When would I invest in ESR-REIT again?

Reader says...
This is my first email to you although been following your blog for about 3 years.

You are an inspiration to me cause although you are 1 year younger than me but you have already achieve financial freedom long ago.






Understand that you have been blogging about not comfortable with ESR and VIva REIT but you also mention before an investment also depends on the price.

So I would like to find out from you at what level will you consider investing in ESR REIT.

Vanishing in less than 15 years.

AK says...
Absolutely no interest.

The whole deal is a godsend or a lifeline for VIVA (which is a ticking time bomb) but rubbish for ESR-REIT.

Yes, I think ESR-REIT got the shorter end of the stick and the shareholders paid for this and will continue to pay for it.






A big chunk of VIVA's portfolio have land leases which will expire within the next 15 to 20 years (see related post #2 at the end of this blog).

Another big chunk of their assets would see a drop in income as they convert from master leases to multi tenanted buildings.

Income support for UE Bizhub East is set to expire later this year.






ESR-REIT will be taking over this horror of a baby.

It would haunt them (mostly the common shareholders of ESR-REIT) later.

Of course, having said this, if there should be a big crash in price, maybe, then, I might take a look. ;p






Related posts:
1. Merger of ESR-REIT and VIVA.
2. VIVA more attractive with 9% yield?

Merger of ESR-REIT and VIVA Industrial Trust.

I have more than a handful of relatively small investments (i.e. anything smaller than $100,000 and usually smaller than $50,000 in size).

Some of them are legacy investments (i.e. leftovers from many years ago after selling off most of the investments) and ESR-REIT (formerly Cambridge Industrial Trust) was one of them.








The last time I blogged about this REIT was in June 2016.

Back then, I added to my investment in the REIT at 52.5 cents a piece.

After adding to my investment, still, it remained a smallish investment and I explained why in related post #1 at the end of this blog.








Well, I have decided to let go of my investment in the REIT.

Why?

Regular readers know that I have concerns about VIVA Industrial REIT. See related post #2 at the end of this blog.

I am uncomfortable that ESR-REIT and VIVA Industrial REIT are talking about merging.

I have enjoyed many years of income distributions and I will also enjoy a capital gain from the divestment.

So, everything taken into consideration, it is not a bad outcome.








This reminds me of the time when I let go of K-Green Trust (KGT) in 2014 when it was decided that they would merge with CitySpring Infrastructure Trust.

I didn't like CitySpring. 

What to do?

I cut KGT loose. See related post #3 at the end of this blog.






With this move, my total investment in REITs shrinks again and, everything else being equal, so will the income distributions I will be receiving from REITs this year.

Read:
ESR-REIT and VIVA in merger talks.

Related posts:
1. Cambridge Industrial Trust (June 2016).
2. VIVA Industrial REIT's short land leases.
3. KGT and CitySprings' unequal marriage.

Sabana REIT could see a change for the better.

As we grow older, feelings of deja vu might become a bit more common. It is probably due to accumulated life experience or maybe the mind is just degenerating.

Anyway, when I read that e-Shang Redwood Ltd (ESR) became a substantial unitholder in Sabana REIT about a week ago, I got a feeling of deja vu.

ESR are the people who bought a majority stake in the manager of Cambridge Industrial Trust (CIT) not too long ago and they also own 12% of CIT.

e-Shang Redwood is a pan Asian logistics entity. Don't play, play.

This reminds me of the time when CIT tried to take over the distressed MacArthurCook Industrial REIT (MI-REIT). Chris Calvert, the CEO of CIT, who was then formerly the CEO of MI-REIT used CIT's resources to buy into MI-REIT.

There was a big fight over MI-REIT with the team led by George Wang. Fortunately, George Wang et. al. won the fight and AIMS AMP Capital Industrial REIT was formed.

In my opinion, Chris Calvert did a poor job of running MI-REIT which led to a need for massive re-capitalisation. If CIT had taken over MI-REIT, with CIT's lacklustre performance and controversy over the years, I think MI-REIT would not have done any better.

