18,962 – 21,999 – 21,999 21,999
Trade and other payables, excluding security deposits, retention sums and rental received in advance 9 – – 10,320 10,320 10,268 Security deposits 9 – – 6,952 6,952 6,520 Retention sums 9 – – 1,801 1,801 1,801 Borrowings 10 – – 423,288 423,288 434,837 Derivative liabilities 12 7,289 – – 7,289 7,289 7,289 – 442,361 449,650 460,715
147 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
Valuation processes applied by the Group on financial instruments
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values for financial assets and liabilities have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values of other financial and non-financial assets and liabilities is disclosed in the relevant notes specific to that asset or liability.
(i) Derivatives
The fair value of profit rate swaps is based on broker quotes at the reporting date. These quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market profit rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take into account of the credit risk of the Group, and counterparties when appropriate.
The fair value of the embedded derivatives component of the Convertible Sukuk is based on an option pricing model. Assumptions and inputs used include risk-free profit rate, equity prices and expected price volatilities.
(ii) Borrowings
The fair values of the fixed profit-bearing and floating profit-bearing borrowings are estimated using the discounted cash flow technique. Future cash flows are based on management’s best estimates and the discount rate is based on a market-related rate for a similar instrument at the reporting date.
The carrying amounts of floating rate borrowings which are repriced within 3 months from the reporting date approximate their fair values.
The fair value of the debt component of the Convertible Sukuk and the loan from a subsidiary is determined by discounting the estimated future cash flows using market profit rates for similar borrowings at the reporting date.
(iii) Other financial assets and liabilities
The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted in arriving at their fair values as at the reporting date.
148 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
Profit rates used for determining fair value
The Group and the Trust used the following rates to discount estimated cash flows:
Group and trust 2013 2012 % %
Non-current portion of security deposits 2.63 2.77 Borrowings 2.63 to 4.85 2.77 to 4.68
Fair value hierarchy
The tables below analyse financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
• Level 3: unobservable inputs for the asset or liability.
Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000
Group
31 December 2013
Derivative liabilities - Profit rate swaps – (4,600) – (4,600) - Embedded derivatives relating to Convertible Sukuk – – (2,762) (2,762)
31 December 2012
Derivative liabilities - Profit rate swaps – (7,289) – (7,289) - Embedded derivatives relating to Convertible Sukuk – – (1,466) (1,466)
149 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
Profit rates used for determining fair value (continued)
Fair value hierarchy (continued)
Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000
Trust
31 December 2013
Derivative liabilities - Profit rate swaps – (4,600) – (4,600)
31 December 2012
Derivative liabilities - Profit rate swaps – (7,289) – (7,289)
During the financial year ended 31 December 2013 and 31 December 2012, there were no transfers from Level 1, Level 2 or Level 3, or vice versa.
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measures in Level 3 of the fair value hierarchy:
Embedded derivatives relating to Convertible Sukuk
Group 2013 2012 $’000 $’000
As at 1 January (1,466) – Recognised at inception – (2,609) Changes in fair value recognised in Statement of Total Return (1,296) 1,143 As at 31 December (2,762) (1,466)
150 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.7 ACCOUNTING CLASSIFICATIONS AND FAIR VALUES (CONTINUED)
The following table shows the valuation technique and key unobservable inputs used in the determination of fair value of the embedded derivatives relating to the Convertible Sukuk.
Inter-relationship between key unobservable inputs Valuation technique Key unobservable input and fair value measurement
The fair value of the Standard deviation The estimated fair value of embedded derivatives the embedded derivatives relating to Convertible relating to Convertible Sukuk Sukuk is derived from would increase if the standard an option pricing model. deviation was higher.
The impact of the unobservable input has been assessed by management to be immaterial.
Offsetting financial assets and financial liabilities
The disclosures set out in the tables below include financial assets and financial liabilities that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the statement of financial position.
The Group’s derivative transactions are entered into under International Derivatives Swaps and Dealers Association (“ISDA”) Master Netting Agreements. The ISDA does not meet the criteria for offsetting in the statement of financial position. This is because it creates a right of set-off of recognised amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the counterparties. In addition the Group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
Gross Gross amounts of amounts of Net amounts financial financial of financial liabilities assets liabilities presented presented presented in the in the in the <------Related------> Statement of Statement of Statement of amounts not Financial Financial Financial offset in the Position Position Position Statement of subject to subject to subject to Financial Position master master master Cash Types of financial netting netting netting Financial collateral Net assets/liabilities agreements agreements agreements instruments placed amount $’000 $’000 $’000 $’000 $’000 $’000
Group and Trust
2013 Financial liabilities Profit rate swaps 4,600 – 4,600 – – 4,600
2012 Financial liabilities Profit rate swaps 7,289 – 7,289 – – 7,289
151 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
16 GROSS REVENUE
Group and Trust 2013 2012 $’000 $’000
Gross rental income 88,940 81,768 Other operating income 545 – 89,485 81,768
17 PROPERTY EXPENSES
Group and Trust 2013 2012 $’000 $’000
Land rent 1,004 881 Maintenance expenses 1,187 501 Property and lease management fees 2,050 1,769 Property tax 1,220 656 Utilities 2,890 575 Others 774 449 9,125 4,831
Property expenses represent the direct operating expenses arising from rental of investment properties.
