Usually, REITs don’t issue rights at a severely discounted price to it’s NAV unless they are in financial distress, and the recent rights issue from Sabana was heavily discounted, but Sabana isn’t in a financially distressed position. So what gives? Well it turns out that having a REIT with a sponsor is a double-edged sword; particularly if the REIT made some purchases which are of a questionable nature in terms of valuation and yield accretion, and the REIT manager prices the rights issue to finance the purchases at a very high discount to it’s recent trading price, compared to other REITs which do not discount the rights much, unless in financial distress due to economic climate and/or business continuity issues. In essence, this deal seems to heavily favour two parties – the sponsor (including the REIT manager), and new investors, who will see that the traded price of the REIT ......