It is one thing having good assets and another having a good manager. If we have both in a REIT, we have a clear winner. However, if I must choose, I will choose a good manager because a bad one will just squander away good assets.

With Sabana REIT, I have shared how its numbers were really good at IPO and it just went downhill 3 years later. The manager has constantly struck me as self serving and mediocre and this is putting it mildly.

So, in Sabana REIT's case, a change is needed. Some might say any manager is better than the current one but, more accurately, I would say that it is difficult to do worse than the current manager.

When CIT bought a big stake in MI-REIT years ago, it was with the intention of taking over MI-REIT. Now, I believe that ESR has the intention of taking over Sabana REIT one way or another.

I am holding on to a legacy investment in Sabana REIT that is free of cost as well as units from the recent deeply discounted rights issue. So, I am very much in the black. If ESR is going to bring change to the REIT, even better.

Related post:
History with Sabana REIT.

Reference:
Sabana REIT and ESR.

BREXIT and 1H 2016 income from S-REITs.

My income from S-REITs in 1Q 2016 received an enormous boost from Saizen REIT's distribution which was partially a return of capital. I said I had mixed feelings about the matter and, actually, it has created another issue for me. 

Cash as a part of my portfolio is now quite large.

Is this a problem?

Of course, keeping some excess money in savings accounts and fixed deposits is always a good idea. These are our war chests. 





However, too much cash (earning too little) and we won't be able to keep up with inflation which is one reason why we invest for income. We want to beat inflation or, at least, keep up with it. We don't want to see our wealth eroding.

To be quite honest, I am in no hurry to re-invest all the distribution received from Saizen REIT in 1Q 2016. 

Approximately, I received 8 years worth of "dividends" (in the guise of capital gain) at one go. So, I have quite a bit of time to wait for good investment opportunities. 

In the meantime, some of my cash is in OCBC 360 and UOB ONE, with most of my cash getting 0.8% to 1.9% in interest income from savings accounts and fixed deposits which are virtually risk free.

However, being mortal (and fallible), I couldn't help but nibble a bit at some S-REITs in 2Q 2016.





1. Cambridge Industrial Trust. I have been holding to a much reduced position in this REIT for many years and in 2Q 2016 decided to make a small addition to my position at 52.5c a unit. 

To be quite honest, I feel that AIMS AMP Capital Industrial REIT is probably a more attractive investment. The two REITs have comparable yields but AIMS AMP Capital Industrial REIT has a stronger balance sheet and a business strategy that leaves less to the imagination. 

However, I decided to go with Cambridge Industrial Trust this time because my investment in AIMS AMP Capital Industrial REIT is already quite big.







2. I-REIT Global. I only became an investor after some time from the IPO which I thought wasn't attractively priced enough and I added to my investment in the REIT last August at 65.5c a unit. 

I decided to nibble at 71c a unit in 2Q 2016 because even at that price, the distribution yield is still pretty attractive. I also like the REIT for its portfolio of German freehold office properties and their high quality tenants.

If BREXIT should spark a contagion, I would become a lot more cautious in adding to my investment in the REIT as its income is in Euros although having real estate in Germany, arguably Europe's strongest economy, I feel that there is some degree of stability.







3. Soilbuild REIT. I decided to add to my investment in the REIT which has seen a large decline in unit price due to issues with one of their tenants, Technics Offshore Engineering, which did not pay their rent.

The REIT has since been paid the firm's bank guarantee of $11.85 million by UOB. This is equivalent to 18 months of rental and it will give the REIT time to search for a new tenant.

In arriving at a price which I am more comfortable to buy at, I noted that the rent payable by Technics is almost $8 million a year which is about 10% of the REIT's revenue of $80 million a year. 

Assuming the REIT is unable to find another tenant after 18 months, without taking into consideration other costs, DPU would decline by 10% accordingly. So, happy with the distribution yield at 73c a unit back in December 2015, with the latest development, I decided that I would only add to my investment at 66c or so a unit.







