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Recently, I talked to myself about helping my parents to pay for their rights entitlement for both AIMS APAC REIT and IREIT Global.
This will take a chunk of money.
As these two REITs are also two of my largest investments, I have to set aside a relatively large amount of money to pay for my own rights entitlement too.
After much thought, I made the decision to forgo my own rights entitlement for AIMS APAC REIT for the following reasons.
1. The money raised is not for any activity that would immediately generate more income.
Of course, I might see DPU increasing again in future if they use the money prudently for AEIs and redevelopment.
However, I won't see any return on the proposed additional investment right away.
2. My investment in the REIT is already free of cost.
All income generated by the REIT is really free money for me.
I don't have to add to my investment to have a good outcome even if I should take an 11% reduction in income from the REIT in the meantime.
Readers who have been following my recent blogs and the comments sections might remember that I talked to myself about these.
Now, hot from the press, we have firm details on IREIT Global's rights issue.
161 for 1000 units at 40.8c a unit.
IREIT Global initially used an illustrative rights unit price of 45c when they announced the proposed acquisition of retail parks in France.
That sent their unit price tumbling down to 44.5c at one point.
When readers asked if that was a good price to buy, I said that it appeared attractive to me with a potential 8% distribution yield.
However, I was waiting to buy at 42c because that was where the chart showed stronger support.
I also said in another reply that we must remember that 45c was only an illustrative price.
With IREIT Global already trading at 45c a unit, the rights issue would have to be at a lower price to be attractive.
So, I would wait.
Now, priced at 40.8c a unit, it is very attractive to me.
I wish I had more money in the war chest to apply for more excess rights.
At a unit price of 40.8c, I am looking at a potential 8.8% distribution yield from mostly freehold assets.
This is also on the back of a relatively strong balance sheet with gearing ratio at 33%, post rights issue.
With interest rates likely to stay higher for longer, I keep saying it would be business entities with stronger balance sheets that would see the light at the end of the tunnel.
The Fed chair has already hinted that a lowering of interest rates would not happen until 2 years later which means sometime in 2025.
Fortunately, IREIT Global has almost 100% of its debt on low interest rates fixed till late in 2026.
It is always darkest before the dawn.
I am quite happy to be paid while I wait.
If AK can talk to himself, so can you!
Related posts:
1. Rigths issues and parents.
2. T-bills and REITs: My plan.
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36 comments:
Dear AK, I was reading the email from IREIT, didn't see the date we could start applying for the rights issue. Would you know ? Don't want to miss it.. paiseh to trouble you with this.. Thank you.
Hi AK,
Looking at your previous reply below, I guess your wish did come true :P
"With the market price at 45 cents a unit now, I wonder if we could see the rights issue priced at 42 cents per unit?
I should be careful with what I wish for. ;p"
Hi C,
We have to pay by 11 July.
Here is the link:
https://investor.ireitglobal.com/news.html/id/2445804
Good luck with excess rights. :)
Hi keng,
I am so lucky! ;p
40.8c is a steal!
I must go look for more money to apply for excess rights.
Hi AK,
【 An article worth sharing… 】📖🤓
For now, investors appear to doubt the hawkish tone emanating from central banks. Stock markets are resilient on both sides of the Atlantic, and investors are pricing in interest-rate cuts in the U.S. and Europe next year. That may be a mistake, according to some economists.
“The bottom line is that inflation at 5% remains too high, and it is clear that markets are under appreciating the Fed’s commitment to get inflation back to 2%,” said Torsten Slok, chief economist at Apollo Global Management.
https://kanebridgenews.com/why-inflation-around-the-world-just-wont-go-away/
Hi AK,
From a REIT manager's perspective, is it better for them to issue rights when the price is low or when it is high (assuming we look at P/B ratio).
On one hand if the price is low, they have to issue a lot of units. But if the price is high and they are overvalued, will they be then paying a premium? Or does it not matter?
Nevertheless moving forward as the cost of capital is high now, I think we can expect more REITs to have rights issue to raise capital from shareholders instead.
Can't seem to wrap my head around this, thanks for your enlightenment!
Regards,
Wei
Hi Eddy,
Thanks for sharing. :)
Always hope for the best but be prepared for the worst. ;)
Hi Wei,
IREIT Global could have funded the entire acquisition with debt given their low gearing.
It would have prevented the huge decline in their unit price.
In fact, unit price could have risen as the DPU would probably increase too.
Of course, gearing level would increase more significantly in such a case.
The management is probably being cautious which is not a bad thing but, of course, some investors would be unhappy to see the unit price plunging.
Personally, I feel that unless we need to sell our investment in the near future for some reason, there is no need to feel any angst with regards to unit price.
I rather focus on value.
Some people are comparing IREIT Global to the old First REIT or, worse, Eagle Hospitality Trust.
Absolutely no comparison and they are terribly misguided.
A more accurate comparison would be with good old Saizen REIT. ;)
hi Ak,
Could we also apply access rights for IREIT?
