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Possible delisting of Saizen REIT, First REIT and LMRT.

Wednesday, October 28, 2015

You know what they say about how things just seem to happen all at once sometimes? It never rains, it pours.

What are the chances of getting three strikes in a row? A turkey! That certainly got my bowling ball excited.


Just a few days ago, we heard news that Saizen REIT received a firm offer for their assets and this could well lead to the REIT being delisted if the offer is accepted. 

On my FB wall and here in ASSI, various discussions went on as to how much the offer could be and what could we do to fill the hole in our passive income if Saizen REIT were to be delisted.




Well, we might have more to ponder over after a friend shared this with me:

Lippo Group plans to shift two real estate investment trusts (Reits) with 35 trillion rupiah (S$3.63 billion) in assets from Singapore to Indonesia in order to benefit from tax breaks offered by Jakarta, its chief executive said.
The property-to-retail group's two Singapore-listed Reits are Lippo Malls Indonesia Retail Trust and First Real Estate Investment Trust.

Source: The Business Times

Saizen REIT and First REIT are two of my biggest investments in S-REITs. My largest investment in S-REITs is, of course, AIMS AMP Capital Industrial REIT. Together, these three REITs account for the majority of my passive income from S-REITs this year.

Although I sold off a large portion of my investment in LMRT (formerly LMIR) some time ago, I still have a meaningful investment in the REIT. Several percentage points might not be a big deal by themselves but add them to what I might be losing from Saizen REIT and First REIT, they become quite significant.

I could be realising significant capital gains but losing a big percentage of passive income from S-REITs in the not too distant future. It is not a tragedy, for sure, but it still creates a problem for me.

I will have to carefully consider how to make the best use of the money if the delisting of these three REITs should really happen.


Related posts:
1. Saizen REIT: Received a firm offer.

2. 9M 2015 passive income from S-REITs.

60 comments:

lzyData said...

And yet First REIT closed unchanged today - either nobody reads the news or Mr Market has discounted it.

I am not sure if they will delist it - and turn it into a private REIT? - or just transfer the listing to Jakarta. I don't think many investors in Singapore would want to own a Jakarta-listed trust. And of course it also begs the question of First REIT's currency structure.

AK71 said...

Hi IzyData,

There is nothing on First REIT's website on this. Early days, I guess.

When Sound Global decided to go with listing in Hong Kong only, they did a voluntary delisting in Singapore. So, a voluntary delisting could happen.

At this point, all we can do is to wait for more details.

unluckid said...

I really hope First Reit wont..my best holdings so far :(

AK71 said...

Hi unluckid,

I know how you feel.

Well, Lippo's CEO has spoken. So, the shift to Jakarta is probably going to happen.

Just a matter of time. -.-"

Machi said...

Hi AK,

I wonder if First REIT will go as planned, would they offer shareholders the current book value price or a premium to it's current share price?

Machi said...

Hi AK,

Also what is the risk if we start accumulating these two reits now at its price? They said planning only right? In your experienced, does this mean it is certain, only a matter of time?
Also LMIR is trading below BV, so in the event the "plan" goes through, would they offer shareholders BV rate?

Dividend Knight said...

Hi AK,

I am vested in First REIT too.

So, basically the report is saying that First REIT might be delisted and re-listed in Indonesia.

What does it mean for Singaporean investors like us? Will they offer to buy out our units around the NAV?

Howard said...

the only alternative left should First go will be Religare? OMG.

AK71 said...

Hi Machi,

I don't know if it is a good idea to start accumulating First REIT or LMRT now. Your guess is as good as mine.

The CEO of the Lippo Group has spoken. So, I don't think it is just something he is toying with. It is probably going to happen.

At what prices would the REITs be delisted if it should happen? Again, I don't know but logically the voluntary delisting prices should be at a premium to their market prices.

AK71 said...

Hi DK,

The report says shifting from Singapore to Jakarta but nothing of the actual mechanics. We will have to wait for more details but if a delisting should take place, it should be at a premium to market prices.

AK71 said...

Hi Howard,

Within the Healthcare REITs space, we don't have many choices. Religare Health Trust was something I took a bite of in late August. It was a nibble and not a gobble though.

Dividend Knight said...

Hi AK,

I agree that Singapore lacks healthcare REIT choices. Only Religare and PLife...

I guess it is time we start to source for new substitute counters to replace the potential delisting of First REIT.

It's gonna be difficult... :(

Jing Quan said...

