For Sabana REIT unitholders, this potential offer provides an attractive takeover premium of ~21% and addresses the persistent discount at which the unit price trades to NAV. ESR REIT unitholders can potentially benefit from a ~7% jump in DPU (Dividend yield of ~7.1%) post-merger attributed to the optimisation of the many levers for Sabana REIT’s portfolio which includes the addition of a retail component at 151 Lorong Chuan post 2Q2020 and optimisation of management fee payments and occupancy rates.
Interestingly, QCM points out that Sabana REIT has more than 1.3million of untapped GFA which ESR REIT can capitalise on. Due to the low leverage ratio of Sabana (30.9%), the combined entity will have around $180 million of debt headroom to make DPU accretive acquisitions.
“A takeover at $0.545 for Sabana Reit is a win-win for unitholders and shareholders of Sabana Reit, ESR Reit and ESR Cayman. The increased scale of the enlarged entity can lead to the inclusion of the Reit in major Reit indices and increase global institutional investor following,” Moermann says.
Sabana REIT closed at 45 cents on Nov 13, and ESR-REIT closed at 52 cents.