Hi DL,
Anyone who is a shareholder of IREIT Global can apply for excess rights. :)
i've been mulling increasing my aa reit position to target size for many months already. so I will be applying for the excess rights + buying from mr. market(I actually already bought one tranche recently, hoping to get another)
so thanks ak! for skipping the aa reit rights! more excess rights for me~
Hi AK, I just read an interesting article on the current rights issue. This came after another rights issue not too long ago. Care to talk to yourself :) ?
https://www.liveyoungandwell.com/wealth/ireit-global-share-price/
Hi zhenling,
Happy to help you get more excess rights. ;p
Unfortunately, as a retiree with limited resources, I cannot buy everything I want to buy.
Must prioritize. (TmT)
Hi Unknown,
The answer to your question is in my blog above.
1. The comparison with First REIT is misguided.
2. The issue of debt level is more crucial than ever today.
Looking at the price to derive the value of a REIT is incomprehensible to me.
I would focus only on the fundamentals.
That was what I did with Saizen REIT when Mr. Market thought it was a basket case. :)
Dear AK
I was contemplating on subscription for AA rights but alas, missed the deadline! Maybe not a bad thing cos now I can use those funds to apply for excess IReit rights :)
May I know if I can apply for less than my entitled rights issue and apply for the excess at the same time? For example, I am entitled to 161, can I instead apply to 100 under entitlement and 100 under excess? Because I do not want to end up with odd lots..
Thank you!
Hi Ana,
It has been a while since I participated in a rights issue but the last time I did, the system had changed.
It used to be that we had to enter acceptance of our entitlement, and then enter another line for the excess rights we want.
That last time, I only had to enter total number of rights units I wished to pay for.
So, I entered the total number of rights units I wished to buy in a single line and it worked. :)
Hi AK,
You can do a simple arbitrage by selling your shares from the main shares at current price $1.21/$1.22, and apply for the rights at $1.189.
Some coffee money to buy OCK or gardenia bread if you don't find it too troublesome :)
-Wei
Hi Hi
I second Zhenling. Thanks for giving up AA.
I applied for just a bit of excess rights.
Very happy with today's tbill auction results too
Hi AK,
Sharing an interview video with AA REIT CEO.
https://youtu.be/dNaiO14uzxw
Hi Wei,
Ah, I did think of the idea but it was too late to execute it. (TmT)
Hi Yv,
Et tu, Yv?
Rubbing salt into my wound. (TmT)
Ouchie. LOL.
Lovely 3.89% p.a. T-bill. Huat ah! :D
On a serious note, I am not giving up AA REIT. ;p
In a nutshell, I think of my strategy as accepting an 11% loss of income from AA REIT while embracing a 16% increase in income from IREIT Global.
Of course, if I had the resources, I would buy everything. ;p
Hi DL,
It is exactly what I thought AA REIT is raising money for.
The money is not being used for anything that generates income immediately.
They are keeping the funds for possible opportunities in future.
I wouldn't be surprised if they choose to use the money to reduce debt either.
All good, but for me as a retiree, unless I have excess funds, it is more important that any money I deploy should immediately generate income for me. :)
Hi AK, I applied for my iREIT rights and excess rights today. Probably I applied about 2.5 times more excess rights than my initial allocation..think you mentioned somewhere this round will be heavily oversubscribed, so we may just get much less. Who knows ? Good luck to us all. Haha,
Will IRELT drop lower than excess right after it is issued?
Hi C,
IREIT Global's rights issue is priced very attractively.
I would be surprised if it isn't heavily oversubscribed. :)
Hi S A,
I doubt it would go under 41 cents a unit.
To be honest, your guess is as good as mine. ;)
Dear AK, thank you for your reply during this time.
Hi C,
I really appreciate all the kindness and concern.
It is only right that I reply to each comment.
I wish I could have done it in a more timely manner.
Then, I wouldn't have had to reply to so many comments at one sitting. ;p
Tomorrow is another day! Soldiering on!
Hi AK,
Where can I find the information on excess rights success rate? May I know how many % in general is accepted?
Thanks
DK
Hi DK,
I believe IREIT's rights units start trading today like regular units.
So, you can check your CDP account to see how many units you have.
As for rights units allotment, it depends on the issuer.
Some favor smaller holders while some favor bigger holders.
Hi AK71,
The reason I asked was my units are held under a bank. I subscribed to excess rights but given ZERO. Could it be the bank "ate" my excess application since they can make money by selling to the market?
Regards
Hi D,
Another reader, GP, has the same issue.
If held in a nominee account, you want to check with your broker what happened?
Mine is in my CDP account and my application was fully filled.
Congrats, and thanks for your reply.
I will move my assets out from this account. Although I can't prove it, but I am convinced that they mishandled.
Hi D,
Unless there is a good reason to keep your shares in a nominee account, moving them into your CDP account is better, I feel.
You have full control of your CDP account. :)
Hi! AK,
Is 42 cents still an attractive price to buy?
What's the dividend payout date?
Thanks
Hi Airman,
IREIT Global distributes income in Q1 and Q3 of the calendar year.
So, it could be the months of March and September.
I am not allowed to recommend any stocks.
All I can say is that 42 cents is where I see some technical support and also the estimated distribution yield should be about 8.4% p.a. on the back of a relatively strong balance sheet.
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