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6M 2015 passive income from S-REITs.

Wednesday, July 15, 2015

I shared how and why I reduced my investment in Sabana REIT substantially and the much lower level of passive income received from my S-REIT portfolio last year was mostly due to this. I retain a very small position in Sabana REIT as a reminder or incentive for me to track new developments, if any. The REIT could become a good investment again in future if the management get their act together.

I feel that although the distribution yield looks relatively attractive for Sabana REIT now, investors want to be cautious and remember that there are only a few months "before the expiry of 11 master leases (and) the Manager is working towards renewing or securing new master leases for 7 of them. The remaining 4 will likely be converted into multi-tenanted buildings." Occupancy level will most likely fall and DPU will most likely take a hit, all else remaining equal.




I am still rather happy with AIMS AMP Capital Industrial REIT. They are doing the right things to add value for unitholders, especially in the way they go about re-developing their properties to max out their plot ratios. I really like how they secure pre-commitment before embarking on such projects and I like the fact that insiders have a meaningful stake in the REIT too. This REIT is definitely one up on Sabana REIT.

I haven't really made any changes to my portfolio of S-REITs (from July 2014 to June 2015) apart from initiating a long position in Soilbuild REIT. The expectation that the REIT would benefit from commercial entities moving their activities (like call centres and IT departments) to business parks should pan out nicely.

So, although industrial properties S-REITs are expected to face challenges from more supply of industrial space in the next 2 years or so, Soilbuild REIT should weather this relatively well.





What about my investment in Saizen REIT? Well, there is some talk on how residential property prices in Japan have gone up in recent times because foreigners are more enthusiastically investing in Japan again. There is also some talk about how prices have gone up too much because rentals have not gone up in tandem. So, some are saying that prices must come down and maybe they would.

Now, perhaps, it is timely to remind ourselves that Japanese residential property prices continually fell for two decades and the fall in prices had been much sharper than the fall in rental in those twenty years.


Something I blogged about in December 2009: here.


The increase in property prices since the introduction of Abenomics is just a bump in comparison to the fall off the cliff in those twenty years. Saizen REIT remains very undervalued and should be a natural beneficiary of the recovery of the Japanese housing market.

My three largest investments in S-REITs are still:

1. AIMS AMP Capital Industrial REIT
2. First REIT
3. Saizen REIT

They account for the bulk of my passive income from S-REITs.



I also have smaller long positions in the following S-REITs:

4. Sabana REIT
5. FCOT
6. Suntec REIT
7. LMIR
8. Cambridge Industrial Trust
9. Cache Logistics Trust
10. Keppel REIT
11. Soilbuild REIT



Half year (2015) passive income from S-REITs: $45,626.80.

On a monthly basis, this works out to be $7,604.46 a month. The slight improvement compared to 2014 is probably due to the addition of Soilbuild REIT to my portfolio.

Although interest rates are expected to rise in the near future, it would be a mistake to think that S-REITs will all go the way of the Dodo. Remember that S-REITs might be bond-like but they are not bonds.

S-REITs are really property leasing businesses and they are more likely to do better compared to bonds in a rising interest rate environment. S-REITs are, generally speaking, still relevant instruments for income investors.

Related posts:
1. 2014 full year income from S-REITs.
2. AK says create your own Dividend Machines.

53 comments:

Sanye ◎ 三页 said...

AK,

I almost fell from my chair when I saw the title for the blog. "Wah lau eh, AK got 6 million passive income alone from S_REIT?!?!" LOL

jojo said...

"Half year (2015) passive income from S-REITs: $45,626.80.
On a monthly basis, this works out to be $7,604.46 a month."

AK, I lau-nouaw ... drooling.. :)

AK71 said...

Hi Sanye,

Then, it should have been "$6M 2015 passive income". LOL.

Missing dollar sign? I wish. LOL. ;p

AK71 said...

Hi jojo,

Don't like that say. ;p

You have been following my blog for years. So, you would know this is not the most I have received from S-REITs but thanks for the encouragement. :)

betta man said...

Hi AK,

Care to share how many stocks you have in your portfolio currently ? I try to keep to 20 for ease of tracking of dividends and monitoring :)

E-commerce said...

Good day AK,

Why is ACCORDIA GOLF TRUST not mentioned in your smaller long positions?

Cory said...

Can i do a poke ! I guess around $1.5 M Reit Portfolio Size :)

AK71 said...