18 FINANCE INCOME AND COSTS
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Finance income: - Profit income from Shari’ah compliant deposits 47 156 47 156 - Ta’widh (compensation on late payment of rent) 14 41 14 41 61 197 61 197
Finance costs: - Commodity Murabaha Facilities 9,797 10,462 9,797 10,462 - Profit rate swaps 3,002 2,902 3,002 2,902 - Convertible Sukuk 3,330 967 – – - Loan from a subsidiary – – 3,330 967 Amortisation of transaction costs 3,940 2,677 3,502 2,556 Brokerage and agent fees 241 246 230 245 20,310 17,254 19,861 17,132
Net finance costs 20,249 17,057 19,800 16,935
152 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
19 MANAGER’S FEES
Included in Manager’s fees of the Group and Trust is an aggregate of 4,151,455 (2012: 4,227,464) Units, of which 2,966,848 (2012: 3,195,006) Units were issued and another 1,184,607 (2012: 1,032,458) Units will be issued, amounting to $4,694,000 (2012: $4,393,000) as partial consideration of the Manager’s fees payable in Units.
20 DONATION OF NON-SHARI’AH COMPLIANT INCOME
The total amount of net income subjected to the cleansing process for the quarter ended 31 December 2013 was approved by the Independent Shari’ah Committee to be donated to Singapore Kadayanallur Muslim League and Singapore Amalgamated Services Co-Operative Organisation Limited Community Project Fund.
During the year, donations that had been approved by the Independent Shari’ah Committee included Singapore Red Cross Society, Mendaki Social Enterprise Network Services Pte Ltd, Lion Befrienders Service Association (Singapore), Ananias Centre and Ng Wei Qi Nera, an infant diagnosed with brain tumours. (2012: City College Holdings Ltd, the Islamic Religious Council of Singapore, “Seeing is Believing”, a global initiative by Standard Chartered Bank to tackle avoidable blindness, Mendaki Social Enterprise Network Services Pte Ltd, Singapore Kadayanallur Muslim League and Majlis Ugama Islam Singapura).
21 OTHER TRUST EXPENSES
Included in other trust expenses are:
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Auditors’ remuneration - audit fees 180 142 172 137 - non-audit fees 118 58 112 55 Valuation fees 85 127 85 127 Professional fees 772 1,130 759 1,126 Service fee payable to subsidiaries – – 40 15 Other expenses 260 326 259 326 1,415 1,783 1,427 1,786
153 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
22 TAX EXPENSE
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Tax expense Current year * * – –
Reconciliation of effective tax rate Total return for the year before taxation and distribution 63,388 74,444 65,339 73,420
Tax using Singapore tax rate of 17% (2012: 17%) 10,776 12,655 11,108 12,481 Non-tax deductible items 2,171 2,039 2,060 2,213 Tax exempt income (2,449) (4,597) (2,670) (4,597) Tax transparency (10,498) (10,097) (10,498) (10,097) * * – –
* Less than $1,000
23 EARNINGS PER UNIT
(a) Basic earnings per Unit
The calculation of basic earnings per Unit is based on the weighted average number of units during the year and total return for the year.
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Total return for the year after taxation 63,388 74,444 65,339 73,420
Number of Units Group Trust 2013 2012 2013 2012 ’000 ’000 ’000 ’000
Weighted average number of Units - beginning of the year 640,490 636,145 640,490 636,145 - issued as payment of Manager’s fees 2,218 2,484 2,218 2,484 - to be issued as payment of Manager’s fees payable in Units 3 3 3 3 - Issued upon conversion of Convertible Sukuk 4,016 – 4,016 – - Private placement 10,849 – 10,849 – Weighted average number of Units 657,576 638,632 657,576 638,632
154 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
23 EARNINGS PER UNIT (CONTINUED)
(b) Diluted earnings per Unit
In calculating the diluted earnings per Unit, the total return for the year and the weighted average number of Units during the year are adjusted to take into account the dilutive effect arising from the dilutive Convertible Sukuk, with the potential Units weighted for the year outstanding.
Group Trust 2013 2012 2013 2012 $’000 $’000 $’000 $’000
Total return for the year after taxation 63,388 74,444 65,339 73,420 Profit impact of conversion of the Convertible Sukuk 6,534 11 4,583 1,035 Adjusted total return for the year after taxation 69,922 74,455 69,922 74,455
Number of Units Group Trust 2013 2012 2013 2012 ’000 ’000 ’000 ’000
Weighted average number of Units used in calculation of basic earnings per Unit 657,576 638,632 657,576 638,632 Weighted average number of Units to be issued assuming conversion of the Convertible Sukuk 62,275 18,134 62,275 18,134 Weighted average number of Units used in calculation of diluted earnings per Unit 719,851 656,766 719,851 656,766
The diluted earnings per Unit is the same as the basic earnings per Unit for the Group as the Convertible Sukuk were anti-dilutive at the Group level.
