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First REIT: DPU increased 16.7% to 1.96c.

Saturday, October 26, 2013

On 26 July, I blogged about a 16.4% increase in First REIT's DPU. That was due primarily to contributions from 4 newly acquired properties. So, a continuation of the higher DPU through the quarter that ended 30 September should not come as a surprise.

Sometimes, in REITs, we see increases in net property income and distributable income but a lower or stagnant DPU. Of course, if the gearing level should be significantly reduced, it could be acceptable. Otherwise, all else being equal, it just means that we had an incompetent management.


When I initially invested in First REIT years ago, it had a relatively low gearing ratio. It was a bit more than 10%. Now, it is above 30%. So, the higher DPU has been achieved by leveraging up. Now, I am not saying that this is a bad thing.

However, to continue growing through acquisitions is going to be more difficult especially because the management wants to keep gearing at around 30%. This was also why I cautioned in an earlier blog post that we could expect a private placement if there should be another acquisition in the pipeline.

With the management saying that they are exploring AEIs to enhance income stream and to maximise returns to unitholders instead, the prospect of having a private placement is much weaker now. I view this as a good thing.


To have a private placement in order to strengthen the balance sheet making an acquisition or development less onerous might or might not result in a higher DPU. In the case of AIMS AMP Capital Industrial REIT, DPU improved while in the case of Cache Logistics Trust, DPU declined although marginally. So, in the case of First REIT, since we have a good thing in hand, why change it? The status quo is fine by me.

The CEO of First REIT's manager, Dr. Ronnie Tan, has a reputation for accumulating the REIT's units at all price levels. His interests are more aligned with unitholders', therefore. So, this is, perhaps, a reason why First REIT has been such a good investment for retail investors.

Related posts:
1. First REIT: DPU increased 16.4% (Part 1).
2. First REIT: DPU increased 16.4% (Part 2).

Don't waste the last bit of jam, again.

It was pineapple and mango the last time. So, what is it this time?




Guess?



One.



Two.



Three.



Times' up!




Did you guess correctly?

Slurp!

For people who don't know what I am talking about, please read related post below. ;)

Related post:
Don't waste the last bit of jam.

3 Trusts in AK71's portfolio and their income distributions.

Thursday, October 24, 2013

I am expected to be quite bogged down by work in the near term and it will probably be a good idea to get more sleep in the meantime. However, reading pages 6 and 7 of The Business Times just now perked me up and I just got to blog about it.

3 Trusts I am invested in have announced their DPU for the last quarter:

The star is AIMS AMP Capital Industrial REIT which, regular readers would know, is one of my two biggest investments in S-REITs, the other one being Sabana REIT. As per my expectations, the annualised DPU of the REIT is now 11c as it declared a DPU of 2.75c for the quarter ended 30 Sep 13.

There are plans to bump up DPU in the next 2 years through AEIs, acquisitions and by maximising plot ratios. I will temper my optimism because if the REIT should try to lower its gearing, it could do another private placement and this would water down any potential increase in DPU.

Cache Logistics Trust which most analysts seem to favour announced a lower DPU of 2.126c, down 0.8%, year on year. Not a big deal although a bit of growth would have been nice. This is especially when distributable income actually rose 9.6% to $16.5million.

DPU came in lower due to 70 million private placement units in March this year. Regular readers know that I much prefer rights issues to private placements since retail investors like me never get to buy discounted units at private placements.


The third Trust is Frasers Commercial Trust (FCOT). It announced a DPU of 2.08c which is some 18.9% higher, year on year. Lower finance costs and lesser payment to holders of its Convertible Perpetual Preferred Units (CPPUs) are what helped to boost DPU.

A rough back of the envelope calculation tells me that the income distributions for the quarter ended 30 Sep 13 from these 3 Trusts will form approximately 7% of my total passive income from S-REITs this year. This will be very useful for my first year end holiday with my family in 5 years. I am looking forward to spending some quality time with my family and taking a longish break from work.

Always good to have positive news to perk us up in life.

Related posts:
1. Cache Logistics Trust: Initiated long position.
2. FCOT: DPU up 16.8% in 18 months.
3. AIMS AMP Capital Industrial REIT: Making money.

Buffett's secrets from Baltimore County Public Library.

Tuesday, October 22, 2013

I just received a parcel. It contains a hard cover copy of "Buffettology" from Baltimore County Public Library!


The library received the book in November 1997. Wow! Imagine that. I was only 26 years old in 1997.