Hi betta man,

For 2014, in 2 blog posts, I listed my investments in REITs and non-REITs. You have been following my blog regularly and, so, you probably know what I did in the first 6 months of 2015. I am sure you can make an informed guess. ;)

AK71 said...

Hi E,

Accordia Golf Trust is not a REIT. :)

AK71 said...

Hi Cory,

Is that a question about the weather? I seem to have gone stupid suddenly. The weather today not bad hor?

qook said...

AK, great post. I found out recently that a lot of large European instituional investors have been buying S-Reits in the past few years, which could have contributed to the massive appreciation and yield compression for some S-Reits. Do you think that when interest rates in their home countries rise, they may pull out of Singapore and invest back home?

Personally I do hope that they go away and let the Reit prices fall back to more reasonable prices. I first started looking at Suntec Reit when it was yielding almost double digit. I divested some when it fell to barely more than CPF returns. By right Reits ought to be yielding more than that!

AK71 said...

Hi qook,

Well, money should go to where it is treated best and, most of the time, they do. :)

QE is in full swing in the EU and Japan. Interest rates are still very low in the USA and the expectation is for an increase in the near future but the pace is likely to be slow. The combination of (still) low interest rates and increasing money supply means more interest from investors in yield plays. I don't see this changing in the near future.

There could come a time when it makes sense for the income investor to just leave most of his money in fixed deposits with the local banks. When might that be? When interest rates are much higher. And when might that be exactly? I don't know. -.-"

As for comparing REITs' distribution yields with the returns we get in our CPF-SA and I am assuming that you are referring to the SA, it isn't an apple with apple comparison. Apart from the fact that nowhere in the world would we find an AAA investment grade bond that has a coupon of 4% to 5%, there are other important differences. However, I know what you mean. :)

E H said...

Hi AK, if I may ask, how much or what is the percentage of the passive income from your CPFIS?

AK71 said...

Hi E H,

That would be the interest income I receive at the end of the year for the money in my CPF-OA since I have not used the money for any investment in stocks yet.

See: How did AK amass so much money in his CPF-OA?

For 2014, the interest income was about $9,000.

everydaypengs said...

Hi AK,

Reading about your level of passive income always inspires me, to continue the good work in building my own... thanks for sharing!

AK71 said...

Hi everydaypengs,

And that is the main reason for my sharing! I am glad. :)

Gambatte! :D

SMK said...

Looks like ground sentiments for reits are stronger than in 2013 and will support prices. Dividends aside, quite sad to have reduction in capital due to lower prices. Dividend machines also need support, right? Haha

AK71 said...

Hi SMK,

I am not pushing for anyone to sign up for "Dividend Machines" and I don't think they "need" support. I don't think they are making a lot of money charging US$250 or so for the course. In fact, I always wonder why they do it because I believe they can make more money doing other stuff with the brains that they have.

Anyway, simply put, I believe that "Dividend Machines" is a good value for money option for anyone who might be looking for structured guidance.

Low Paul said...

Hi AK,
Personally i have been investing for near 10yrs. What i did was to use my dividends n external cash to feed the income producing counters. N i rebalance it regularly.
portfolio size varies accordingly to market sentiments.
but one constant remains ie my dividend grows unidirection.
over time the portfolio will eventually grow to catch up with this dividend increase.
so over a long time both portfolio n dividend will move upwards.
Cashing out into FD n holding it there to wait for a more suitable timing to reenter the market appears a bit like timing it, for no one can predict what the short term say 3-5years market's going to be like.

AK71 said...

Hi Paul,

I am usually not good at making predictions since I don't have a working crystal ball. Once in a while, my bowling ball might get it right though. ;)

Investing in the stock market for income is definitely a process. Well, after 20 years of stumbling around in the stock market, I have learnt at least that much. We need a bit of patience, a bit of courage and a bit of caution. Time will do the rest. :)

Low Paul said...

Personally
my view is that the overall direction is still upwards.
so long as we stick to fundamentally stable stks which pays decent dividends n just reinvest them n rotate them periodically, i think its as simple as can get.
20yrs ago..we have nokia as leader..the phone can only call n sms
now xiaomi or samsung smartphone with unimagineable functions.
So is the biomedical fields.
the world is advancing n still will..imho..it cannot go backwards rite?

AK71 said...

Hi Paul,

I always tell people that we are all made differently and in more ways than one too. It is never my way or the highway. ;)

Peter said...

Hi AK,

It is pleasure to read your blog. Thanks for your detail analysis.