24 OPERATING SEGMENTS
The operating segment information is based on the Group’s internal reporting structure for the purpose of allocating resources and assessing performance by the Manager’s CEO (the chief operating decision maker).
Segment revenue comprises mainly of income generated from tenants. Segment property income represents the income earned by each segment after allocating property expenses.
Segment assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly cash and cash equivalents, other receivables, borrowings and other payables.
155 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
24 OPERATING SEGMENTS (CONTINUED)
The Group has four reportable segments whose information is presented in the tables below.
<------Group ------> Chemical High-tech Warehouse Warehouse General Industrial & Logistics & Logistics Industrial Total $’000 $’000 $’000 $’000 $’000
2013
Gross revenue 51,837 9,140 19,359 9,149 89,485 Property operating expenses (7,699) (211) (532) (683) (9,125) Segment net property income 44,138 8,929 18,827 8,466 80,360 Net change in fair value of investment properties 5,222 900 4,600 1,719 12,441 Finance income 61 Finance costs (20,310) 72,552 Unallocated amounts: - Other expenses (9,329) - Loss on conversion of Convertible Sukuk (1,228) - Net change in fair value of financialderivatives 1,393 Consolidated total return for the year before taxation 63,388
Assets and liabilities Segment assets 713,592 120,221 263,595 122,048 1,219,456 Unallocated assets 17,297 Total assets 1,236,753
Segment liabilities 16,061 27 3,155 1,572 20,815 Unallocated liabilities: - borrowings 447,392 - others 12,042 Total liabilities 480,249
156 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
24 OPERATING SEGMENTS (CONTINUED)
<------Group ------> Chemical High-tech Warehouse Warehouse General Industrial & Logistics & Logistics Industrial Total $’000 $’000 $’000 $’000 $’000
2012
Gross revenue 44,114 9,140 19,352 9,162 81,768 Property operating expenses (3,555) (219) (529) (528) (4,831) Segment net property income 40,559 8,921 18,823 8,634 76,937 Net change in fair value of investment properties 13,397 1,000 7,458 3,461 25,316 Finance income 197 Finance costs (17,254) 85,196 Unallocated amounts: - Other expenses (9,199) - Net change in fair value of financialderivatives (1,553) Consolidated total return for the year before taxation 74,444
Assets and liabilities Segment assets 638,528 119,325 258,958 120,584 1,137,395 Unallocated assets 19,143 Total assets 1,156,538
Segment liabilities 12,523 196 6,094 2,343 21,156 Unallocated liabilities: - borrowings 420,800 - others 11,725 Total liabilities 453,681
Geographical segments
Segment information in respect of the Group’s geographical segments is not presented as the Group’s activities for the year ended 31 December 2013 and 31 December 2012 related wholly to properties located in Singapore.
157 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
25 COMMITMENTS
(a) Operating lease commitments
The Group and the Trust are required to pay JTC Corporation (“JTC”) and Housing Development Board (“HDB”) annual land rent in respect of certain properties. The annual land rent payable is based on the market land rent in the relevant year of the lease term. However, the lease agreements limit any increase in the annual land rent from year to year to 5.5% of the annual land rent for the immediate preceding year.
The land rent paid/payable to JTC and HDB amounted to $6,054,000 in relation to 18 properties (2012: $5,502,000 in relation to 18 properties) for the year ended 31 December 2013 (including amounts which have been recharged to the master lessees).
(b) Lease commitments
The Group and the Trust lease out their investment properties under operating lease agreements. Non-cancellable operating lease rentals receivable are as follows:
Group and Trust 2013 2012 $’000 $’000
Within 1 year 77,107 78,943 Between one and five years 119,201 88,543 More than five years 40,831 – 237,139 167,486
(c) Capital commitments
Group and Trust 2013 2012 $’000 $’000
Capital expenditure commitments contracted but not provided for 456 –
158 SABANA REIT | ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2013
26 SIGNIFICANT RELATED PARTY TRANSACTIONS
For the purposes of these financial statements, parties are considered to be related to the Group if the Manager has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Manager and the party are subject to common significant influence. Related parties may be individuals or other entities. The Manager and Property Manager are subsidiaries of a significant Unitholder of the Trust.
