Sabana-ESR Reits merger: MAS says safeguards in place against conflicts of interest

SINGAPORE - The Monetary Authority of Singapore on Friday clarified that its regulatory framework does not prohibit a shareholder group from owning substantial stakes in two real estate investment trust managers managing Reits invested in the same property class.

The unitholders last week wrote to MAS and Singapore Exchange Regulation,"urgently" seeking guidance on how to resolve the alleged conflict. For Sabana, its manager's board is composed entirely of independent directors, with no representation of directors from either the sponsor ESR Cayman or the ESR-Reit manager, the Sabana manager clarified in a bourse filing on Friday.Another regulatory safeguard MAS noted was that Reit managers and their directors have a legal obligation to act in the best interests of unitholders, and prioritise unitholders' interests over those of the manager and its shareholders.

MAS said that it may require financial institutions to put in place additional measures to address specific risks where needed, including that of conflicts of interest.MAS also noted that only the Sabana unitholders who are independent have a say in whether to approve or reject the proposed merger based on the financial terms negotiated and put forth by the Reit managers.

It added that its board went through a"thorough" process to evaluate the terms of the merger, involving"lengthy and careful deliberations" with its management team as well as financial advisers engaged to evaluate the commercial terms. Deloitte & Touche Corporate Finance is the appointed independent financial adviser to advise the independent directors of the Sabana manager and its trustee on the scheme.

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