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3Q 2018 passive income (S-REITs).

Monday, October 8, 2018

In 2Q 2018, there was a bit of action in the S-REITs space for me and one of the things I did was to add to my investment in Starhill Global REIT at 64c a piece.


In 3Q 2018, I was ready to add to my investment in Starhill Global REIT if Mr. Market's pessimism should worsen.

However, Mr. Market felt better about the REIT's prospects and the unit price rebounded.






To understand why I bought more of Starhill Global REIT when I did and how it became one of my larger smaller investments, go to the related post at the end of this blog.

The top 3 income contributors from my investments in S-REITs in 3Q 2018 were:

1. AIMS AMP Capital Industrial REIT
2. First REIT
3. IREIT Global





I often get asked whether we should continue investing in S-REITs since interest rates are on the rise.

I am aware that this is really another way of asking what is going to happen to the unit prices of S-REITs in future.

I don't know how the prices will move in future.

I only know that investing in bona fide income producing assets has been rewarding and it should continue to be rewarding.






If we believe that real estate has intrinsic value, then, buying at a discount to valuation, we should have some margin of safety.

Also, we have to ask whether the management is honest and capable enough to unlock value for shareholders too.


Of course, S-REITs are not perfect nor are they the only tool available to investors for income.

We also want to be careful not to be overly reliant on S-REITs as the higher yield comes at a price.



Remember, S-REITs pay out 100% of their cash flow most of the time and have no retained earnings.

So, investing in S-REITs, we have to be prepared for the possibility of rights issues.

Those who are fully invested and dependent on S-REITs for income should beware.





This is especially if the dependence on S-REITs for passive income is absolute and critical.

"Absolute" means that these investors have no other sources of passive income.

"Critical" means that any reduction in passive income from S-REITs would be a life altering event for these investors.






Remember, how we invest and what we invest in should depend on our personal circumstances and what we hope to achieve.

It is never my way or the highway.

You should have a plan, your own plan.

However, to have a plan that works for you, you must know what you want and what you are capable of and willing to do.




For example, in middle of September this year, a reader asked me about investing in Soilbuild REIT again.

blazingruby60 said...
I remembered you mentioned that all investment is good investment at the right price.

looking at soilbuild i have sold after reading this article here and wondering would you consider buying soilbuild again at 58 cents?

considering soilbuild has ventured overseas to australia to acquire some properties and all.

thanks n cheers.







AK said... 

I was thinking about it but I decided not to invest in Soilbuild REIT now because

1. I already have a pretty large exposure to industrial property S-REITs which also have exposure to the Australian economy (AIMS AMP Capital Industrial REIT and Fraser Logistics Trust).

2. I would like to have a much bigger percentage of my portfolio in non-REITs to reduce reliance on S-REITs for income.

Of course, things could change in future. :)





Investing in S-REITs for income, we have to take in a bigger picture and, to be realistic, your picture could be quite different from mine.


My total 3Q 2018 passive income from S-REITs was:

S$ 19,884.80

AA REIT 10-year Anniversary 
- Celebrating 10 years of Partnership!





On a per month basis, it works out to be about S$6,628.00 a month.

Related post:
2Q 2018 passive income from S-REITs.

8 comments:

INVS 2.0 said...

Hi AK,

I remember you subscribed to Soilbuild's preferential offering in 2016. Since it's a non-renouncable rights issue, how did you manage to sell all of your holdings in Soilbuild?

Best regards.

AK71 said...

Hi INVS 2.0,

Your memory is better than mine.

I probably took up my entitlement which means I paid for the rights units.

Once paid for, they became regular units which I could sell in the open market.

-Collin- said...

If you are buying based on NAV, ever consider the possibility that NAV is wrong? Simpler terms, property overpriced. If there is a property market correction, then the stock would be overpriced based on the new NAV. Just wondering.

Unknown said...

Hi AK

First Reit price is declining. Is it a good time to buy?

AK71 said...

Hi Collin,

There are many ways to value stocks, for sure.

NAV would not be a good way to value stocks like ST Engineering and SingTel because their revenue is mostly derived from providing services.

For stocks which derive income from properties, I believe NAV is a pretty good indicator of what they should be worth.

Of course, in a recession, property prices could be lower but that is something I cannot predict and I can only act based on what I know now.

AK71 said...

Hi Unknown,

Whether it is a good time for you to buy First REIT is an unknown to me. ;p

Have a plan, your own plan.

Laurence said...

Quote.
Whether it is a good time for you to buy First REIT is an unknown to me. ;p
Have a plan, your own plan.
Unquote.


AK buys, We buy.
AK's plan, Our plan.
It's so Simple (according to Uncle Sim of Visa Paywave ).

;)

AK71 said...

Hi Laurence,

Alamak.

Cham lah liddat. -.-"

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