In the normal course of its business, the Group carried out transactions with related parties on terms agreed between the parties. During the financial year, in addition to those disclosed elsewhere in the financial statements, there were the following significant related party transactions:
Group and Trust 2013 2012 $’000 $’000
Rental income received/receivable from a sponsor and its related companies 15,629 15,369 Acquisition fees paid/payable to the Manager 595 610 Management fees and reimbursables paid/payable to the Manager 5,868 5,491 Property/lease management fees and reimbursables paid/payable to the Property Manager 2,050 1,769 Trustee fees paid/payable to the Trustee 488 447
27 FINANCIAL RATIOS
Group 2013 2012 % %
Ratio of expenses to weighted average net assets (1) - including performance component of Manager’s fees 1.30 1.35 - excluding performance component of Manager’s fees 1.30 1.35
Portfolio turnover rate (2) – –
(1) The annualised ratios are computed in accordance with the guidelines of Investment Management Association of Singapore. The expenses used in the computation relate to expenses of the Group, excluding property expenses, profit rate expense and income tax expense.
(2) The annualised ratio is computed based on the lesser of purchases or sales of underlying investment properties of the Group expressed as a percentage of daily average net asset value.
28 SUBSEQUENT EVENT
Subsequent to 31 December 2013, the Manager declared a distribution of 2.19 cents per Unit in respect of the period from 1 October 2013 to 31 December 2013.
159 SABANA REIT | ANNUAL REPORT 2013
ADDITIONAL INFORMATION
RELATED PARTY TRANSACTIONS
Interested person (as defined in the Listing Manual of the SGX-ST) and interested party (as defined in the Property Funds Appendix) transactions (collectively “Related Party Transactions”) during the financial year are as follows:
Name of Related Party Aggregate value of all Related Party Transactions during the financial year under review (excluding transactions less than $100,000)
S$’000
Vibrant Group Limited and its subsidiaries - Rental income 15,629 - Acquisition fees 595 - Manager’s fees 5,868 - Property and lease management fees 2,050
HSBC Institutional Trust Services (Singapore) Limited 488 - Trustee’s fees
There are no transactions conducted under shareholder’s mandate pursuant to Rule 920 during the financial year under review.
160 SABANA REIT | ANNUAL REPORT 2013
STATISTICS OF UNITHOLDINGS Year ended 31 December 2013
ISSUED AND FULLY PAID UP UNITS As at 28 February 2014
Number Amount Price Date Event of Units (S$) (S$)
26 April 2013 Quarterly management fee 902,993 1,137,410 1.2596 3 May 2013 Conversion of Convertible Sukuk 5,028,072 6,000,000 1.1933 21 June 2013 Conversion of Convertible Sukuk 1,257,018 1,500,000 1.1933 25 July 2013 Quarterly management fee 993,185 1,147,427 1.1553 24 September 2013 Private placement 40,000,000 40,000,000 1.0000 25 October 2013 Quarterly management fee 1,070,670 1,162,533 1.0858 29 January 2014 Quarterly management fee 1,184,607 1,246,917 1.0526
There were 691,959,462 Units (voting rights: one vote per Unit) outstanding as at 28 February 2014. There is only one class of Units in Sabana REIT.
Market capitalisation S$709.3 million (based on market closing price of S$1.025 on 28 February 2014).
DISTRIBUTION OF UNITHOLDINGS (As at 28 February 2014)
Percentage Number Percentage Number of Units in Size of Unitholdings of Unitholders of Unitholders (%) of Units Issue (%)
1 - 999 9 0.07 1,818 0.00 1,000 - 10,000 8,597 67.99 40,707,088 5.88 10,001 - 1,000,000 4,003 31.66 206,581,834 29.86 1,000,001 and above 35 0.28 444,668,722 64.26 Total 12,644 100.00 691,959,462 100.00
161 SABANA REIT | ANNUAL REPORT 2013
STATISTICS OF UNITHOLDINGS Year ended 31 December 2013
TWENTY LARGEST UNITHOLDERS (As at 28 February 2014)
No. of No. Name Units %
1 HSBC (SINGAPORE) NOMINEES PTE LTD 131,900,375 19.06 2 CITIBANK NOMINEES SINGAPORE PTE LTD 80,746,255 11.67 3 UNITED OVERSEAS BANK NOMINEES (PRIVATE) LIMITED 61,984,600 8.96 4 DBS NOMINEES PTE LTD 32,675,277 4.72 5 RAFFLES NOMINEES (PTE) LIMITED 19,942,068 2.88 6 DBSN SERVICES PTE. LTD. 18,295,335 2.64 7 SABANA REAL ESTATE INVESTMENT MANAGEMENT PTE. LTD. 10,443,372 1.51 8 MEREN PTE LTD 9,100,000 1.32 9 PHILLIP SECURITIES PTE LTD 8,108,487 1.17 10 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 7,832,800 1.13 11 BANK OF SINGAPORE NOMINEES PTE. LTD. 7,378,460 1.07 12 UOB KAY HIAN PRIVATE LIMITED 6,876,000 0.99 13 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 5,402,072 0.78 14 OCBC NOMINEES SINGAPORE PRIVATE LIMITED 4,806,124 0.69 15 MOHSEIN HYDER 4,000,000 0.58 16 YAP CHONG HIN GABRIEL 3,010,000 0.43 17 DB NOMINEES (SINGAPORE) PTE LTD 2,628,130 0.38 18 CIMB SECURITIES (SINGAPORE) PTE. LTD. 2,543,000 0.37 19 NG CHENG HWA 2,525,000 0.36 20 YEO SIAK MENG 2,300,000 0.33 TOTAL 422,497,355 61.04
162 SABANA REIT | ANNUAL REPORT 2013
STATISTICS OF UNITHOLDINGS Year ended 31 December 2013
UNITHOLDINGS OF THE DIRECTORS OF THE MANAGER (As recorded in the Register of Directors’ Unitholdings as at 21 January 2014)
Direct Interest Deemed Interest No. of No. of Directors Units %1 Units %1
Steven Lim Kok Hoong – – – – Yong Kok Hoon 2 – – 1,050,000 0.15 Kevin Xayaraj 3 – – 9,258,765 1.34 Henry Chua Tiong Hock – – – – Ng Shin Ein – – – –
Notes: 1 The percentage interest is based on total issued Units of 690,774,855 as at 21 January 2014. 2 Yong Kok Hoon is deemed to have an interest in the units held by his spouse, Ong Lee Choo. 3 Kevin Xayaraj is deemed to have an interest in the units held by Sabana Real Estate Investment Management Pte. Ltd. by virtue of Section 7 of Companies Act.
