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Added more Croesus Retail Trust and reduced Sabana REIT.

Thursday, November 21, 2013

I initiated a long position in Croesus Retail Trust earlier this month.

I recently added to this position as I believe that this Trust could do better in the years ahead.

However, I also decided not to increase the size of my investment portfolio as I am close to 75% invested which is not very comfortable for me. So, I had to do some portfolio balancing.

For a while now, I have been thinking of reducing my exposure to industrial properties in Singapore, given the concerns of oversupply.

I have investments in a few industrial properties S-REITs and my two largest are in AIMS AMP Capital Industrial REIT and Sabana REIT.

Of the two, after some thought, I decided to reduce my investment in Sabana REIT because, comparing them, I believe that AIMS AMP Capital Industrial REIT has done a better job of improving value for unit holders in the last two years.

Mr. George Wang regularly buys into AIMS AMP Capital Industrial REIT while in the case of Sabana REIT, the CEO has divested his direct stake completely in recent months. This gives me the impression that the insiders of AIMS AMP Capital Industrial REIT have their interests more aligned with minority unit holders'.

508 Chai Chee Lane
Sabana REIT's recent purchase of a half vacant building in the midst of softening prospects did not inspire much confidence in Mr. Market who has shown his displeasure in the usual way. This compared with AIMS AMP Capital Industrial REIT's development of certain properties to max out plot ratios while securing tenants in advance tells a contrasting story of performance and, perhaps, competence.

Of course, Sabana REIT could still do better in future if they manage to fill up the space left vacant by the non-renewal of 4 master leases as well as the vacant space in the latest property acquired from AMD. I would be very happy if this should happen since I still retain a relatively large position in the REIT, having reduced my investment by about 24% only.

With the partial divestment of Sabana REIT, it means that AIMS AMP Capital Industrial REIT is now my largest investment in S-REITs.

Croesus Retail Trust has become a more significant investment for income in my portfolio but because it is not a REIT, my expected full year income from S-REITs in 2014 will probably see a decline, everything else remaining equal.

Related posts:
1. Croesus Retail Trust: Long position at 87c.
2. Sabana REIT: Initiated long position.


Cory said...

I like the idea of selling one reit sector to go another. Have been deliberating this for a while and even going to less leverage stocks.

With increasing strength in USD and further strengthening of SGD. The probability of Yen facing another round of weakening imo. is higher. At best equilibrium but is unlikely to strengthen.

AK71 said...

Hi Cory,

The weakness in the JPY is likely to persist in the next couple of years at least. How long will it stay weak for? That is more difficult to say.

The many rounds of QE meant that the US$ stayed weak for the last few years. Eventually, it would strengthen.

By the same token, the JPY will one day strengthen. In the meantime, its weakness represents short term pain for some.

As long as I am being compensated adequately while waiting for the Trust to do better over time, I am contented.

cp said...

What are your views on industrial reits with low gearing and stable, quality master leases? It seems prices are all falling as one but the industrials are all not equal. Do you think they are still attractive at the right yield?

AK71 said...

Hi Clueless Punter,

All investments are good at the right price! I believe this.

Industrial properties' landlords will face headwinds in 2014 and 2015. I don't doubt this.

Some pessimism from Mr. Market is only natural. However, if Mr. Market should become overly pessimistic, there could be buying opportunities. :)

AK71 said...

Hi Capricon,

In an interview, the CEO said that they want to move quickly because prices of commercial properties are moving up in Japan. So, I feel that this fund raising is a follow through on that.

I believe that the NPI yield of shopping malls in Japan is close to 6% and DPU accretive purchases could still be made.

Will wait to see how things turn out. :)

AK71 said...

The Croesus Group is an independent Asian based private investment firm that has been involved in real estate management and strategic business advisory since its formation in 2005.

The Croesus Group was formed in Japan, and now has a presence in Japan, China, Singapore and Taiwan. Between 2007 and 2010, the Group managed a US$500 million residential real estate fund in Japan for a leading financial institution.

The Group has also advised on various real estate, transportation, infrastructure and hotel investments in Asia.

In 2013 the Group sponsored the IPO of Croesus Retail Trust, the first retail business trust with an initial portfolio located in Japan to be listed on the Singapore Exchange.

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