Together, these nibbles used up less than 10% of the distribution I received from Saizen REIT in 1Q 2016. I think it is important to put them in perspective. They are really only nibbles.

S-REITs are leveraged income instruments. So, it won't be wrong to say that I remain wary as to how rising interest rates in the future could impact distributable income negatively, all else remaining equal.

There isn't anything retail investors like me can do but to be more conservative when it comes to debt and investments which depend largely on debt to bring home the bacon especially if growth is not particularly promising.






However, thanks to BREXIT, interest rates are likely to remain low in the near future and the most disadvantaged in the financial world are probably still the savers. In the search for higher yields, S-REITs are natural beneficiaries.

So, how much bacon did I receive from my investments in S-REITs in 1H 2016?

S$ 397,294.28








S-REITs remain relevant instruments for the income investor and I will continue to keep an eye on them, buying more of the ones I like if Mr. Market should go into a depression.

Related post:
1Q 2016 income from S-REITs.

Distribution Reinvestment Plan: First REIT and CIT.

I received a few enquiries from readers as to what I am doing with regards to the Distribution Reinvestment Plans (DRP) offered by First REIT and Cambridge Industrial Trust. I think readers who have been following my blog for a long time would have guessed my answer.

I invest in REITs for income and I will take the distributions in cash, usually. Usually? Yes, usually and I would have said "always" if not for the single instance when I took part in the DRP of AIMS AMP Capital Industrial REIT's.

So, why did I do it then? Was I being inconsistent?

Well, if I could make money out of a situation and yet not stray from my original intention of investing for income, I am being consistent. That was the case then. So, it was a case of having my cake and eating it too. Why wouldn't I do it?

For those who are unfamiliar with the circumstances surrounding the DRP I am referring to, please read: AIMS AMP Capital Industrial REIT: DRP.

As for the DRPs offered by First REIT and Cambridge Industrial Trust now, I don't see how they are compelling offers apart from the fact that unit holders who take part will be saving on brokerage fees and other costs which would be incurred if they were to make the purchases in the open market instead.

First REIT is offering to allot new units at a price of S$1.0163 per unit. Market price is now $1.02 per unit.

Cambridge Industrial Trust is offering to allot new units at a price of S$ 0.6737 per unit. Market price is now $0.68 per unit.

As anyone can see, there is only a very slight discount to the current market price in both cases.

So, unless we are thinking of increasing our exposure to the REITs at current prices anyway for some reason, it would not make much sense to take part in the DRPs.

I have shared the reasons why I am not adding to my investments in S-REITs in earlier blog posts but those reasons are good for me. They might not be good for everyone.

Having said this, I still think that REITs are relevant investments for income and would not hesitate to add to my long positions if Mr. Market were to make me offers too good to refuse.

Related posts:
1. 9M 2013 income from REITs and more.
2. 2013 full year income from S-REITs.
3. Strategy to grow wealth and augment income.

Cambridge Industrial Trust: 30 Teban Gardens.

Cambridge Industrial Trust is looking at buying 30 Teban Gardens for S$41m.

"Cambridge Industrial said 30 Teban Gardens Crescent is a high quality asset, with prominent exposure to the Ayer Rajah Expressway. The acquisition will further reduce the reliance of the trust’s income stream on any single asset or tenant."

Eurosports Auto at 30 Teban Gardens distributes Lamborghinis.

What I am immediately interested in is how are they going to fund the purchase and how will it impact my income received from the REIT.

The REIT has a gearing level of some 35.9% as of March 2012. Not excessive but it is not low either.

The manager has said that the acquisition will be funded through a mixture of equity fund raising and debt. In what proportion and in what form is the equity fund raising going to take? I guess we will have to wait for more details.

