Kevin Xayaraj Tay, CEO, Sabana Real Estate Investment Management Pte Ltd. Sabana Shari ah Compliant Industrial REIT

Transcription

1 Kevin Xayaraj Tay, CEO, Sabana Real Estate Investment Management Pte Ltd Sabana Shari ah Compliant Industrial REIT February 2011

2 Introduction to Sabana Shari ah Compliant Industrial REIT ( Sabana REIT )

3 What is Sabana REIT? World s largest listed Shari ah Compliant REIT IPO Deal of the Year Real Estate Deal of the Year First listed REIT globally to adopt stricter GCCstandard Shari ah compliance First Shari ah Certificate for a Singapore listing Largest IPO free float for industrial Singapore REITs Access to untapped equity markets (e.g. Bahrain and Jordan) 3

4 Sabana Shari ah Compliant REIT in the press It is rare for the global mutual fund operator (Fidelity) to come in as a cornerstone in IPOs, both in Asia and globally...the strong interest among Islamic investors was not surprising FinanceAsia, 22 Nov 10 Sabana REIT has advantage over conventional REITs, with access to investors from both Shari ah and conventional markets. The growth in the Islamic finance industry globally...will translate to an increase in demand for Shari ah compliant financial products. Bloomberg, 22 Nov 10 A template for Islamic REITs The Asset, Jan 11 4

5 Why a Shari ah compliant REIT? Unprecedented access to unique investor base New source of capital Key differentiator Industrial assets are suitable IPO demand by geography IPO cornerstone investors Middle East 25% Middle East 47% Asia 65% Europe 10% Conventional 53% 5

6 Sabana REIT - overview Listed 26 November Singapore industrial properties High-tech Industrial Overview Asset: c.s$885m / US$680m Sponsored: Freight Links, a Singapore-listed logistics company Chemical Warehouse & Logistics 151 Lorong Chuan 33 & 35 Penjuru Lane Warehouse & Logistics General Industrial 34 Penjuru Lane 123 Genting Lane Source: Prospectus 6

7 Sabana REIT portfolio highlights NLA by tenants or sub-tenants sector Gross revenue by asset type 5.7% 20.4% 11.9% 19.5% 6.1% 17.5% 16.4% 58.4% High-tech Industrial Chemical Warehouse & Logistics Warehouse & Logistics General Indusrial 3.1% 8.2% 16.8% 5.1% Chemical Engineering Healthcare Logistics Research & Development Telecommunication & data warehousing 3.0% 3.4% 4.5% Electronics Food & beverage Information technology Others Storage Source: Prospectus 7

8 Sabana REIT s Shari ah compliance Activity Shari ah compliant Sabana REIT Income Distributions from Shari ah compliant activities only 5% income from non-shari ah activities, which is cleansed < 0.3% from non-compliant income Required cleansing is immaterial Debt Insurance Deposits Corporate governance If Shari ah product not available, debt up to 1/3 of NAV or market capitalisation Shari ah products preferred Shari ah advisory panel Commodity Murabaha Insurance replicates Takaful Shari ah compliant product Shari ah Committee 8

9 GCC-aligned Shari ah compliance Sabana REIT has deliberately adopted a Shari ah compliance policy that is aligned with GCC standards Regulation Malaysia REIT Sabana REIT Non-Shari ah income contribution 20% 5% Proportion of non-shari ah debt 0% Up to 1/3 of NAV or market capitalisation 9

10 The case for Singapore REITs and the impact of the world s largest Shari ah compliant REIT

11 Income stability Stable source of income from long-term rentals Ideal for investors diversifying away from Sukuks without foregoing stability Sabana forecast DPU yield at IPO 8.22% 8.25% Income stability c.100.0% occupancy WALE: 3.8 years Annual step-up: up to 2.0% Gearing: 26.5% Debt headroom: US$88m to US$565m FY2011 FY2012 Source: Prospectus 11

12 Compelling total return proposition Singapore REITs offer investors a healthy balance of income stability through stable distributions plus capital growth 27.6% FY2011E total return for Singapore REITs by assets Singapore s top 5 REITs by assets 8.6% 19.0% 18.8% 5.4% 13.4% 12.9% 5.9% 7.0% 15.8% 5.1% 10.7% 14.4% 6.7% 7.7% 21.1% 7.0% 14.1% 16.6% 6.0% 10.6% Sabana CapitaMall Suntec CapitaCommercialAscendas Mapletree Logistics Average top 5 Target price differential FY11E DPU yield Source: Bloomberg (11 Feb 2011) 12

13 Impact on industry Prior to Sabana, none of the existing listed Shari'ah compliant REITs had : asset size >US$400m GCC Shari ah compliance standards a sizeable investor base outside Malaysia Assets (US$m) Listing Asset type Industrial Healthcare Plantation Mixed Shari ah compliance Mkt cap (US$m) Float (%) Sources: Company reports, Bloomberg (11 Feb 2011), Factset 13