SUBSTANTIAL UNITHOLDERS (As recorded in the Register of Substantial Unitholdings as at 28 February 2014)
Direct Interest Deemed Interest No. of No. of Directors Units %1 Units %1
Singapore Enterprises Private Limited 38,352,000 5.54 - - Vibrant Group Limited 2 9,083,000 1.31 48,795,372 7.05 Vibrant Capital Pte Ltd 3 - - 57,878,372 8.36 Lian Hup Holdings Pte Ltd 4 - - 57,878,372 8.36 Khua Hock Su 5 1,229,000 0.18 57,878,372 8.36 Khua Kian Keong 6 12,988,000 1.88 57,878,372 8.36
Notes: 1 The percentage interest is based on total issued Units of 691,959,462 as at 28 February 2014. 2 Vibrant Group Limited (“Vibrant Group”) is deemed to have an interest in the Units held by Singapore Enterprises Private Limited (“Singapore Enterprises”) and Sabana Real Estate Investment Management Pte. Ltd. (“SREIM”). 3 Vibrant Capital Pte Ltd (“Vibrant Capital”) is deemed to have an interest in the Units held by Vibrant Group, Singapore Enterprises and SREIM. 4 Lian Hup Holdings Pte Ltd (“Lian Hup”) is deemed to have an interest in the Units held by Vibrant Capital, Vibrant Group, Singapore Enterprises and SREIM. 5 Khua Hock Su is deemed to have an interest in the Units held by Vibrant Group, Singapore Enterprises, Vibrant Capital and SREIM. 6 Khua Kian Keong is deemed to have an interest in the Units held by Lian Hup, Vibrant Group, Singapore Enterprises, Vibrant Capital and SREIM.
Free Float
Under Rule 723 of the Listing Manual, a listed issuer must ensure that at least 10.00% of its listed securities are at all times held by the public.
Based on information avalable to the Manager as at 28 February 2014, 89.43% of the Units in Sabana REIT are held in the hands of public. Accordingly, Rule 723 of the Listing Manual has been complied with.
163 SABANA REIT | ANNUAL REPORT 2013
NOTICE OF ANNUAL GENERAL MEETING
SABANA SHARI’AH COMPLIANT INDUSTRIAL REAL ESTATE INVESTMENT TRUST (a real estate investment trust constituted on 29 October 2010 under the laws of the Republic of Singapore (as amended))
Managed by Sabana Real Estate Investment Management Pte. Ltd. (Company Registration No. 201005493K)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the holders of units of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT” and the holders of units of Sabana REIT, “Unitholders”) will be held at Mandarin Ballroom 1, Mandarin Orchard Singapore at 333 Orchard Road, Singapore 238867 on Friday, 11 April 2014 at 2.00 p.m., to transact the following business:
(A) AS ORDINARY BUSINESS
1. To receive and adopt the Report of the Trustee issued by HSBC Institutional Trust Services (Singapore) Limited, as trustee of Sabana REIT (the “Trustee”), the Statement by the Manager issued by Sabana Real Estate Investment Management Pte. Ltd., as manager of Sabana REIT (the “Manager”), and the Audited Financial Statements of Sabana REIT for the financial year ended 31 December 2013 and the Auditors’ Report thereon. (Ordinary Resolution 1)
2. To re-appoint KPMG LLP as Auditors of Sabana REIT and to hold office until the conclusion of the next Annual General Meeting of Sabana REIT, and to authorise the Manager to fix their remuneration. (Ordinary Resolution 2)
(B) AS SPECIAL BUSINESS
To consider and, if thought fit, to pass the following Ordinary Resolution, with or without any modifications:
3. The authority be and is hereby given to the Manager, to
(a) (i) issue units in Sabana REIT (“Units”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Units to be issued, including but not limited to the creation and issue of (as well as adjustments to) securities, warrants, debentures or other instruments convertible into Units,
at any time and upon such terms and conditions and for such purposes and to such persons as the Manager may in its absolute discretion deem fit; and
(b) issue Units in pursuance of any Instrument made or granted by the Manager while this Resolution was in force (notwithstanding that the authority conferred by this Resolution may have ceased to be in force at the time such Units are issued),
164 SABANA REIT | ANNUAL REPORT 2013
NOTICE OF ANNUAL GENERAL MEETING
provided that:
(1) the aggregate number of Units to be issued pursuant to this Resolution (including Units to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed fifty per cent. (50%) of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Units to be issued other than on a pro rata basis to Unitholders (including Units to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed twenty per cent. (20%) of the total number of issued Units (excluding treasury Units, if any) (as calculated in accordance with sub-paragraph (2) below);
