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Saizen REIT: Received a firm offer and unit price jumps.

Friday, October 23, 2015

Messages were coming in fast asking me what was happening to Saizen REIT as its unit price shot up. Well, this happened:

Further thereto, the Manager wishes to announce that the Manager has received a firm offer in relation to the assets of Saizen REIT which the Evaluation Committee and the joint financial advisers are currently reviewing and evaluating. No definitive agreements have been entered into and there is no assurance that the offer will be accepted and that definitive agreements will be entered into.

 Earlier in the year, I had a blog post on how undervalued Saizen REIT was. Of course, it wasn't really a new angle on the REIT as I blogged about it many times over the last few years.

In that blog post back in April, I asked if investing in Saizen REIT was a good idea for you. Whether it was a good idea would depend on your motivation and your temperament.

Although deeply undervalued, I said "whether the value could be unlocked and returned to unit holders is much harder to say. Could we see an acquisition by a residential J-REIT?"

I also said that "anyone who is buying into Saizen REIT, hoping for value to be unlocked, will have to be patient and also remember that it might or might not happen."

Of course, regular readers know that Saizen REIT is a big part of my portfolio for years. I have been patiently waiting for value to be unlocked and while I waited, I received regular dividends.

It is not a bad thing to be paid while we wait, I feel.

So, what did you do?

Announcement: here.

Related posts:
Saizen REIT: Deeply undervalued?
2. 9M 2015 passive income from S-REITs.


Siew Mun said...

Opportunity for me to get out of jail. I bought 91,000 shares over 2.5 years averaging at 92 cts per share.

AK71 said...

Hi Siew Mun,

Saizen REIT has been selling their properties at a premium to valuation in recent years. In their latest presentation, they revealed that they "divested Niken Chaya Grand Heights at a premium of 20.4% above valuation".

So, I believe that their book value of $1.14 per unit is conservative. Having said this, I feel that many unit holders would be quite happy to receive $1.14 per share.

seefei said...

i like the way Siew Mun put it - "get out of jail". i got in at 19.3ct before the 5-for-1 consolidation. if DPU remain at 6.5ct, the yield is still >7% and very good.

Saizen is one jail my $$$ is not in a hurry to get out. they have been treated well there. If not for this post, i already forgotten the price i paid for Saizen.

Mum4mygals said...

Hi AK, Thank you for the heads up!

I am following your blog for a while, and in April, when I read your article about Saizan, I did a comparison between Saizan and the other Reits and rank them accordingly. My thots at the time was fear for the exchange rate risk between Yen and Sgd, and the earning yield vs the other REITS was not the tops... I failed to do any deeper analysis into the REITS. Looks like there is a lot more to learn!!

Bought some today. Hope the ship has not left yet.

P.S: was at InvestXCongress last sat.. agree with the others that your session was too short. We need to see more of you. :)

Sanye ◎ 三页 said...


With regard to Saizen Reit, I have you to thank. After reading your blog on this counter, I did some research into it and eventually took up a small position on it. Just like you, I waited patiently for its value to be unlocked, and collected dividend regularly while waiting.

I will be happy to receive 93 cts for my units, of course better at $1.14.


AK71 said...

Hi seefei,

Indeed, I shared on FB that I have mixed feelings when I read the news.

I have grown used to the 10% yield I get from Saizen REIT and I have no issues with holding on to freehold residential properties in Japan for many more years to come.

If the offer should be accepted, because Saizen REIT is a big part of my portfolio, there would be a gaping hole in my annual passive income from stocks. -.-

AK71 said...

Hi M4MG,

Well, to be fair, many investors do not know how to value Saizen REIT properly. There isn't any comparable REIT in Singapore. I talked about this before at some of my public appearances and probably blogged about it too.

If the firm offer received by Saizen REIT is close to its NAV, I think it is OK to accept the offer. I do not think that the offer would be at a premium to NAV although it would be a nice surprise for me if it should be the case. Selling a building at a premium to valuation is easy but not selling more than 130 buildings in a single transaction.

As for InvestX Congress, if I should be invited to next year's event, I will ask the organisers to consider a longer Q&A session. :)

AK71 said...