14 Impact on industry (cont d) Increased industry market capitalisation by 62% and total assets by 64% Aggregate market capitalisation (US$m) Total assets (US$m) 1,400 1,200 1,725 1, % +64% Aug 05 Aug 06 Sep 07 Oct 08 Nov 09 Dec 10 1Q10 2Q10 3Q10 4Q10 Axis Al-Aqar Al-Hadharah Sabana Sources: Company reports, Bloomberg (11 Feb 2011) Note: Assuming Al-Aqar had same amount of assets in 3Q and 4Q 14

15 Impact on industry (cont d) Why is this important? Establishes the listed REIT as a viable Shari ah vehicle Education of conventional investors on the benefits of Shari ah compliance Tipping point: New Shari ah compliant REITs expected in Asia 15

16 The End

17 Appendix: Additional details

18 S$636m Sabana Shari ah Compliant REIT IPO Issuer: Offering type: Pricing date: 18 Nov 10 Listing date: 26 Nov 10 Base offering size: Mkt cap: Free float: Price range: Final price: Sabana Shari ah Compliant Industrial REIT ( Sabana REIT ) IPO on Mainboard SGX S$636m / US$491m, or 605.8m units (100% primary) S$664m / US$513m 95.7% of share capital S$ per unit S$1.05 Transaction summary FY11E DPU 8.22% yield: Premium to NAV: 5.8% Gearing: 26.50% Offering International Offering (87.5%) structure: Public Offer in Singapore, including Reserved tranche (12.5%) Cornerstone investors: (% of int l offering) Selling restrictions: Fidelity (5.2%), Al Salam Bank- Bahrain (5.4%), Metro Holdings Singapore (4.5%), Capital Investment & Brokerage Jordan (3.4%) Reg S only 18

19 S$636m Sabana Shari ah Compliant REIT IPO Largest and first Shari ah certified industrial REIT globally Second largest REIT IPO in Asia since 2006 Transaction highlights Unique Shari ah Compliant nature of this landmark transaction attracted a whole new set of investors Attracted quality institutional accounts internationally with a healthy mix between Shari ah and conventional investors Cornerstone investors include Fidelity, Capital Bank, Al Salam Bank-Bahrain, Metro Holdings Orderbook multiple times oversubscribed, with participation from over 100 investors Attractive yield pick-up of 6.0% over the Singapore risk-free rate Low gearing of 26.5% vs. an average of 34.4% for Industrial S-REITs 19

20 Sabana REIT benchmarking against peers (1) 12-mth forward DPU yield (%) (5) 8.2% 6.7% 7.3% 8.8% 8.4% 9.1% 6.9% No. of properties at IPO No. of properties currently Assets at IPO (S$m) (4) , Assets currently (S$m) (4) 885 4,854 2, ,000 Free float at IPO (S$m) GFA at IPO ( 000 sqft) 3,286 2,639 (2) 16,368 2,474 3,857 4,593 2,993 (2)(3) GFA ( 000 sqft) 3,286 25,801 16,368 4,359 3,860 7,013 17,849 (2)(3) Occupancy rate (%) 100.0% 95.7% 90.9% 96.0% 100.0% 99.8% 98.1% Sources: Bloomberg, Company annual reports Notes: 1. Assuming offering price S$ GFA data not available. Represents net lettable area 3. Excludes Pulau Sebarok as this property comprises land only 4. Including property values provided by Independent property valuers 5. As at 26 Nov 2010, listing date 20

21 Sabana REIT benchmarking against peers (1) Weighted average lease term to expiry 3.8 years 4.8 years 2.6 years 4.4 years 6.1 years 4.7 years 5.0 years Weighted average unexpired lease term 41 years 53 years (2) 49 years 47 years (2) 37 years 41 years 60 years Current cost of debt 4.5% 3.9% 2.4% 4.2% 4.1% 5.9% 2.4% Current gearing 26.5% 33.5% 38.4% 28.8% 24.7% 42.3% 38.7% Mgmt fee % distributable income 8.2% 10.0% 15.9% 10.6% 9.3% 10.6% 18.5% P / NAV 5.8% 31.3% 25.6% (3.9%) 12.3% 3.3% 3.5% Investment focus Asia Singapore Singapore Asia Asia Asia Asia Manager s mgmt base fee 0.5% p.a. of deposited property 0.5% p.a. of deposited property 0.5% p.a. of deposited property 0.5% p.a. of deposited property 0.5% p.a. of deposited property 0.5% p.a. of deposited property 0.5% p.a. of deposited property Manager s mgmt performance fee 0.5% p.a. of NPI (DPU growth>10%) 19% 0.1% p.a. of deposited property (DPU growth>2.5%) 24% 3.6% p.a. of NPI 21% 1% 0.1% p.a. of deposited property (DPU growth>2.5%) 14% 1.5% p.a. of NPI Capped at 0.8% p.a. of deposited property 3.6% p.a. of NPI 8% Asset type breakdown by valuation (5) 58% Sources: Bloomberg, Company annual reports Notes: 1. Assuming offering price S$ A-REIT is weighted by NLA; AA-REIT is weighted by land area 3. As at 26 Nov 2010, listing date 6% 17% 56% 3% 17% 26% 78% High-tech Industrial Chemical Warehousing & Logistics Warehousing & Logistics 100% 60% General Industrial Others 44% 4% 52% 92% 21