(2) subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the purpose of determining the aggregate number of Units that may be issued under sub-paragraph (1) above, the total number of issued Units (excluding treasury Units, if any) shall be based on the total number of issued Units (excluding treasury Units, if any) at the time this Resolution is passed, after adjusting for:
(a) any new Units arising from the conversion or exercise of any Instruments which are outstanding at the time this Resolution is passed; and
(b) any subsequent bonus issue, consolidation or subdivision of Units;
(3) in exercising the authority conferred by this Resolution, the Manager shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the trust deed constituting Sabana REIT (as amended) (the “Trust Deed”) for the time being in force (unless otherwise exempted or waived by the Monetary Authority of Singapore);
(4) unless revoked or varied by the Unitholders in a general meeting, the authority conferred by this Resolution shall continue in force until (i) the conclusion of the next Annual General Meeting of Sabana REIT or (ii) the date by which the next Annual General Meeting of Sabana REIT is required by the applicable law or regulations to be held, whichever is earlier;
(5) where the terms of the issue of the Instruments provide for adjustment to the number of Instruments or Units into which the Instruments may be converted in the event of rights, bonus or other capitalisation issues or any other events, the Manager is authorised to issue additional Instruments or Units pursuant to such adjustment notwithstanding that the authority conferred by this Resolution may have ceased to be in force at the time the Instruments or Units are issued; and
(6) the Manager and the Trustee, be and are hereby severally authorised to complete and do all such acts and things (including executing all such documents as may be required) as the Manager or, as the case may be, the Trustee may consider expedient or necessary or in the interest of Sabana REIT to give effect to the authority conferred by this Resolution. (Ordinary Resolution 3)
(Please see Explanatory Note)
165 SABANA REIT | ANNUAL REPORT 2013
NOTICE OF ANNUAL GENERAL MEETING
(C) AS OTHER BUSINESS
4. To transact such other business as may be transacted at an Annual General Meeting. (Ordinary Resolution 4)
By Order of the Board
Sabana Real Estate Investment Management Pte. Ltd. (Company Registration No: 201005493K) As Manager of Sabana REIT
Kevin Xayaraj Chief Executive Officer and Executive Director
Singapore 21 March 2014
Notes:
1. A Unitholder entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Unitholder.
2. Where a Unitholder appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her holding (expressed as a percentage of the whole) to be represented by each proxy.
3. The proxy form must be deposited at the office of Sabana REIT’s Unit Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 not later than 2.00 p.m. on 9 April 2014 being 48 hours before the time fixed for the Annual General Meeting.
Explanatory Note:
Ordinary Resolution 3, if passed, will empower the Manager from the date of this Annual General Meeting until (i) the conclusion of the next Annual General Meeting of Sabana REIT, (ii) the date by which the next Annual General Meeting of Sabana REIT is required by the applicable regulations to be held, or (iii) the date on which such authority is revoked or varied by the Unitholders in a general meeting, whichever is the earliest, to issue Units, to make or grant Instruments and to issue Units pursuant to such Instruments, up to a number not exceeding 50% of which up to 20% may be issued other than on a pro rata basis to Unitholders (in each case, excluding treasury Units, if any).
The Ordinary Resolution 3 above, if passed, will empower the Manager from the date of this Annual General Meeting until the date of the next Annual General Meeting of Sabana REIT, to issue Units as either full or partial payment of fees which the Manager is entitled to receive for its own account pursuant to the Trust Deed.
For determining the aggregate number of Units that may be issued, the percentage of issued Units will be calculated based on the issued Units at the time the Ordinary Resolution 3 above is passed, after adjusting for new Units arising from the conversion or exercise of any Instruments which are outstanding at the time this Resolution is passed and any subsequent bonus issue, consolidation or subdivision of Units.
Fund raising by issuance of new Units may be required in instances of property acquisitions or debt repayments. In any event, if the approval of Unitholders is required under the Listing Manual of the SGX-ST and the Trust Deed or any applicable laws and regulations in such instances, the Manager will then obtain the approval of Unitholders accordingly.
