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LMIR: Proposed 1 for 1 rights issue.

Saturday, October 1, 2011

I read with great interest the 1 for 1 rights issue proposed by LMIR. As regular readers know, I much prefer rights issue to private share placements as the former allows all unitholders to take part in the enlarged capital base of the REIT.


This rights issue is to raise some S$337m to help fund the purchase of two malls in Indonesia: Pluit Village and Medan Fair.  Pluit Village is to be purchased from the REIT's sponsor while Medan Fair is from an independent third party.

Pluit Village
Consideration: S$234m
Occupancy: 78.1%
NPI yield: 10.8%

Medan Fair
Consideration: $154m
Occupancy: 91.2%
NPI yield: 7.4%

Total purchase consideration is S$388m.  The proposed 1 for 1 rights issue at 31c per unit will raise some S$337m. The balance required for the proposed purchases will be funded by internal resources or debt.


LMIR's current NPI yield is 7.5%.  So, its purchase of Pluit Village is NPI yield accretive while that of Medan Fair is not. However, as the former is of a much larger value, it more than compensates for the latter. In aggregate, the purchase of the two properties is NPI yield accretive.

Now, is this rights issue good for unitholders?

The annualised distribution per unit (DPU) is estimated at 4c per annum currently. At the current unit price of 54c, that is a distribution yield of 7.4%. Subscribing to the rights issue at 31c per unit will give us an average unit price of 42.5c per unit. The number of units in issue will double while back of the envelope calculations show distributable income will increase only approximately 40%.

Therefore, DPU is likely to decrease to 2.8c per annum which will give us a pro forma distribution yield of only 6.59% based on the post rights unit price of 42.5c. So, this rights issue is not a good idea for unitholders who are investing for income. In terms of distribution yield, it is regressive.

Even if the management were to improve the occupancy of Pluit Village from the current 78.1% to 90%, it would not really make a difference.

This rights issue could be good in the longer run as it will probably send the REIT's gearing level to under 10% which will give it more debt headroom for future growth. It is perfectly reasonable to then question, with already such low gearing level in the first instance, why the REIT has to resort to such a large rights issue for these proposed purchases?

I have always thought of LMIR as a bullet proof REIT, a stable passive income generator. However, I have also been unhappy with their hedging policy which to me seems to suggest a mediocre management. I hope this rights issue is not going to prove me right (pun unintended).

Read announcement here.

Related post:
LMIR: Thoughts on partial divestment.

CapitaMalls Asia: Dual listing in Hong Kong.

Friday, September 30, 2011

Earlier in March, CapitaMalls Asia announced that it was exploring the option of a secondary listing in Hong Kong.

Today, it received in-principle approval and will list on Hong Kong's mainboard come 18 October.

"CapitaMalls Asia may not be raising new capital from its listing in Hong Kong, but the move will allow the mall developer to widen its investor base here in Hong Kong and by default China.


"This is expected to help improve its market visibility and trading liquidity - which then opens up additional sources of funding for the company."

Read complete article here.

Although I continue to believe in the fundamentals of CapitaMalls Asia as well as its longer term prospects, its share price is something else.


Technically, the counter's share price is very much in a downtrend. Selling into strength is, therefore, a sound strategy.

A movie: Real Steel!

When I was at the movies earlier this week, I saw the trailer for "Real Steel". Wow! I am so going to watch this!


This is a story set in the near-future where the sport of boxing has gone high-tech. It stars Hugh Jackman as Charlie Kenton, a washed-up fighter who lost his chance at a title when 2000-pound, 8-foot-tall steel robots took over the ring.

Now nothing but a small-time promoter, Charlie earns just enough money piecing together low-end bots from scrap metal to get from one underground boxing venue to the next. When Charlie hits rock bottom, he reluctantly teams up with his estranged son Max (Dakota Goyo) to build and train a championship contender.

