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This is a reply to a reader's comment on REITs and how I process them in my mind.
If you are interested, see reader's comment: HERE.
My reply:
What we look out for will depend on our motivation.
As an investor for income, I am more interested in whether my investments are able to pay me a meaningful and sustainable dividend.
This is especially important for a retiree like me with no earned income.
When it comes to REITs, I pay attention to whether money is being put in my pocket.
I would ask if what the management is doing would be beneficial or detrimental over time?
If beneficial, we want to make sure the benefits are bona fide for the longer term.
We want to make sure that the benefits are not illusionary or temporary.
Of course, there are other things to consider because we don't want to put money in an Eagle Hospitality Trust, for example.
It is hard to put everything down on paper because it could also just be personal experience at times.
It is hard to put everything down on paper because it could also just be personal experience at times.
I could get bad vibes and just decide to stay away for peace of mind, for example.
So, for a start, understand what you want and you will know what to look out for.
"I can never make it easy by saying ‘Here are three things’. You have to derive it yourself to ingrain it in your head for the rest of your life."
- Charlie Munger
Having said this, there was something I gave out during my talks (i.e. Evening with AK and friends) in the past and it might or might not be useful to you:
I also pulled some older blogs which I think might make for interesting reading:
I also pulled some older blogs which I think might make for interesting reading:
After more than 12 years of blogging, you could probably find more related posts in ASSI if you do a search.
You could also go to the web version of my blog and read the blogs linked in the right sidebar.
Unfortunately, the mobile version of my blog does not display the sidebars (and many other things.)
Gambatte!
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19 comments:
Hi AK
Can you talk to your crystal ball, what are your thoughts about Lendlease Reit, their plan to acquire JEM, and the placement they embarked on to fund the purchase.
Also interested to know your view on their future, as they are a relatively new kid on the block.
Hi Jermel,
I don't have a crystal ball.
I only have a bowling ball that thinks it is a crystal ball.
Yeah, like its owner, it is also mental. ;p
As for Lendlease REIT, I don't have any interest in it but I will say that as long as the money raised is used to generate more income for their investors, it is generally OK.
See:
REITs and rights issues: A Singaporean tale.
A back of the envelope calculation says that the acquisition is going to be slightly DPU accretive and this is because the REIT will be using quite a bit of debt to fund the acquisition which will push gearing level above 40%.
Having a much higher gearing level for a slight DPU accretion suggests that the deal isn't all that good for the buyer and it is probably better for the seller.
As for their future, the pandemic has changed the way people shop and I am not sure that shopping centers are as good an investment as they once were.
It is telling that Capitaland Retail China Trust dropped the world "Retail" in their name and included business parks in their portfolio.
I rather like Capitaland China Trust which trades at a big discount to NAV and has a much higher distribution yield compared to Lendlease REIT.
For exposure to shopping centers in Singapore, I already have a smallish investment in Starhill Global REIT which trades at a big discount to NAV but, of course, Starhill Global REIT's assets are underperforming as they depend very much on the tourist dollar.
See this blog on how much things have changed since:
Online shopping and retail S-REITs.
Still, the REIT delivers a respectable distribution yield of 6% today with a gearing level only in the mid 30%.
I will be spending the next few days with my folks and will not be gaming or blogging.
So, apologies for slow replies in advance. :)
Hi AK,
Yep. Unless one is very rich, buying property can be very illiquid unlike in stocks where REITS can be easily bought or sold.
After looking thru at Ireit Global, decided to take a nibble and enter. Hopefully, it will not be like Eagle trust... haha
Thank you AK and your bowling ball. Have learnt so much over the years from both of you. And hope to learn more still, so hopefully you will be blogging for many more years to come.
Hi Rellangis,
Welcome to IREIT Global. :)
I rather like the REIT and hope nothing goes wrong.
Crossing fingers. ;p
Hi Jermel,
I have probably picked up quite a few things from my bowling ball over the years too.
It doesn't get emotional and is quite happy to do nothing or simply roll with the punches.
Seems to be much wiser than I am. ;p
Hi AK
Probably it is opportune timing for a qtrly income report
Hi SgFire,
Eh, it is still early.
Maybe, next week.
Yes, I know, AK is lazy. ;p
Hahaha ok
Hi AK,
Have received AGM proxy forms for sabana reits and would like to have your input. The activist fund managers Quarz and Black Crane had proposed to vote against the items. Understand you have some stake in the reit as well, what are your view on this?
Thanks !
Hi Rellangis,
It was thanks to the activist investors that the low ball offer by ESR REIT was rejected and it was thanks to them that I got back into Sabana REIT.
So, I am with the activist investors. ;)
Hi AK,
ARA Log is also under target by ESR. Not too sure about your thoughts on the merger. Seems like it is a closing deal but somewhat people doesn't like the management of ESR (Due to their management history :0))
Hi r,
Oh, you didn't know I blogged about ESR REIT's offer for ARA Logos?
See:
ESR REIT gives ARA Logos the short end...
Alamak. ;p
Hi AK,
Btw, there is a $20 NTP+ voucher if we submit the completed proxy form back. If I vote against the items and submit the form, wonder if I will still get the voucher... lol
Hi Rellangis,
I don't see why not. ;p
I was holding on to ireit for a year but decided to come out of it after the Russian invasion. Europe might go into recession due to inflation. Will hope to dca ireit around 50c and below
Hi Blur Sotong,
I imagine 50c a unit for IREIT Global would be a screaming BUY. ;p
Yes. If Europe goes into a recession or Euros devaluates, we might see covid19 numbers. Time to load up on IREIT. Hee!
Hi Blur Sotong,
I am holding on to my investment in IREIT Global as the REIT should still be able to generate a good income for me even in a recession.
There might be a slight reduction in income if they lose their weaker tenants but it shouldn't be a bomb of a drop.
Fundamentally, there isn't anything wrong with the REIT and I don't want to try to time the market too much. ;p
However, Mr. Market could be stricken with pessimism and we could see unit price lower.
So, yeah, I might buy more then. :D
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