166 SABANA SHARI’AH COMPLIANT INDUSTRIAL REAL ESTATE INVESTMENT TRUST IMPORTANT: (a real estate investment trust constituted on 29 October 2010 1. For investors who have used their CPF monies to buy units in under the laws of the Republic of Singapore (as amended)) Sabana REIT, this Annual Report is forwarded to them at the request of the CPF Approved Nominees and is sent FOR THEIR Managed by Sabana Real Estate INFORMATION ONLY. Investment Management Pte. Ltd. 2. This Proxy Form is not valid for use by CPF investors and shall be (Company Registration No. 201005493K) ineffective for all intents and purposes if used, or purported to be used by them.
3. CPF Investors who wish to attend the Annual General Meeting as PROXY FORM observers have to submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, ANNUAL GENERAL MEETING they must submit their voting instructions to the CPF Approved (Before completing this form, please read notes to the proxy form Nominees within the time frame specified to enable them to vote on on reverse page)
I/We, ______(Name)______(NRIC/Passport Number) of ______(Address) being a Unitholder / Unitholders of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (“Sabana REIT”), hereby appoint:
NAME ADDRESS NRIC / PASSPORT NO. PROPORTION OF UNITHOLDINGS No. of Units % and / or (delete as appropriate)
NAME ADDRESS NRIC / PASSPORT NO. PROPORTION OF UNITHOLDINGS No. of Units % or failing him/them, the Chairman of the Annual General Meeting (“AGM”), as my/our proxy/proxies to attend and vote for me/us on my/our behalf and if necessary, to demand a poll, at the AGM of Sabana REIT to be held at Mandarin Ballroom 1, Mandarin Orchard Singapore at 333 Orchard Road, Singapore 238867 on Friday, 11 April 2014 at 2.00 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the AGM as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies may vote or abstain from voting at his/their discretion, as his/they may on any other matter arising at the AGM. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.
No. of votes No. of votes NO. ORDINARY RESOLUTIONS For* Against* ORDINARY BUSINESS 1 To receive and adopt the Report of the Trustee, the Statement by the Manager, the Audited Financial Statements of Sabana REIT for the financial year ended 31 December 2013 and the Auditors’ Report thereon. 2 To re-appoint KPMG LLP as Auditors of Sabana REIT and to authorise the Manager to fix their remuneration. SPECIAL BUSINESS 3 To authorise the Manager to issue Units and to make or grant convertible instruments. OTHER BUSINESS 4 To transact any other business as may be transacted at an AGM.
* If you wish to exercise all your votes “For” or “Against”, please tick (✓) within the box provided. Alternatively, please indicate the number of votes as appropriate.
Dated this ______day of ______2014 TOTAL NUMBER OF UNITS HELD
Signature(s) of Unitholder(s) / Common Seal of Corporate Unitholder
IMPORTANT: PLEASE READ NOTES TO THE PROXY FORM ON THE REVERSE PAGE IMPORTANT: PLEASE READ THE NOTES TO PROXY FORM BELOW 8. Where the Proxy Form is signed on behalf of the appointor by an attorney or a duly authorised officer, the power of attorney or other authority Notes to Proxy Form (if any) under which it is signed, or a notarially certified copy of such power or authority must (failing previous registration with the Manager) be 1. A unitholder of Sabana REIT (“Unitholder”) entitled to attend and vote lodged with the Proxy Form, failing which the Proxy Form may be treated at the Annual General Meeting (“AGM”) is entitled to appoint one or two as invalid. proxies to attend and vote in his/her stead. 9. The Manager shall be entitled to reject a Proxy Form which is incomplete, 2. Where a Unitholder appoints more than one proxy, the appointments improperly completed or illegible or where the true intentions of the shall be invalid unless he/she specifies the proportion of his/her holding appointor are not ascertainable from the instructions of the appointor (expressed as a percentage of the whole) to be represented by each proxy. specified on the Proxy Form. In addition, in the case of Units entered in the Depository Register, the Manager may reject a Proxy Form if the 3. A proxy need not be a Unitholder. Unitholder, being the appointor, is not shown to have Units entered against his/her name in the Depository Register as at 48 hours before the time 4. A Unitholder should insert the total number of Units held. If the Unitholder appointed for holding the AGM, as certified by CDP to the Manager. has Units entered against his/her name in the Depository Register maintained by The Central Depository (Pte) Limited (“CDP”), he/she 10. All Unitholders will be bound by the outcome of the AGM regardless of should insert that number of Units. If the Unitholder has Units registered whether they have attended or voted at the AGM. in his/her name in the