I have two questions

1)Whether reits are only good in low interest environment. It seems that most of SG reits are listd after 2008.
2)how do you think Saizen REIT`s CEO disposal of his share?

Peter

AK71 said...

Hi Peter,

You will find my opinion in the last two paragraphs of this blog post and you might also want to read this: How should we approach REITs now?

I don't think it was Saizen REIT's CEO. I believe it was the Chairman, Arnold Ip. Peter Lynch said before that there are many reasons why insiders sell but there is only one reason why they buy. I don't know why the Chairman sold some of his shares in the REIT but it doesn't bother me. Having said this, I would be concerned if all the insiders start selling and selling most of their stakes at the same time.

Peter said...

Hi AK, thanks for your quick reply.

AK71 said...

CACHE Logistics Trust on Monday reported a 0.3 per cent dip in distribution per unit (DPU) to 2.14 Singapore cents for its second quarter ended June 30, 2015. This was due to a larger base of units compared to a year ago.

Source:
http://www.businesstimes.com.sg//companies-markets/caches-q2-dpu-down-03

AK71 said...

KEPPEL Reit marked a 9.5 per cent year-on-year drop in distribution per unit (DPU) to 1.72 Singapore cents in the second quarter ended June 30, 2015. But this was due to an enlarged base following an issuance of new units to fund Marina Bay Financial Centre (MBFC) Tower 3.

Source:
http://www.businesstimes.com.sg//companies-markets/keppel-reits-q2-dpu-down-95-0

AK71 said...

First Reit: Contributions from new acquisitions and its Indonesian and Singapore properties lifted the trust's DPU for the second quarter by 3.5 per cent from the preceding year to 2.07 Singapore cents. It said in a statement that though Indonesia saw its economy slow down this year, healthcare spending is expected to remain supported due to a universal healthcare scheme introduced by the government.

Source:
http://www.businesstimes.com.sg//stocks/stocks-to-watch-m1-keppel-reit-cache-logistics-trust-first-reit

AK71 said...

Frasers Commercial Trust (FCOT) traded flat on Tuesday morning, a day after it reported a 7.3 per cent increase in distribution per unit (DPU) to 2.35 Singapore cents for its third quarter ended June 30, 2015, compared with 2.19 cents a year ago.

This was mainly due to the better performances of Alexandra Technopark and 55 Market Street. Alexandra Technopark saw a 68.4 per cent increase in NPI in Q3 on higher rents than the fixed master lease rent it used to get. 55 Market Street also continued to perform well on the back of higher rentals and occupancy, it said.

FCOT is uniquely positioned as the only office Singapore Reit not exposed to the oversupply of Grade A office space ... on a quarter-on-quarter basis, the trust's DPU had weakened on the depreciating Australian dollar against the Singapore dollar, even though its distributable income was fully hedged. The trust has two properties in Canberra and Perth.


Source:
http://www.businesstimes.com.sg//stocks/hot-stock-frasers-commercial-trust-flat-despite-reporting-a-73-increase-in-dpu

AK71 said...

FRASERS Commercial Trust (FCOT), which owns commercial property in Singapore and Australia, said on Friday it has raised gross proceeds of about S$142.1 million from a private placement.

In a press release, the trust manager added it intends to declare an "advanced distribution" of its distributable income for the period of July 1 to Aug 2, 2015, to its existing unitholders, which it estimated to be 0.7805 Singapore cent per unit.

Its placement was of 96 million new units at S$1.48 apiece, which the trust said was at the top end of the price range.

It added that the placement was upsized 14.3 per cent to S$142.1 million after strong demand from existing and new institutional investors.


Source:
http://www.businesstimes.com.sg//companies-markets/frasers-commercial-trust-raises-s1421m-from-upsized-placement

Peter said...

Hi AK

May I know what price you sold your Sabana reit? I feel the price is quite attractive now.

AK71 said...

Hi Peter,

I started selling sometime in late 2013. I cannot remember all the sell prices but they were all above $1.00.

AK71 said...

... further to the announcement dated 20 July 2015 in relation to the application of a distribution reinvestment plan (“DRP”) to the distribution of 2.07 cents per unit in First REIT (“Unit”) for the period from 1 April 2015 to 30 June 2015 (the “Distribution”), the issue price of the new Units to be issued under the DRP in respect of the Distribution is S$1.3719 per Unit.