This book is 16 years old! It was sitting in a public library in the USA and now it is mine. I get a strange, fuzzy feeling thinking about it.

It also gives me satisfaction to know that this purchase from BetterWorldBooks helped to fund literacy for the less privileged.

Some stuff in the book.

New material for bedtime reading.

Related post:
Good deal on Buffettology.

Emergency Fund: How much is enough?

Monday, October 21, 2013

I want to thank a former guest blogger, Winston Koh, for showing me a video clip by the famous Suze Orman on the topic of "Emergency Fund".



In case we lose our jobs, it could take us a much longer time to get a new job if Singapore goes into a severe recession. Think GFC. Think AFC.

We would need an emergency fund to tide us over and we do not want to be in a situation where we might have to liquidate our investments at depressed prices. The cost of holding an emergency fund is well worth it. There is no question about this.

Related posts:
1. Why a meaningful emergency fund is important?
2. Nobody cares more about our money than we do.
3. Don't see money, won't spend money.

Fukushima and investing in Japanese real estate.

Sunday, October 20, 2013

I have real estate investments in Japan through Saizen REIT. So, naturally, I am concerned about whether there is any progress made at the Fukushima nuclear power facility.

Prime Minister Shinzo Abe seems to be doing all the right things to kick start an economy that has been in deflation for 20 years. He has also openly asked for help from the international community to help manage the problematic Fukushima power plant. Is a solution close at hand?


Radioactivity levels at Japan's Fukushima nuclear power plant on Thursday were 6,500 times higher than the previous day's readings. 19 October 2013.

The situation does not seem to have improved.

Although Saizen REIT does not have buildings within a 20km radius of the power plant, the nearest being 60km away in Koriyama and 100km away in Sendai, the inability of Japan to handle the problem in an effective manner raises pertinent questions since earthquakes are likely to occur again. If nuclear plants in other parts of Japan should face the same problem in future, what then?

Having said this, if we believe that the Japanese economy is turning around and if we want to invest in Japanese residential real estate, it would make more sense to invest in a REIT than to invest in specific properties in Japan. This will lower the risk of a total loss due to natural calamities.

Related posts:
1. Saizen REIT: Sendai, Koriyama and Morioka.
2. Invest in Japanese real estate.
3. December 2011 in Japan: Hakone.

How to be truly "rich" when the world collapses?

There is a very interesting article in the weekend edition of The Business Times. It is by Cai Haoxiang and he asks the question "What asset do you flee to when the world collapses?"

We have heard people saying that bonds are now a bad idea and that equities are preferred. So, many are invested and even fully invested in the stock market. No emergency fund? No war chest?

Singaporeans, of course, have a never ending love affair with real estate with many thinking that real estate prices on our tiny island will only see prices going higher. 

Someone told me that there is never a bad time to buy a property. Well, never say never. Those who bought a property here before the Asian Financial Crisis in the late 90s just broke even recently.

Then, there are the bears who believe that a correction is overdue and that the longer the bulls continue charging, the bigger the correction is going to be. 

There are people who do not believe in the rally. What are they doing? Staying 100% or close to 100% in cash and waiting to buy assets on the cheap.

However, in a situation where the world economy really collapses like in 1929, who wins?




"... how long can Singapore survive if there is a sustained global economic crisis? With zero natural resources and an economy heavily dependent on global trade flows, Singapore's economy is especially vulnerable when nobody wants to trade and people worry about clean water and edible plants, not chemicals and electronics.

"In rich, sophisticated Singapore populated with financiers, lawyers and plenty of middle managers, skills actually useful to survive an economic collapse might be startlingly in short supply...

"Build up a set of skills and contacts that people will want in good times and bad and you will never go hungry for as long as you live."

We could have tons of money, even gold and silver coins. Could they be worth more than food and clean water if these should suffer from scarcity? If Singapore's economy should go into a tailspin, would the FTs still want to come here? Who would rent all the spanking new condominiums which have been built? Could we see vacancy rate in the double digits?

"... gold can't be eaten... try convincing the chicken rice seller to take your Bitcoins as you fend off squatters from your multiple properties."

A sobering read with a dash of humour. Get a copy of this weekend's edition of The Business Times. The article is on page 5.

Disclosure:
AK71 is a shareholder of SPH. Every copy of The Business Times sold could contribute to AK71's financial well-being.

Related posts:
1. How to tell if you are rich?
2. Jim Rogers: Why I won't sell gold?
3. Never lose money in real estate?
4. Change to become richer.
5. The Millionaire Next Door.


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