If the acquisition goes through, the manager expects the net property income (NPI) of the trust to improve some 4.6%. If the acquisition is fully funded by debt, DPU could be impacted similarly but with equity fund raising involved, depending on how many new units are issued, DPU would probably not increase by as big a percentage. If a rights issue is involved, we would also have to see the asking price before we can calculate the distribution yield.

Cambridge Industrial Trust has improved on its DPU for four consecutive quarters and it seems like a relatively good investment for income. However, I am unable to forget Chris Calvert's spotted track record before this. So, this remains a smallish investment in my portfolio.

I have a nagging feeling that this acquisition is not a good idea. Although the acquisition would only go through on a condition that the vendor (seller) obtains a further 22 years lease from JTC, the initial lease term was for 10 years only (from 1 July 2007). This means that 5 years have lapsed. Even with a further 22 years of lease, it would mean a total of only 27 years is left to the lease and would expire in 2039.

Is the valuation overly optimistic and is the REIT overpaying?

Slides presentation 26 - 28 June 2012: Here.

See announcement on acquisition: Here.

OCBC Research: Industrial REITs.

I came across an interesting piece of research by OCBC on industrial REITs in Singapore and would like to share the salient points here (some of which I have mentioned before in my blog):

Industrial REITs reported healthy 4Q11 results.

Industrial REITs appeared to outperform market expectations.

Expecting stable performance.

Operating metrics still healthy.

Earnings likely to stay resilient.

Percentage of leases due for renewal at comfortable level.

Aggregate leverage may inch upwards after funding potential investments.

Industrial REITs in better financial position now

Maintain OVERWEIGHT view.

I am pleased to see that AIMS AMP Capital Industrial REIT, Sabana REIT, CIT and Cache Logistics Trust have all performed above consensus expectations as I am vested in all four. Bigger names such as Ascendas and Mapletree have only performed within expectations; not vested. (Refer to exhibit 3 in the report.)

See the full report: here.

Related post:
Office S-REITs VS. Industrial S-REITs (3).

Cambridge Industrial Trust: 4Q FY2011.

Unit price of Cambridge Industrial Trust has been creeping upwards, probably in anticipation of the Trust going CD.

Total assets under management exceed $1b with recent revaluation of properties. This resulted in a lower gearing level apart from boosting NTA/unit to 62c. Year on year, gearing ratio has fallen from 34.7% to 33.1%. The REIT has no borrowings due until June 2014.

Interest cover ratio: 5.0x
Average land lease remaining: 36 years.

DPU increased quarter on quarter from 1.082c to 1.118c, representing an increase of 3.33%. Annualised, the distribution yield at 50c per unit is 8.94%.

The REIT will go XD on 6 February and the income distribution is payable on 29 February.

See presentation slides: here.

On 14 October 2011, I said that Cambridge Industrial Trust could be worth another look. That view has not changed.

See blog post here:
Cambridge Industrial Trust: Worth another look.

Related post:
Cambridge Industrial Trust: Templeton and acquisition.

Cambridge Industrial Trust: Templeton and acquisition.

In a blog post dated 14 October, I said that Cambridge Industrial Trust is worth another look as I expect its income to bump up in 2012 and 2013 without any need for further fund raising. It is interesting to note that subsequently on 1 November, Templeton became a substantial unitholder. Announcement here.

More recently, the Trust has proposed the acquisition of 3C Toh Guan Road East for S$35.5m. This acquisition to be completed in the first quarter of 2012 is to be part funded by debt and the rest by cash.

The acquisition is expected to bump up annual DPU by 0.24c. If the unit price of CIT were to decline to 46c, we would be looking at a prospective annual distribution yield of 9.92%. That could be attractive enough to increase long exposure to the trust.

Is this increase in DPU sustainable? Everything else remaining equal, it is. This is because it is secured through a three years leaseback agreement to the seller of the said property.

Any potential pitfalls. I do see one which is some 10 years away. This is a 30+30 years leasehold property which saw its land lease commencing in 1991.  So, it is only 10 years away before the land lease has to be renewed. At what price? We will know then. For the next few years, it should be a productive asset.

