Quarz has been buying the Sabana REIT since 2018

Quarz Capital Management is pushing for a merger of two large Singapore-based real estate investment trusts (REITs). The activist fund is pushing for a merger of Sabana Shari’ah Compliant Industrial REIT and ESR-REIT.

Quarz worries that ESR Cayman’s cross-ownership of the two funds creates disadvantages if the REITs’ investment mandates overlap. A merger would resolve the issues, according to the firm.

Quarz Capital Management Letter to Sabina REIT

Meanwhile, Quarz sent a letter to Sabina REIT on Thursday.

“We are not convinced by ESR’s argument that they are able to clearly manage Sabana and ESR REITs independently,” the letter read. “As a recently listed company in Hong Kong, ESR has a fiduciary duty to enhance the value of its shareholders, which translates to ensuring that the value of its stakes in both ESR and Sabana REITs are maximized.”

Quarz proposes that the two REITs merge. It proposes an exchange of 0.92 units of ESR-REIT and S$0.067 in cash for one unit of Sabina REIT.

Finally, Quarz Capital Management has been busy this year pushing for Singapore REIT consolidation. In April, it pushed for a deal between Ascott Residence Trust and Ascendas Hospitality Trust. At the time, Quarz also raised concerns after CapitaLand took ownership of both REITs managers.

Further, the two companies announced a merger in July. The deal will likely close in December.