Hi Sanye,

If the offer from the potential buyer is 93c a unit, I hope fellow investors will reject the offer. It still severely undervalues Saizen REIT.

Given the consideration that it is a single transaction for all of the REIT's assets, I think if we were to be asked for a small discount to book value, it is acceptable. Maybe, 5%. So, I would expect an offer of at least $1.08 a unit in this case.

Good luck to us all. :)

joel said...

Hi AK,

Were you at their AGM this morning? Some good questions were brought up regarding the announcement.

Could you shed some light on what you mean when you say you were holding Saizen, and waiting for its value to be unlocked? Do you see it being potentially unlocked based on this offer? Were you referring to the market pricing it at book value or are you hoping that it would be bought over by another firm?

I am not very clear and the board has given little to no information on what the "offer" is, if I am not wrong. Could it be simply an offer for one of their many properties? The board mentioned that if the building requires costly renovation to remain competitive, then it is more likely to be put up for sale.

I apologise if my questions are amateur-like. I am a student trying to learn more :) Thank you!

AK71 said...

Hi Joel,

No, I didn't go for the AGM.

As for my motivation for investing in Saizen REIT and what I had in mind, you would probably find the answers in my older blog posts regarding the REIT. You might want to do a search in my blog using the "Search" function at the top right corner.

One relevant blog post could be this:
Saizen REIT: Sell the entire portfolio or find a larger partner.

Unknown said...

Hello AK, I finally got to see you (though still in your martial arts master disguise) during InvestX Congress! I brought along a friend, who is an investing newbie, to the seminar. Feel a sense of achievement and fulfillment to nudge someone into an 'uncomfortable' world.

On Saizen, I agree with you on the dilemma. I am more inclined towards having the regular income, though it's just a smallish position. Is kinda nice to think that I have a residential portfolio in Japan.

AK71 said...


I hope both you and your friend enjoyed InvestX Congress. I heard Rusmin and Victor were quite engaging in their segments. :)

You have done your friend a big favour and I certainly hope we have a new traveler on the road to financial freedom because of what you did. ;)

As for Saizen REIT, yes, I cannot help but have mixed feelings but, perhaps, we are thinking too much. Let's wait for more details on what the firm offer is all about. :)

JJ said...

Hi AK,

You mentioned about leaving a gaping hole in your passive income if the eventual buyout of Saizen goes through. Assuming its sold at a huge premium over your average price, wouldn't it be good if the years worth of passive income comes in at one go?

AK71 said...

Hi JJ,

Well, I could get creative with how I look at it and I am sure I have done it before. ;p

Strictly speaking, however, I would be losing a regular income while enjoying a one time capital gain.

Ming-Jie Chai said...

Hi Ak

Just out of curiosity, which would you prefer? A one-time capital gain based on a small discount (5% say) to NAV, or a steady stream of passive dividend income that is slightly higher than other S-reits, say 8-9%, for many years to come?

As a side, I note that the small volume of Saizen units at less than 300M does make an acquisition of Saizen relatively easy and attractive.


Kind regards

AK71 said...

Hi MJ,

Actually, I have mentioned openly both in my blog and during my public appearances that if I had the money, I would buy some of Saizen REIT's assets as the rental yield is really good. We are looking at 12 or 13% gross yield at times.

If I had a lot of money, taking Saizen REIT private is probably even more attractive especially when investors could be more than willing to sell their stakes at a discount to NAV. I doubt we would be able to buy any one of Saizen REIT's buildings at valuation even.

Would I prefer a steady and meaningful stream of income in perpetuity or a one time capital gain? Give a choice, I am more inclined to choose an income in perpetuity. This does not mean that I am unhappy with a generous one time gain but it would mean looking for another investment that would fill Saizen REIT's shoes.

AK71 said...

Going through my archives to find blog posts on Saizen REIT for readers, I found out that I have produced 197 blog posts since 2009 which discussed Saizen REIT either in part or in whole. gasp emoticon

This was the very first blog post published on Christmas Eve of 2009:
Passive income with high yield: Saizen REIT.

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