Dear AK71,

I think such an announcement has already caused a sell down on the lippo counter. now i wonder with the sell down does it means when they take it off, it will be off the market value? If it is not worth to buy up more I hope its not so soon i still want my last dividend haha

As for saizen, i was only thinking of entering only to see it soar. seems like i dont need to buy liao :(

JQ

AK71 said...

Hi DK,

For Residential REITs, it is even worse. We only have one and that might soon be gone as well. ;p

AK71 said...

Hi JQ,

Mr. Market doesn't seem to like the news. First REIT got sold down pretty badly but seems to have found a floor now. I am just going to wait and see what happens.

As for Saizen, I do think that any offer to delist should be closer to its NAV than what it is now. Of course, without any further details on the offer, it makes sense to stay cautious.

Jing Quan said...

Dear AK,

Yup for First reit. For lippo, I am not sure if its time to scoop some more and hope when delisting, we will be paid handsomely on capital gains because nothing has been talked about compensating investor :D but this is a gamble is it worth the risk?

As for saizen. Perhaps I have no position in it so I am quite neutral on the prospect of buying but prices has went up over the past few months even thought its still below p/b 0.8 :D

JQ

AK71 said...

Hi JQ,

Actually, I wonder if there is a possibility of First REIT and LMRT being migrated to Jakarta, current investors and all. Then, we might become shareholders of a listed REIT in Indonesia. Maybe, this is what some of First REIT's shareholders are rebelling against. I hope we get more information soon.

Jing Quan said...

Dear AK,

what you say might be true. because its in rupiah I don't think my brokerage firm (standard charted) has that market. not sure how will it work out. Should i sell my LMRT or add my position haha..

E H said...

Aiyo. First Reit dropped 12cts just now.

But if you got in with a huge margin of safety like AK, then you are probably safe too :)

FT said...

Wah considering First is under healthcare industry; this counter sure has quite a swing for last few months

Bought some more here to receive more passive income; and hope for the best outcome :D

AK71 said...

Hi JQ,

I am sure many investors are worried too. So, sell and take back money better? ;p

My remaining investment in LMRT is virtually free. This is actually the only reason why I decided to hold on to it (and collect free money every quarter). It is not a REIT I would buy even at the current price.

AK71 said...

Hi FT,

After the sell down, First REIT looks less expensive now but it was only a couple of months ago when it touched a low of $1.14 a unit.

As an investment for income, back then, I decided to buy into Religare Health Trust instead of adding to my investment in First REIT. At the prices Mr. Market offered then, I was looking at a prospective distribution yield of 8% for the former and 7% for the latter.

Good luck to all of us. :)

Jing Quan said...

Dear AK71,

Yes will try to do some bottom fishing as this will help me average down abit and not to mention the upcoming Dividends distribution in Nov :D:D

Wow, you really have confidence in this counter. I thought its rather attractive at this price.

Thanks !!!
JQ

AK71 said...

Hi JQ,

Regardless of its unit price, First REIT's business will go on as usual. A lower unit price will mean it is more attractive but whether it is attractive enough for us to invest in the REIT will differ from person to person. We will have our own considerations. :)

Jing Quan said...

Dear Ak71,

I was referring to LMRT attractive price and your confidence that its is worth grabbing now. sorry you got confused with First REIT.

JQ

AK71 said...

Hi JQ,

Er... I did not say LMRT is worth grabbing now. -.-"

Jing Quan said...

Hi JQ,

I am sure many investors are worried too. So, sell and take back money better? ;p

My remaining investment in LMRT is virtually free. This is actually the only reason why I decided to hold on to it (and collect free money every quarter). It is not a REIT I would buy even at the current price.

October 29, 2015 at 11:07 AM

We different frequency? ok you did not use the word to grab :p

AK71 said...

Hi JQ,

LMRT is not a REIT I would buy even at the current price.

It means I won't buy...

Jing Quan said...

Oopss my bad. pie seh I feel like finding a hole to bury my head now :X

AK71 said...

Haha... All's well that ends well. No worries. ;p

AK71 said...

"Currently, Lippo has two REITs in Singapore with Rp 35 trillion in asset value and we will move those to Indonesia," said James in Jakarta on Wednesday.The Singapore-listed REITs are Lippo Malls Indonesia Retail Trust and First Real Estate Investment Trust.