As the stakes in the brutal, no-holds-barred arena are raised, Charlie and Max, against all odds, get one last shot at a comeback.

I like this kind of inspiring stories and with robots thrown in, the little boy in me cannot resist it!

Play the Real Steel game and win movie premiums.
Check it out:
http://sg.churpchurp.com/AK71SG/share/realsteel

Sabana REIT: Acquiring 21 Joo Koon Crescent.

Thursday, September 29, 2011


Sabana REIT is recently on an acquisition spree. Today, it announced the proposed acquisition of 21 Joo Koon Crescent. With this latest acquisition which will be funded fully by debt, its gearing level will bump up to 35%.

Property: 21 Joo Koon Crescent.
Consideration: S$20.274m.
Remaining lease: About 43 years.

If all its recent proposed debt funded acquisitions should be successfully carried out, it is reasonable to expect rather much higher distributable income starting 2012 which would bump up DPU, of course.

However, with pro forma gearing level at 35%, the REIT could possibly resort to some equity fund raising for future proposed acquisitions.

I am still sanguine about Sabana REIT's numbers and I will accumulate if there should be any weakness in its unit price.

Read announcement here.

ARA: Partial divestment at $1.20

I was hoping that ARA's unit price would retest resistance provided by the declining 20dMA yesterday after the rather nice white candle the day before. So, I was hoping that there would be a chance to sell closer to $1.30.


Unfortunately, yesterday's black candle was formed on the back of much higher volume as price tried unsuccessfully to move higher. The ADX is rising and the DIs are still negatively placed. Selling pressure was strong.

The white candle today had even lower volume than that of two days ago. The bulls seem to lack conviction. So, I decided to lock in some gains by divesting those units obtained at $1.13 recently at $1.20.

If price were to go higher from here to test resistance provided by the declining 20dMA which approximates $1.29, I could divest those units obtained at $1.22 last week. If price were to weaken, I could load up again if the immediate support at $1.11 should hold firm.

Tea with AK71: Ad by Abercrombie & Fitch is indecent!

On 28 August, I made a quick mention of the gigantic poster at Knightsbridge (the former Crown Prince Hotel) put up by Abercrombie & Fitch and how it caused distress to some people with more puritanical persuasion. They said it was lewd. Read blog post here.

This was a photo I took that day:


Indecent?

What if we were to put a 4 storey high statue of David by Michelangelo in the same location?


Totally indecent! Gasp! It does not even have a pair of jeans to hide the privates!

Or what about this famous painting in the Sistine Chapel (yes, in a Chapel) also by Michelangelo?


Anyway, the Advertising Standards Authority of Singapore (ASAS) in its infinite wisdom has decided that the ad is indecent and has called for the ad to be removed.

Why bother talking about being more vibrant in the arts when we are not even able to match the openess of the Renaissance period a few centuries ago?

Read article here.

Do you want to be a millionaire?

Wednesday, September 28, 2011

Many people would like to be millionaires. There is something magical about having a million dollars in our bank account, it seems.

Of course, when we think about it, a million dollars these days is really not a big deal, especially when a DBSS flat in Tampines could cost almost as much!


I read an article in China Daily recently which is titled "After making a fortune, millionaires find a gaping vacuum in their lives". 

The article makes me wonder how many actually lost themselves in money making frenzies and, in the process, forgot why they want to be rich in the first place.

In China, it is almost as dangerous to be rich as it is to be a police officer as between "2008 and 2010 nearly two in every 10,000 multi-millionaires with a net worth of more than 100 million yuan lost their lives; for police officers, the country's most dangerous occupation, the death rate is three in every 10,000...

"Out of the 72 multi-millionaires and billionaires who have died in the past eight years, 19 died from illness; the rest died of unnatural causes...

"Of the 17 millionaires and billionaires who killed themselves over the past eight years, the average age was 50..."

The article made an interesting statement by saying the 

"poor can always nurse the hope of a better life.." 

while 

"wealthy entrepreneurs.. become confused over their original aim of making money."

