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AIMS APAC REIT and perpetual bonds.

Wednesday, August 25, 2021

This very short blog is in reply to a reader's comment on a topic which other readers might find interesting. 


AIMS APAC REIT is well run and it has been very rewarding as an investment for income. 

A perpetual bond is a good thing for the REIT because it does not add to the REIT's gearing while giving it more funds. 

A coupon of above 5% is also pretty attractive to anyone interested in lending money which is what we are doing when we buy bonds. 

Personally, I rather be invested in AIMS APAC REIT than to lend money to them because I think it is more rewarding to invest in the REIT. 

I would suggest that readers interested in the perpetual bonds read these blogs: 


26 comments:

Unknown said...

Hi AK,
Do you think that the 5+% coupon rate is reasonable?
With such low interest rate environment, I thought the rate should be lower.

Unknown said...

Hi AK,
Do you think the coupon rate of 5+% given is reasonable?
Due to low interest rate environment, I thought the rate should be lower.
30Yr Govt bond is 1.863%
I am learning and comparing between Hyflux and AA

AK71 said...

Hi Unknown,

It has to do with credit ratings.

The SG govt is a AAA rated entity while AA REIT is far from that.

Unknown said...

Hi Ak
How to apply? Could i apply at the Atm? Thank you.

AK71 said...

Hi Unknown,

I believe that this is for institutions and private banking clients only.

"Deal statistics showed an orderbook of S$450 million across 31 accounts, with 99 per cent of investors from Singapore and 1 per cent from overseas. Some 51 per cent of the overall orderbook came from private banks, with the remaining 49 per cent from fund managers and banks." Source: The Business Times.

You might want to give your broker or banker a call to verify this.

Unknown said...

Thank you for your reply

Eddy said...

《AIMS APAC REIT Management Limited (the Manager) as manager of AIMS APAC REIT (AA REIT or the REIT) today announced that AA REIT will be included in the FTSE EPRA Nareit Global Developed Index with effect from 20 September 2021.》

Hi AK,
I guess this should be a positive news for AA Reit and all shareholders.

AK71 said...

Hi Eddy,

Thanks for sharing the good news.

This would likely lead to yield compression as the REIT's unit price would probably strengthen.

Krishna said...

Hi AK,

Since AA Reit will be included in FTSE NAREIT global index, we expect the index to buy AA rEIT units and hence the demand will increase and so price of the units will increase leading to yield compression.

Is that correct?

Thx

Krishna

P.S: Thx to Eddy for sharing the news

AK71 said...

Hi Krishna,

I feel that it is a reasonable assumption. :)

ok said...

Hi AK

https://www.businesstimes.com.sg/real-estate/aa-reit-chief-executive-koh-wee-lih-resigns-to-be-replaced-by-investment-head

john said...

AA reit CEO had resigned and replaced by existing IR head.
They are also buying a australia property at just 5% yield.

Any view on it?

Blur Sotong said...

hi AK,
Any thoughts on the recent sell down in Aims APAC Reit? it came right with a change in CEO and also announcement that they are interested in purchasing Woolsworth with data center property in Australia. It is quite a steep fall by Aims APAC standard from $1.60 to $1.44 (now) just over 8th and 9th Sept.

Thanks for your thoughts.

BS

AK71 said...

Hi ok,

I spent some time with Mr. Koh Wee Lih a few years ago when he brought me on a tour of some of AA REIT's properties in Singapore.

I like him and he will be missed.

Reference:
AA REIT: A private tour.

AK71 said...

Hi John,

Mr. Koh Wee Lih did good work at AA REIT and I hope his successor will continue to do a good job.

As for the Australian property, a 5% yield is relatively low.

I suspect they might be interested in the long lease and the potential to increase the net lettable area by a big percentage. This could improve income visibility and also higher future income.

For the long term, it seems like a good idea but there will be short term pain.

AK71 said...

Hi Blur Sotong,

Please see my replies to ok and John above.

As for the fall in unit price, obviously, Mr. Market does not like the news.

I have mixed feelings about the possible purchase of the Australian property.

Will just have to see if the purchase actually happens.

Betta man said...

Sembcorp Industry has dropped to about $1.88 at point to writing. Do you think it is a good time to buy the dip ?

Thanks for sharing your wisdom

AK71 said...

Hi Betta man,

Buying SCI at $1.88 today is not the same as buying it at $1.88 last year in June. ;p

I am not interested in adding to my investment in SCI now but it could be interesting to others, of course. :)

Reference:
SCI investment is larger now.

Focus said...

why the share price has been falling ? since the assumption by you was it will go up ?

-----------------------------------------------------------------------------------
Krishna said...
Hi AK,

Since AA Reit will be included in FTSE NAREIT global index, we expect the index to buy AA rEIT units and hence the demand will increase and so price of the units will increase leading to yield compression.

Is that correct?

AK71 said...

Hi Focus,

If things go the way we assume they would all the time, life would be really easy.

Mr. Market doesn't care what our assumptions are. ;)

Reference:
S-REITs: Are we asking the right questions?
"Of course, Mr. Market does not care what I think. This is a good thing."

Siew Mun said...

AK, Dragon Pacific divested 8m AA shares at 1.463 which reduced their holding from 8% to 6%. There is no changes to majority shareholders holdings except Dragon Pacific.

Siew Mun said...

I took the opportunity to add more AA to my current holdings. I continue to add if they go lower. I am a dividend income investor. :-p

AK71 said...

Hi Siew Mun,

Dragon Pacific Assets Limited is a long time shareholder and I remember they were aggressively increasing their stake in AA REIT more than 10 years ago when the REIT was trading at about 23 cents a unit or $1.15 after consolidation. AA REIT has been a very good investment in terms of income generation as well as capital gain for them.

For sure, if AA REIT's unit price declines again, all else being equal, distribution yield will expand and the REIT becomes even more attractive to income investors. :)

MT said...

Hi AK
wonder if you can talk to yourself about hongkong land? It has decent div yield and low pb ratio. Wonder if you ever invested in it. Thanks!
Regards
Mt

AK71 said...

Hi MT,

I have looked at HK Land before but my plate is quite full.

I also have more than enough exposure to undervalued property developers.

It could take a long time for value to be unlocked if they get unlocked at all.

Reference:
Exposure to property developers...

So, we have to be prepared to wait.

Of course, if we are paid while we wait, it makes the waiting more bearable.

SgFire said...

Siew Mun

Are you a long time aims investor?


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