Last week, the government announced its fifth economic policy package, which mainly aims to boost property and infrastructure investment by cutting a multiple tax previously imposed on a financial instrument known as a collective investment contract of REITs.

James acknowledged the government had made a breakthrough, after 10 years of discussion, by cutting the double tax to encourage the development of REITs. This development, he said, was very important.

"If we do not develop REITs, property project funding will be difficult. These developments are very important decisions."

The company, James said, would shift its REITs from Singapore next year.

Last week, Economic Coordinating Minister Darmin Nasution said that property companies used to create a subsidiary to turn their real assets into underlying assets, for REIT securities. They raised funds by selling and listing the REITs on capital markets abroad, such as in Singapore.

Previously, the government imposed a tax on the property companies and also on the subsidiaries.Finance Minister Bambang Brodjonegoro added that the government would publish the necessary finance minister’s regulation this week, to officially scrap the double taxation practice

Source:
http://www.thejakartapost.com/news/2015/10/28/fifth-policy-package-sees-lippo-shift-reits-indonesia.html#sthash.wYk4pNol.dpuf

Siew Mun said...

I got out of jail for LMRT. I bought 25,000 @ 0.355 and bought 15,000 @ 0.0305 manage to sell all at 0.335 with a small loss of ~$154 to switch to a better quality REIT AIMSAMP which was trading at $1.345-$1.35. Attribute to luck I guess.

WK said...

FR going down to NAV?

FT said...

Dear AK

Looks like market doesnt like the news at all; bloodbath morning :O

AK71 said...

Hi Siew Mun,

My history with LMRT goes way back to the days when it was LMIR. I loaded a lot more from 18.5c a unit during the GFC. Sold about half of my stake at 50+c a unit more than 2 years ago largely because I was unimpressed with the management at that time. -.-"

AK71 said...

Hi WK,

There is a conspiracy theory making its rounds now about how someone is trying to push down First REIT's unit price to NAV. Your guess is as good as mine. ;p

AK71 said...

Hi FT,

Indeed so. Mr. Market showing his displeasure in the usual way.

Dividend Knight said...

Trading for Saizen REIT is halted today.
Probably going to be a major announcement made soon.

FT said...

Hi AK

To further flame the conspiracy theory, and for the benefit of the rest of your readers, my counterparties this morning from 1.205 to 1.155; sellers were all local broking houses (if that means anything at all)

:D

raf said...

What should we read into announcements by managers of First Reit and LMR that they have no news in this regard

havefund said...

was looking at saizen report on valuation dated 20Aug15, it said total assets valued at S$474.1M and looking at the outstanding shares of 283.6M, does it mean the value stand at S$1.60? So if the offer price is near valuation, are we looking at this offer price? just wondering.

on lippo and FR, i guess we are all in the same boat waiting for what to come...is painful watching FR falling like a rock and lippo (her value at S$0.37?) undecided. i hope the sponsor don't play us out...crossing finger. My retirement just go bumped... :)

AK71 said...

Hi DK,

I certainly hope it is going to be good news for all of us. :)

AK71 said...

Hi FT,

I am waiting to see if First REIT's unit price is going to drop to NAV. If it should, I would buy some. It doesn't make sense, really, to have such a steady income generator sold down to that level, if it should happen.

AK71 said...

Hi raf,

It seems that the sponsor is a little sneaky? ;)

Well, we are talking about the Riady family but they have not done anything illegal, of course. :)

AK71 said...

Hi havefund,

Well, Saizen REIT's NAV should be a bit lower, taking into consideration the liabilities.

Good luck to all of us. :)

Siew Mun said...

Lone Star Fund to acquire Saizen @$1.17 at a small premium of 3.4% premium. Announced in SGX at 4.49 am 31 Oct 2015.

lzyData said...

Big news for Saizen. Looks like AK71 will have a good exit:

http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3Months&F=49UNXEC5H4QQCGAQ&H=8b83bc8f1fa7ffe7664d913a59b598ac642e7fb35ed142cde593f9d516583b84

SOLIDCORE said...

Hi AK,

Good luck to us all indeed. The offer stands at $1.17, a slight premium over NAV. I tend to think that the offer would be accepted at the next meeting given this bountiful offer.

Personally, I connect with you on the emotion of being happy and sad at the same time. Torn between a one time "lucky" gain and loss of a great REIT for supplementary income.

Moving forward, it's more for the war chest and taking these few months to think what's next. From a REIT to another REIT? From a REIT to another defensive category? May all choices be one that shines favorably upon us.