Register of Unitholders of Sabana REIT, he/she should insert that number of Units. If the Unitholder has Units entered 11. At any meeting, a resolution put to the vote of the meeting shall be decided against his/her name in the said Depository Register and registered in on a show of hands unless a poll is (before or on the declaration of the his/her name in the Register of Unitholders, he/she should insert the result of the show of hands) demanded by the Chairman or by five or more aggregate number of Units. If no number is inserted, this Proxy Form (as Unitholders present in person or by proxy, or by one or more Unitholders defined in note 5 below) will be deemed to relate to all the Units held by present in person or by proxy holding or representing not less than one- the Unitholder. tenth in value of the Units represented at the meeting. Unless a poll is so demanded, a declaration by the Chairman that such a resolution has been 5. The instrument appointing a proxy or proxies (the “Proxy Form”) must carried or carried unanimously or by a particular majority or lost shall be be deposited at the office of Sabana REIT’s Unit Registrar, Boardroom conclusive evidence of the fact without proof of the number or proportion Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 of the votes recorded in favour of or against such resolution. Singapore Land Tower, Singapore 048623 not later than 2.00 p.m. on 9 April 2014, being 48 hours before the time set for the AGM. 12. On a show of hands, every Unitholder who (being an individual) is present in person or by proxy or (being a corporation) is present by one of its 6. Completion and return of the Proxy Form shall not preclude a Unitholder officers as its proxy shall have one vote. On a poll, every Unitholder who is from attending and voting at the AGM. present in person or by proxy shall have one vote for every Unit of which he/she is the Unitholder. There shall be no division of votes between a 7. The Proxy Form must be executed under the hand of the appointor or Unitholder who is present in person and voting at the AGM and his/her of his/her attorney duly authorised in writing. Where the Proxy Form is proxy(ies). A person entitled to more than one vote need not use all his/ executed by a corporation, it must be executed under its common seal or her votes or cast them the same way. under the hand of its attorney or a duly authorised officer.
1st fold here
Affix Postage Stamp SHARI'AH COMPLIANT REIT
BOARDROOM CORPORATE & ADVISORY SERVICES PTE. LTD. (as Unit Registrar of Sabana Shari’ah Compliant Industrial Real Estate Investment Trust)
50 Raffles Place #32-01 Singapore Land Tower Singapore 048623
2nd fold here CORPORATE INFORMATION
SABANA REIT LEGAL ADVISER THE MANAGER Allen & Gledhill LLP REGISTERED ADDRESS One Marina Boulevard #28-00 REGISTERED ADDRESS HSBC Institutional Trust Singapore 018989 Sabana Real Estate Investment Services (Singapore) Limited Phone: (65) 6890 7188 Management Pte. Ltd. 21 Collyer Quay Fax: (65) 6327 3800 #10-02 HSBC Building Company registration number: Singapore 049320 UNIT REGISTRAR 201005493K Boardroom Corporate & 151 Lorong Chuan TRUSTEE Advisory Services Pte Ltd. #02-03 New Tech Park HSBC Institutional 50 Raffles Place Singapore 556741 Trust Services #32-01 Singapore Land Tower Phone: (65) 6580 7750 (Singapore) Limited Singapore 048623 Fax: (65) 6280 4700 21 Collyer Quay Phone: (65) 6536 5355 #03-01 HSBC Building Fax: (65) 6536 1360 BOARD OF DIRECTORS Singapore 049320 Steven Lim Kok Hoong Phone: (65) 6658 6906 BANKERS Chairman and Fax: (65) 6534 5526 The Hongkong and Shanghai Independent Director Banking Corporation Limited AUDITOR OF THE TRUST (Singapore Branch) Yong Kok Hoon KPMG LLP Independent Director Public Accountants and Malayan Banking Berhad Chartered Accountants (Singapore Branch) Ng Shin Ein 16 Raffles Quay Non-Executive Director #22-00 Hong Leong Building United Overseas Bank Limited Singapore 048581 Henry Chua Tiong Hock Phone: (65) 6213 3388 CIMB Bank Berhad Non-Executive Director Fax: (65) 6225 4142 (Singapore Branch) Kevin Xayaraj Partner-in-charge: Jek Lim STOCK QUOTES CEO and Executive Director Appointed since financial year STI – M1GU ended 31 December 2011 Bloomberg – SSREIT SP AUDIT COMMITTEE Reuters – SABA.SI Yong Kok Hoon (Chairman) INTERNAL AUDITOR POEMS – SBNR.SG Steven Lim Kok Hoong PricewaterhouseCoopers LLP Ng Shin Ein 8 Cross Street #17-00 WEBSITE PWC Building www.sabana-reit.com NOMINATING AND Singapore 048424 REMUNERATION COMMITTEE Phone: (65) 6236 3388 Yong Kok Hoon (Chairman) Fax: (65) 6236 3300 Steven Lim Kok Hoong Henry Chua Tiong Hock
COMPANY SECRETARY OF THE MANAGER Chang Ai Ling GOING FORWARD, WE AIM TO DO MORE.
Sabana Real Estate Investment Management Pte. Ltd. (As Manager of Sabana REIT)
151 Lorong Chuan #02-03 New Tech Park Singapore 556741 Phone: (65) 6580 7750 Fax: (65) 6280 4700 www.sabana-reit.com