22 Shari ah Committee scholars Dr Mohamed A. Elgari Dr. Elgari is Professor of Islamic Economic at King Abdulaziz University, Jeddah, Saudi Arabia and Former Director of the Center for Research in Islamic Economics, in the same university. He is an Expert at the Islamic Jurisprudence Academy of the OIC and the Islamic Jurisprudence Academy of the Islamic World League and a member of the Shari'ah Council of AAOFI He is member of editorial board of several academic publications in the field of Islamic Finance and Jurisprudence among them, Journal of the Jurisprudence Academy (of the IWL), Journal of Islamic Economic Studies (IDB), Journal of Islamic Economic (IAIE, London), and the advisory board of Harvard Series in Islamic Law, Harvard Law School Dr. Elgari is member of numerous Shari'ah Boards of Islamic Banks and Takaful Companies world wide. He authored several books in Islamic finance and published tens of articles on the subject both in Arabic and English. Dr. Elgari is also a frequent speaker in conferences worldwide. Dr. Elgari is the recipient of the Islamic Development Bank prize in Islamic Banking and Finance for the year 1424H (2004) Dr. Elgari holds a PhD from the University of California and was born in Makkah, Saudi Arabia in the year

23 Shari ah Committee scholars cont d Dr Obiyathulla Ismath Bacha Prof. Obiyathulla is professor of Finance and Director of the Management Centre. Prior to joining IIUM, Prof. Obiyathulla was at Malayan Banking Bhd from May 1984 August He was an Assistant Professor of Finance at Boston University where he received the Allen E. Beckwith Teaching Award. He teaches finance courses at both MBA and undergraduate levels. The courses taught by him for the MBA Program are Financial Planning & Strategy, International Finance, and Managing Risks with Futures & Options He is vice-president of the Malaysian Economic Association (MEA) and Committee Member of the Malaysian Finance Association. Dr. Obiyathulla has also been a trainer at several institutions such as the Securities Commission and Central Bank of Malaysia He has published in numerous local and international journals and presented papers at several international finance conferences. His paper on the Nikkei Stock Index Futures Contract won the 1993 Chicago Mercantile Exchange; Competitive Research Award He received his DBA (Finance), MBA (High Honors) and MA (Economics) from Boston University and B. Soc. Sc from the University Science Malaysia 23

24 Shari ah Committee scholars cont d Dr. Ashraf Bin Md Hashim Dr. Ashraf Bin Md Hashim is currently an Associate Professor at the Department of Islamic Law, Ahmad Ibrahim Kuliyyah of Laws, International Islamic University Malaysia ( IIUM ). Dr. Ashraf has to his credit, a book and a number of articles relating to Islamic law and Islamic finance published in local and international journals and was a Visiting Research Fellow at the Oxford Centre for Islamic Studies, United Kingdom from November 2006 to August Dr. Ashraf has vast experience in providing Shari ah views on retail and investment banking products, Sukuk structuring and unit trusts and is also actively involved in advising Takaful and Retakaful companies. He is currently a Shari ah committee member for Al-Rajhi Banking and Investment Corporation (Malaysia) and Securus Data Centre Fund, and was previously a Shari ah committee member for Takaful Malaysia and Asean Retakaful International Limited, to name a few. Dr. Ashraf holds a Postgraduate Diploma in Shari ah Law and Practice from IIUM, a Doctor of Philosophy in Islamic Law from Birmingham University (U.K.), a Master of Arts, Fiqh and Usul al-fiqh (Jordan) and a Bachelor of Arts, Shari ah (Madinah) and is proficient in English, Arabic and Malay. 24

25 Shari ah Adviser - Five Pillars Pte. Ltd. Five Pillars Pte. Ltd. ( Five Pillars ) specialises in Shari'ah advisory, training and structuring products that are Shari'ah compliant. Five Pillars is focused on delivering Shari'ah based solutions to conventional financial institutions like banks, international investment funds, insurance companies, PE funds on the demand side and companies wanting to access funds from Shari'ah investors on the supply side. We also help investment managers identify companies that are Shari'ah compliant for investment purposes Five Pillars has a renowned and reputable team that provides you with a menu of comprehensive solutions to benefit from the Islamic Finance world Some of our clients include: Reuters PLC Financial Information services DST International Fund Management software Temenos Banking solutions Securas Data Property Fund Shari'ah compliant fund 25