Sabana Reit: shareholder activism (2)

It seems that the activism (I wrote about it before) is progressing quite well, an interesting case to follow.

A new development was reported by The Edge:

Disgruntled Sabana REIT unitholder lodges complaint with CAD over valuation of Changi South property

A disgruntled Sabana REIT unitholder has lodged a complaint to the white-collar crime department of the Singapore police against the property valuation houses of Colliers, Savills and Knight Frank.
This is in relation to the valuation reports the three houses have done to support the acquisition of 47 Changi South Ave 2 by Sabana REIT from its sponsor Vibrant Group.

Colliers was engaged by Vibrant while Knight Frank and Savills were engaged by Sabana REIT's manager. The transaction requires the permission of minority unitholders at an EGM, which is yet to be scheduled.

Colliers, Savills and Knight Frank separately and independently did a valuation on the Changi South property using the Capitalization Approach and Discounted Cash Flow Analysis (DCF).

All three concluded that the property was worth exactly $23 million, which is also the price at which Vibrant will sell the asset to Sabana REIT.

Jerry Low Chin Yee, the unitholder of Sabana REIT who complained to the CAD, is questioning how Colliers, Savills and Knight Frank could have arrived at exactly the same valuation for the property. “In order for all three to come up with the exact valuation figure, they must have used the same future rental income, same assumed discount rate, same forecasted 30 years rent renewal payable and the same estimated terminal value etc," he says in his complaint to the CAD, a copy of which The Edge Markets has seen.

“Colliers, Savills and Knight Frank all agree that the Changi South property is worth exactly $23m. I can only hypothesize that they were given the same exact figures to value the property,” alleges Low.
If this is true, it begs the question of objectivity and independence of these and past valuation reports, says Low.

“It will be worst if all of them (including the vendor and the manager of Sabana REIT) actually conspire to come up with the exact $23m figure so that the property can be “properly” sold to the REIT at $23m in accordance to the code of collective investment scheme pertaining to Related Party Transaction,” adds Low.

Low says he does not have any evidence of wrongdoing but believes the matter warrants scrutiny “purely on the fact that for all three valuation houses to separately and independently come to a valuation of exactly $23m for a property with so many variables, is too much of a coincidence unless they are using the same input provided by either the Vendor or the REIT Manager. And the price of $23m was by design rather than by valuation.”


I hope the complaint will be dealt with soon, I agree that the matter warrants serious scrutiny.

In the Malaysian context, I have often seen strange valuations and independent valuers agreeing with them:

• regarding RPTs: major shareholders injecting their private companies at skyhigh valuations in their listed vehicles
• regarding privatisations: companies taken private for a song,

I have written about several cases, and complained in a few to the authorities, to no avail (no surprises there), although I was proven right at the end.

The only positive message is that things seem to have improved somewhat lately in Malaysia. Not much comfort though for the minority investors who were disadvantaged in the past for huge amounts of money.