AK71 said...

Hi Siew Mun, Izy and Solidcore,

This is good news indeed and exceeds my expectation. I will vote in favour.

It is like getting 17 income distributions all at once for me.

My cash position will swell but passive income will take a hit. -.-"

benedict yong said...

Hi AK, I was thinking of buying First REIT but now that this happened. I have to look into AIMS. But I saw the headline "AIMS AMP Capital Industrial REIT: 2Q16 Net Profit Down 55.7% To S$19.1 Million" and "AIMS AMP Capital Industrial REIT: 1Q16 Net Profit Down" in btinvest.com.sg. Is it still a good buy?

AK71 said...

Hi Benedict,

Well, first, you have to decide for yourself what matters to you.

If investing for income is what you want to do, then, you want investments that will pay you regularly and in a meaningful way. You could do this through investing in stocks or other income generating assets like REITs. You will also have to understand how they do their jobs. REITs are not valued the same way as companies, for example.

I personally think that AIMS AMP Capital Industrial REIT is well managed. Take a look at their latest financial statement and decide for yourself:
http://ir.chartnexus.com/aimsampcapital/website_HTML/attachments/attachment_63351_1446084684.pdf

Happy number crunching. ;)

benedict yong said...

Hi AK,
Thank you for the link. It is giving a more complete picture from btinvest.com.sg.
I noted that their NPI is increasing QoQ. It is the "Net change in properties
under development" that is altering the final "net profit".
I guess for FY2016Q2, it is actually performing with increased NPI and DPU; for the "properties under development" part, it is something that is not yet finalized till completion.

I also feel like you, that AIMS is a well managed REIT - given that they learned from their history.
Thanks for your reply, it further supported my conviction. cheers :)

AK71 said...

Hi Benedict,

I enjoyed your comment. I could feel the sense of satisfaction in your writing. :)

I don't think the REIT is doing better now because they took away lessons from their history. I believe it is a change in leadership during the last crisis and a change for the better with George Wang at the helm after he led his team to recapitalise the REIT. Thumbs up!

Siew Mun said...

I am sorry, I cannot reconcile why btinvest reported "AIMS AMP Capital Industrial REIT: 2Q16 Net Profit Down 55.7% To S$19.1 Million" and "AIMS AMP Capital Industrial REIT: 1Q16 Net Profit Down" From AIMS income statement reported NPI is up 2.4% QonQ and 5% YonY. AK how did btinvest derive profit down 55.7%?

AK71 said...

Hi Siew Mun,

I didn't bother to find out. I do know that we cannot value REITs like the way we value stocks. They are different types of investments which was why I suggested to Benedict to read the REIT's financial reports and not depend on newspaper headlines.

This was a blog post from 2010 which might interest you:
REITs, depreciation and FFO.

Shen said...

Dear AK,

I just have a curious question. As the estimated offer price for Saizen is 1.17. How is it possible that the stock is currently still trading at 1.10? Could this be a potential for arbitrage? Or am i missing some important information :/

AK71 said...

Hi Shen,

Please see my comment made last night in a more recent blog post on Saizen REIT:
http://singaporeanstocksinvestor.blogspot.sg/2015/10/saizen-reit-net-offer-price-of-1172-per.html

;)

AK71 said...

According to the latest annual reports, PT Lippo Karawaci only owns 33.5% of First REIT and 30% of Lippo Malls Indonesia Retail Trust. This suggests that Lippo Group would need the support from other unitholders to successfully delist both REITs from the Singapore Stock Exchange.

There have been no new information from either REIT since last Wednesday. Given the magnitude of the issue, it does seem rather unprofessional for Lippo Group to leave other unitholders of both REITs stranded, without any further information.

Firstly, minority unitholders were not informed of any plans for the delisting. Instead, unitholders were left to find out from an outside news report instead of directly from the REIT’s disclosure on bourse operator Singapore Stock Exchange‘s platform.

Secondly, five days have passed since the news report. There has been no additional information from the REIT managers or the sponsor on what exactly is being planned.


Source:
https://www.fool.sg/2015/11/02/what-is-lippo-group-planning-for-its-two-reits/

Mao Mao said...

I have an amount being credited into my bank savings account. The item description is "SAIZEN R". I guess this means Saizen REIT has fully delisted?

AK71 said...

Hi Mao Mao,

I believe that Saizen REIT is still listed. There is still some residual value in the REIT. :)

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