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3Q 2017 passive income from S-REITs.

Friday, September 29, 2017

Although I did blog about REITs in 3Q 2017, I didn't make any changes to my investments in S-REITs. Pretty much the status quo.

Well, not entirely the status quo because there is the rights issue by Cache Logistics Trust which will close this evening. 

Since I have a small legacy position, I took up my entitlement and also applied for some excess rights.

As it is an exercise to strengthen the REIT's balance sheet, it does nothing to generate more passive income for me.

Cache Logistics Trust Rights.

Anything exciting happened?

What would be the equivalent of something exciting in the world of investing for income?

Maybe, this. 

What would have been a big deal in 3Q 2017 in the S-REITs universe failed as Cromwell European REIT's IPO was pulled out. 

The reason was probably insufficient interest from investors and this was after the size of the IPO was cut too.

I had a disturbing vibe about the failed REIT IPO as it felt as if the sponsor was trying to dump a mish mash (i.e. rojak) of assets.

Cromwell European REIT cuts IPO size

Even so, it would have been interesting to have a new addition to the number of S-REITs available. I have no doubt that the REIT would have attracted retail investors who are yield focused.

When we plonk money in REITs, we must not think about them like how we would think about fixed deposits. 

REITs are more complicated than fixed deposits. They are investments, not savings.

It is perhaps worth reiterating here that we should avoid the instant gratification of yield. 

SingTel, Starhub and REITs.

Having said this, REITs remain relevant tools for income investors and I like to remind myself that all investments are good investments at the right price. 

My portfolio of S-REITs continues to benefit from investments made in 1Q 2017 as I received distributions from Starhill Global REIT, CapitaRetail China Trust and also an enlarged investment in IREIT Gobal.

Income from S-REITs in 3Q 2017:


I was hopeful that there would be a slight increase in income compared to 2Q 2017 but there is a 1.36% decline instead.

This decline took place because industrial S-REITs continue to face headwinds due to general oversupply of industrial space and weak demand in a slow economy. 

See, for example:
Decline in Soilbuild REIT's DPU.

As there are many industrial S-REITs in my portfolio, as a group, their weaker performance in the quarter was a drag.

There is talk of a pick up in the global economy which will give Singapore's economy a lift. If it happens, it should benefit industrial properties too.

In the meantime, I am happy with the investments made in 1Q 2017. 

If I did not make those investments, the decline in income generated by my portfolio of S-REITs would have gone unmitigated.

The top 3 income contributors for the quarter are the following:

3. IREIT Global

Related post:

2Q 2017 income from S-REITs.


laurence said...

Proven yet again that you are the true Oracle of REITs. Everything you touch turns to gold.
A look at your dividend numbers will turn many faces green with envy.
But also inspire many to achieve the same and more. I am one such person.
Unfortunately, this year I exited from a triple whammy from Singpost, Triyards and Ezion just one year into dabbling with CPFIS.

AK71 said...

Hi Laurence,

You are very kind but please remember that I have my share of failures in investments too.

As for our CPF money, we should be very careful with it. If we want to invest with the money, we must think of it as the ultimate war chest.

If we want peace, be prepared for war.

Keith said...

Hi AK , what is a good price to enter for IREIT Global ?

AK71 said...

Hi Keith,

You could read my past blogs on IREIT Global but you would have to decide for yourself what is a good price for you.

For example:
Would AK invest in IREIT Global today?

TT said...

Hi AK,
let's say you have a HDB property worth $450k which earn a monthly rental of $2k.
would it be better to sell the HDB and invest the $450k into Reits?
Reason being is HDB will become zero aft 99years while Reits still have it's value.
and $450k into Reits will also get you $1.8k based on 5%.

pls advice.

AK71 said...

Hi TT,

I don't give advice. ;)

Based on numbers alone, if $450K is able to generate $24K a year in gross income, that is a 5.3% gross yield. That is not bad in today's leasing environment.

REITs do own leasehold properties too. Not all of them have freehold properties.

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