Do you still want to be a millionaire? ;p

Related posts:
Passive income: A higher purpose.
No change to my plan as I plan changes to my life.

A wealthy doctor was strangled, shot and stabbed in his Florida mansion.

Win $80,000 cash or a Volkswagen Touran!

Monopoly is back at McDonald’s with over 3 million prizes to be won. Get your game labels with any Extra Value Meal purchase to win.


With over 3 million prizes be won including (1) $80,000 cash from Visa (2) Volkswagen Touran (3) A trip to Atlanta from Coca Cola and (4) A trip to Prague from Dynasty Travel plus many more.

And with over 3 ways to win in 2011 (1) Collect to win (2) Instant Win and (3) Chance Card all prizes must go.

The new Chance card also wins you $100 instantly and a final entry into the draw to win any unclaimed prizes.

Double labels on weekends also means you receive double the labels with any EVM purchased over the weekend period.

All prizes must go!

Start playing McDonald’s Monopoly today:
http://sg.churpchurp.com/AK71SG/share/mcd-monopoly2011

Meanwhile, want to win a $300 H&M voucher?
Play the Biore Marshmallow Whip Game:
http://sg.churpchurp.com/AK71SG/share/biore-marshmallow-whip-game

Good luck!

Have an iPad? Use Flipboard to follow my blogs.

Tuesday, September 27, 2011

I am probably one of the least tech savvy person around. So, for me to blog about technology is a rarity.

Ever since I started using an iPad, high technology is just a touch away. It is really a joy to use.

Recently, I was introduced to an app by a very good friend. The app is called "Flipboard".

The "cover" of Flipboard looks like the cover of magazines. It uses pictures from the publications we are subscribed to for its "cover".

I am able to keep up with my favourite magazines, newspapers and blogs all with this one single app!

Once we "flip" the cover, we search for publications to subscribe to and they will become a part of our Flipboard. It is that easy.

I really like how the introductions to articles in my blog are visually presented. Looks very professional, don't you agree?

If you have an iPad, you know what to do. Just go to the Apple app store and download Flipboard.

It is free and that makes me happy too.

Related posts:
1. Protect your iPad.
2. China prices, global deals.

First REIT, AIMS AMP Capital Industrial REIT, ARA and Sabana REIT.

Monday, September 26, 2011

It is kind of late and I still have a long drive ahead of me. So, this will be a quick update with very simple charts.

My overnight buy order for First REIT at 76c was filled. My other overnight buy order at 74.5c was not filled although the unit price did go that low today.


Overnight buy order for AIMS AMP Capital Industrial REIT at 19.6c was filled. I thought that many people would want to buy more units of this REIT at 19.5c, the last low. So, I queued 1 bid higher at 19.6c.


Towards the end of the day, I also bought shares in ARA at $1.13 and units in Sabana REIT at 86.5c.

Like I said in my last blog post on ARA, I did not put in an overnight buy order at $1.17 which was the next support I identified if $1.22 should fold. I said I would rather wait and see. Today, ARA's volume was rather low and $1.13 was a good 9c lower than $1.22. Could we see ARA at $1.08 next?


As for Sabana REIT, I would like to get this closer to 83.5c, its last low. At 83.5c, it would be giving a distribution yield of 10.5%. 86.5c is a few bids higher.


Looking at the chart now, I think I should have stuck to the original plan and waited for its unit price to get closer to 83.5c. Well, who knows for sure? Could have a bullish harami in the next session. ;)

Good luck to us all.

Making your first million dollars in real estate investment: Dreams and nightmares.

Sunday, September 25, 2011

Often, we hear that investing in real estate is the fastest way to making the first million dollars.

We saw people in queues and offering blank cheques in buying frenzies for projects such as One Devonshire some two years ago. The buyers then would have bagged nice gains and many would have sold their properties by now.

