Sponsored Links

To retire by age 45, start with a plan.

"Is early retirement the right financial choice?" Jim Ellis discusses long-term financial growth strategies. I have blogged a...

Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.

Archives

"E-book" by AK

Second "e-book".

Another free "e-book".

Pageviews since Dec'09

FOLLOW AK ON FACEBOOK.

Recent Comments

ASSI's Guest bloggers

AIMS AMP Capital Industrial REIT: Distribution Reinvestment Plan.

Tuesday, May 14, 2013

Regular readers know that I will always take the income distributions from REITs in cash when they offer a Distribution Reinvestment Plan (DRP) as an alternative.

There are two reasons why I do this and they are because:

1. I invest in REITs primarily for income and accepting new units in lieu of cash distributions means having less passive income.

2. There is a possibility that I could get to buy more units of the REITs cheaper later on.

These seem to be reasonable enough.

However, with the DRP offered by AIMS AMP Capital Industrial REIT with regards to 4Q FY2013's distribution, I have decided to accept some DRP units and the balance in cash.

See? Who said that people who invest in REITs are predictable? Could anyone have predicted this decision of mine? OK, why have I decided to do this?

Let us start with what we all know. The REIT went XD on 26 April 2013 with a DPU of 3.14c. Today, the REIT closed at $1.84 per unit. The DRP units are at the issue price of S$1.6727.

So, there is a 10% difference between the REIT's closing price today and the DRP issue price. If we were to take advantage of this, we would get 10% more money than choosing to receive the distribution in cash only, wouldn't we?

For example, if someone who was going to receive S$1,672.70 in cash distribution should opt for new units instead, he could sell these new units for S$1,840.00 to Mr. Market and make some nice pocket money! Of course, we wouldn't know if the unit price would still be at S$1.84 later on. It could possibly be lower, after all.

The solution to this is quite simple. The person could sell an equivalent number of units from his existing holdings now to lock in the price of S$1.84. These units sold would soon be replaced by the DRP units anyway.


I like to have my cake and be able to eat it too. Who doesn't? However, what I have described so far might not work for everyone. Why?

Although to receive about 10% more money is attractive, the operation would make sense only to those unit holders whose cash distribution from the REIT amounts to S$1,672.70 or more. Doing some simple calculations, with DPU at 3.14c, it would only make sense to investors who hold 54 lots or more of units in the REIT to do this. Any lesser, it won't be viable.

It would also make sense for unit holders who hold more substantial stakes in the REIT to calculate exactly how many of the units they currently hold should be used in accepting DRP units to avoid odd lots which could be quite a pain.

For anyone who is thinking of accepting DRP units, remember that the closing date is 23 May 2013.

Related posts:
1. AIMS AMP Capital Industrial REIT: Bumper distribution.
2. Made and still making money from S-REITs.
3. AIMS AMP Capital Industrial REIT: Making money.

19 comments:

JCK said...

I have been accepting DRP since I bought into AIMSCAP last year.
Done pretty so far! :)

AK71 said...

Hi JCK,

On hindsight, accepting the DRP each time it was offered in the last one year was a good move for anyone who wished to grow his stake in the REIT.

Congratulations! :)

Cory said...

Is quite hard for me as i am based oversea ...

AK71 said...

Hi Cory,

Well, accepting the distribution fully in cash is not a bad deal too. ;)

Poh Soon said...

I had opt for scrip for all my AAREIT holding this time round too...

AK71 said...

Hi Poh Soon,

I get the feeling that the increasing confidence Mr. Market has in the REIT has helped to push more people to accept the DRP. This is good news for the REIT, of course. :)

Marco said...

Hi AK71, I did not received any DRP offer?
I am staying in Malaysia, can I subscribe for DRP online?
Thank you.

AK71 said...

Hi Marco,

I don't think there is an online option. :(

You might want to give the CDP in Singapore a call.

Hotline: 6535-7511

FT said...

Any idea why is this AIMS looking so heavy the last few days?

FT said...

Hi AK71

This AIMS seems to be rather heavy the last few sessions .. hmm .. i wonder why

AK71 said...

Hi FT,

Er.. what do you mean by "heavy"?

EG said...

Anyone know what the reason for the sudden sell down yesterday?

AK71 said...

Hi EG,

I certainly don't but I get the feeling that buyers are waiting to get in.

EG said...

Anyone know what happened yesterday? There was such a huge sell off, not that I am complaining.

EG said...

AK,

You can put me on tt list of buyer, but was hoping this week will see more reduction in price.

AK71 said...

Hi EG,

Oh, I am sure many are looking out for lower prices to get in.

Annual DPU is likely to be 11c in the next 12 months.

When I was asked if I would buy more, I said that I already have a big long position in the REIT and will not add unless valuation is very compelling.

Then, what about an 8% distribution yield? That would certainly look interesting for a REIT that is actively pursuing redevelopment and AEIs.

8% yield would mean seeing the unit price at about $1.37. Would it go that low? Your guess is as good as mine. :)

Jackson Wee said...

Hi Ak71,

just an enquiry. how do you sell away the odd lots in the future when you subscribed to the DRP?

AK71 said...

Hi Jackson,

Call your broker. There is an odd lot market they can access.

For me, I wouldn't bother as the fees could be too hefty a percentage. I would just keep the odd lot forever and collect pocket money. ;p

AK71 said...

Jun 24, 20158:47 AM

AIMS AMP Capital Industrial Reit Management, manager of AIMS AMP Capital Industrial Reit (AA Reit), said on Wednesday it is issuing and listing 2.03 million new units under its distribution reinvestment plan (DRP).

The units will be issued at an issue price of S$1.4804 per unit to eligible unitholders who have elected to participate in the DRP. Following the issue of the DRP units, the number of issued units in AA Reit will increase from 631.75 million to 633.78 million. The units to be allotted will commence trading on the mainboard of Singapore Exchange on Wednesday.

Source:
http://www.businesstimes.com.sg//companies-markets/203m-new-aa-reit-units-to-commence-trading-on-wednesday

Monthly Popular Posts

 
 
Bloggy Award