Sabana REIT Faces Material Uncertainties: Auditors Flag Going Concern Risks Amid Management Shake-Up, Loan Deadlines

Summary of Key Points

• Independent auditor flags material uncertainty over Sabana REIT’s ability to continue as a going concern.
• Potential financial implications arising from ongoing internalisation of REIT management and upcoming refinancing deadlines.
• Removal of the current manager could trigger mandatory repayment of outstanding loans and bonds, creating significant risk.
• Net current liabilities of \$77.6 million as of 30 September 2025, mainly due to a maturing \$75 million loan in March 2026.
• Lenders previously refused to waive “removal of manager” clause; negotiations ongoing but outcome uncertain.
• Shareholders strongly cautioned: share price may be impacted and further updates are expected; exercise caution when trading.

Full Article

Sabana Industrial Real Estate Investment Trust (“Sabana REIT”) has found itself under intense scrutiny following the release of its unaudited 3Q 2025 interim financials and a stark warning from its independent auditor, Ernst & Young LLP. The auditor’s review report has included a significant “emphasis of matter” paragraph, flagging a material uncertainty that casts significant doubt on the REIT’s ability to continue as a going concern.

What’s Driving the Uncertainty?

The auditors’ concerns stem from two critical issues facing the REIT:

1. Internalisation Process: Following a unitholder resolution at the August 2023 EGM, the process is underway to remove Sabana Real Estate Investment Management Pte. Ltd. (“SREIM”) as the REIT manager and internalise the management function. However, this transition is fraught with risk. Removal of SREIM would trigger a “review event” under Sabana REIT’s existing unsecured loan and bond facilities, potentially resulting in mandatory prepayment of all outstanding loans and bonds if no satisfactory agreement is reached with lenders within 30 days (or a longer agreed period).
2. Loan Refinancing Risk: As of 30 September 2025, Sabana REIT reports net current liabilities of \$77.6 million (a sharp reversal from \$2.4 million in net current assets at year-end 2024), largely due to a \$75 million loan maturing in March 2026. While the manager is presently in discussions with lenders for a potential extension or refinancing, there is no guarantee of a positive outcome.

If these issues are not resolved, the REIT could face immediate and substantial liquidity challenges.

Potential Consequences for Shareholders

The risks highlighted are not theoretical. Should the manager be removed and lenders enforce their rights, Sabana REIT may be forced to repay significant debts ahead of schedule, jeopardising its operational and financial stability. The Credit Guarantee & Investment Facility (CGIF), which guarantees Sabana’s five-year senior unsecured sustainability-linked bonds due 2029, could also impose additional conditions. This scenario would impact both the REIT and its unitholders, potentially causing serious adverse consequences and share price volatility.

Lender Engagement and Manager’s Position

The manager had previously sought waivers from the relevant lenders to prevent a review event should SREIM be removed. However, lenders refused to provide such waivers at that time. Negotiations are ongoing, but the final outcome remains highly uncertain.

Despite the auditor’s warning, it is important to note that the review report’s conclusion is not qualified. The manager maintains that the REIT’s financial position is “adequate” and that, given its moderate unencumbered gearing ratio, it should be able to meet funding requirements when the loan matures. Nevertheless, this outlook is contingent on successful lender negotiations and a smooth internalisation process.

What Should Investors Do Now?

Given the highly fluid situation and the potential for rapid and material developments, the manager has issued a stark cautionary statement for all unitholders and investors. Shareholders are advised to exercise extreme caution in dealing with Sabana REIT units, as these events could materially affect share value in the near future. Investors are strongly encouraged to consult their professional advisers before making any decisions and to closely monitor further announcements from the REIT.

Background: Sabana REIT at a Glance

Sabana REIT, listed on the SGX-ST since November 2010, holds a diversified portfolio of 18 industrial properties in Singapore, valued at over S\$1 billion as of end-2024. It is a component of the SGX S-REIT Index and MSCI Singapore Micro Cap Index.

Conclusion

The coming months will be crucial for Sabana REIT. The combination of management upheaval, lender negotiations, and looming debt maturities has created a situation fraught with uncertainty—and with the potential for significant share price movement. Investors should remain vigilant and await further updates.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or an offer to buy or sell any securities. Investors should conduct their own due diligence and consult with their financial advisers before making investment decisions. The value of investments can go down as well as up, and past performance is not indicative of future results.

View Sabana Reit Historical chart here