Sometimes, the building specifications of the property do not even matter for buyers. Positive sentiments just drive them to pay whatever asking price is out there.

Building specifications? Yes, for example, when I buy a condominium, I will find out how many lifts serve each block and how many units are there per floor per block. This is very important to me because if there were too few lifts, the waiting time could be unbearably long especially if we were staying on a high floor.

A HDB point block has 2 lifts serving 25 floors and 4 units per floor . This means 1 lift for 48 units (remembering that ground level is the void deck). So, if a property has 36 floors and 3 units per floor, having 3 lifts is about right. We get 1 lift for 35 units.

So, the lift to units ratio is very important, wouldn't you think?

Apparently not. Southbank, a condominium along North Bridge Road, has 197 units in its residential block but only 3 lifts. This means 1 lift for almost 66 units. This ratio is worse than a HDB point block! I wouldn't buy a unit there but it does not mean that people who did would not make money from their purchase. Indeed, in two years, its price has appreciated a hefty 50% on average.

I also consider having ample parking lots essential. All too often, I hear friends living in some condominiums complaining that their visitors cannot find parking lots in their estates and some even got their wheels clamped for parking in lots designated for residents.

We see so many condominiums built with just 1 parking lot per unit these days. If a resident has two cars, he is in trouble. Of course, where are visitors going to park?

We see many condominiums built with enough parking lots for only 80% of the units just because the developments are a short distance from the nearest MRT station. If every resident owned a car, things could turn ugly.

We also see some condominiums these days with mechanical parking lots and I read that it takes 7 minutes for a car to be parked. Imagine if five people should come home at the same time. Could the fifth car's waiting time be 35 minutes?

Increasingly, we see newer condominiums being more and more marginal in that they are compromising on the day to day pragmatics. These are projects I would avoid but it does not mean that one would not make money in these projects, of course. It is just that if it is not a condo I would want to live in, I wouldn't buy it. Quite simple.

Of course, some would say that buying a piece of real estate is about location, location and location. Doesn't matter if it has enough lifts, parking lots or whether it is freehold or leasehold. I imagine this to be true for most but for me, it is more than just location.

Now, certain things I can see and analyse but certain things I can't. It is a bit like buying shares of companies. We can look at a developer's history and the project's specifications and asking price psf just like how we can look at a company's history, its numbers and its share price. However, there will always be things we cannot see.

I read in the news today that a very reputable developer in Singapore, Wheelock Properties, is being sued for S$14m "in compensation for defects that have been plaguing the estate for the last three years". We are talking about The Seaview.



Wheelock Properties is the developer of Ardmore Park, long regarded as the standard in luxury condominiums before SC Global came into the picture with even more grandiose developments. So, it came as a surprise to me that "in late 2009, building surveyors found at least 32 cases of defects in areas such as lift lobbies, the swimming pool, residential units and the basement car park.

"In addition, the MC claimed that the contractors did not carry out waterproofing properly in areas such as the basement car park, causing damage and safety risks.

"Residents said the same problem was occurring on the rooftops, which meant that higher-floor residents had problems of water seepage and water-stained ceilings and walls."

The Seaview was marketed as the Ardmore of the east and was a very pricey project. It still is. A 1,647 square feet four bedroom unit is asking for $2.5m today. With quality issues aplenty, I wonder if buyers would give it a wide berth. If we take a look at Property Guru's website, we see many trying to sell their units in The Seaview.


So, is buying condominiums developed by a reputable company always a good idea? Is buying new always better than buying old because the perception is that the property's condition would be relatively newer and that less repairs are required?

The article on The Seaview is quite detailed and I have only reproduced a small section of it. To read the whole article, click here.

I have very few blog posts on real estate investment, I realise, and I hope you have enjoyed this one, especially if you are thinking of taking that next step to invest in a condominium in the next few years.
 
Related posts:
1. Real estate as a hedge against inflation.
2. Money continues to flow into Singapore.


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