Source:
http://firstreit.listedcompany.com/newsroom/20150728_182643_NULL_FST63G2P2KJ7DU1S.1.pdf

Koala said...

Hi AK.

I wonder if this is the reason First REIT dropped till 1.36 today.

AK71 said...

Hi Koala,

Possibly and this would probably scuttle the REIT's DRP.

TI said...

Saizen announced Distribution Reinvestment Plan on 22-Jul-2015 =)

slacker said...

Hello ak, just started reading ur blog.
What's ur thought on interest rate increase.? How is it going to impact on reit? Also I'm interested to know how u pick your reits stocks.

AK71 said...

Hi slacker,

Welcome to my blog.

You have just started reading my blog but I have been blogging about REITs for many years and to answer your questions here would be like rewriting many of my old blog posts. Hope you forgive me if I tell you I feel too lazy to do that. ;)

However, you might want to use my blog's search box located at the top right corner to search for past blog posts on stuff you might be interested to find out more about. Of course, that includes REITs. If it is something I have blogged about before, you would be able to find it.

I have also provided many (useful) links in both the right and left side bars of my blog. In particular, you might be interested in 2 boxes in the right side bar with the headings "Invest in S-REITs" and "S-REITs AK71 invests in".

Nothing sacred. Just my thoughts. Hope you find them helpful.

Lancelot Chua said...

Hi AK,

Have been reading your blog (thanks for the inspiration) for sometime and recently due to the bearish market i have came back to re-read some of your post to stay level-headed. What do you think of the current market and when will things turn around?

Also, care to share how long (10/20 years) it took you to accumulate these investments? Again, $7,604.46 a month for passive income is very very impressive !

Thanks !

AK71 said...

Hi Lancelot,

Well, to get to where I am today, it took me about 20 years. It is a process. :)

As for what I think about the market, Mr. Market will do what Mr. Market does. I don't know how to predict his moods. I don't know if things will get worse or if things will improve. I certainly do not know when they are going to happen.

What I do know is what I would do if Mr. Market gets much more depressed from here. Have a plan. Have a war chest ready. ;)

You Can Do It said...

Hi Ak,

I read that croesus retail trust gearing is at 50%. would you continue to hold this or sell?

thanks

kt

AK71 said...

Hi kt,

A gearing level of 50% for a business trust in itself is not reason enough to sell. ;)

AK71 said...

Overnight BUY order for Soilbuild REIT filled at 75c a unit.

PL N said...

Hi

Is it gd time to buy AIMS and first reits now?

Cache logistics is dropping drastically? still holding?

Thanks

PL

PL N said...

Hi AK

Is it a gd period to buy first and AIMPS reits now?

Btw, cache logistics keeps falling. Still holding?

Pls advise.

Thanks

PL

PL N said...

Hi AK

Is it the time to buy AIMPS and first reits now?

Btw, cache logistics is falling. Still holding?

Pls advise?

Thanks

PL

AK71 said...

Hi PL N,

Relatively new to my blog? ;)

You must have had some idea of what are the fair values for these. Why did you buy Cache Logistics Trust when you did, for example?

Then, if you think they are not overpriced now, you could buy some. If you think that they are undervalued now, buy a bit more. Of course, there is no guarantee that prices wouldn't fall further.

blazingruby60 said...

hi AKS

Soilbuild Launches Preferential Offering to fund Bukit Batok Connection Acquisition.The preferential offering will issue up to 94,353,672 new units in Soilbuild REIT to raise S$59.4 million dollars. New units will be issues on the basis of 1 new unit for every 10 existing units. The new units will be issued at a price of S$0.63 per unit.

Will you be subscribing to this preferential offering?

I have a small position in soilbuild so i am in two minds...

Whats your take?

thanks

AK71 said...

Hi Ruby,

I like buying a fairly priced building that generates a meaningful level of income which has visibility for many years to come. So, I am participating.

I said this in FB and also elsewhere in the comments section here in my blog. You might want to follow me on FB or my blog's comments section as well. :)

See: Following AK etc.

Chula Sulagaesuan said...

Hi AK

I am not familiar with preferential offering, can normal retail investor participate? Or it is only for certain groups? Thanks!

AK71 said...

Hi Chula,

Retail or institutional investors, as long as they are existing unit holders, they will receive the offer if they have a Singapore registered address.

Chula Sulagaesuan said...

Dear AK

Thanks for the info! This will be different from private placement then?

AK71 said...

Hi Chula,

Oh, definitely. :)

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