See announcement here.

Related post:
Cambridge Industrial Trust: Worth another look.

Cambridge Industrial Trust: Worth another look.

I was looking at Cambridge Industrial Trust's latest presentation slides. It could be worth another look as its income could bump up quite meaningfully in 2012 and 2013.

Latest numbers:
Gearing: 33.1%
(No refinancing due till 2014.)
NTA/unit: 61.7c
Interest cover ratio: 5.1x
DPU: 1.082c

What I find attractive:
1. Built-To-Suit Project at Tuas View Circuit. Completion by 3Q 2012.
2. Built-To-Suit Project at Seletar Aerospace Park. Completion by 3Q 2013.
3. AEI for 30 Toh Guan Road. Completion by 4Q 2012.
4. AEI for 88 International Road. Completion by 4Q 2013.
5. AEI for 4 & 6 Clementi Loop. Completion by 4Q 2012.
6. Proposed acquisition of 25 Pioneer Crescent.

With gearing level at 33.1%, the Trust has ample debt headroom to finance items 1 to 5 if the management should decide to take on more debt. This would mean greater distribution yield accretion.

Item 6 is to be financed with internal cash resources which means gearing level will not go up and the purchase will be distribution yield accretive, everything else remaining equal.

Buying now at 46c per unit will give a distribution yield of about 9.4%. Even with all the initiatives announced, I would like to see this yield going nearer to 10% before increasing my investment in the Trust.

See presentation slides here.

Cambridge Industrial Trust: 2Q 2011 results.

The last time I blogged about this REIT was on 28 April and I was so negative about it that some readers divested their shares in the REIT straightaway. Read blog post here.

Now, I have to say this again that my blog is purely to share my thoughts, a place where I think aloud, so to speak. It is not to exhort anyone to buy or sell anything.

In a reply to a reader, OT, I mentioned that I would wait to see if I could divest my investment at 52c just to close a chapter (again). Even with mediocre investments, there could be a better time to sell.

Fundamentally, with a 2Q DPU of 1.036c, it translates to an annualised distribution yield of just 7.97% at the unit price of 52c.

Gearing at 32.7% and interest cover ratio at 5x are similar to AIMS AMP Capital Industrial REIT's.

The difference? AIMS AMP Capital Industrial REIT has an estimated distribution yield of 9.09% at the unit price of 22c. Money should go to where it is treated best.

Technically, the resistance as provided by the 200dMA at 51.5c was taken out convincingly today as price closed at 52c, forming a long white candle in the process.

A breakout? It seems to be the case and we could see price test 53c in the near future. I have entered my sell order.

See presentation slides here.

Cambridge Industrial Trust: 1Q 2011 results.

I must say that Mr. Chris Calvert, CEO of Cambridge Industrial Trust, has not failed suspicions that he could underdeliver. He did so and did so stupendously.

DPU declared for 1Q 2011 is 1.001c (XD 5 May 2011). This is to be paid on 14 June 2011. Annualised DPU is provided by the management as 4.06c. This is much lower than the DPU of 4.84c, post rights, as suggested by the manager. I blogged about the tricky nature of the rights issue and DPU forecast in an earlier blog post. Read it here.

At today's closing price of 51c, the annualised DPU of 4.06c would mean a distribution yield of only 7.96%. This is greatly disappointing! Has Mr. Chris Calvert outdone himself? A rhetorical question.

Property manager's fees increased a whopping 46.4% while manager's management fees increased 8% year on year. All these while the gross revenue of the REIT increased only 3.8% year on year.

Regular readers know that I do not have a high opinion of Mr. Chris Calvert and I have blogged about how the Trust has failed to deliver in the past. An example? Please read blog post here. However, I decided to be friends with Cambridge Industrial Trust again (read blog post here) and it seems that I could have been too forgiving.

Given a chance for a small gain, I would probably divest my smallish investment in this Trust. Yes, the consolation is that my investment in this Trust is a very small one. Perhaps, a wary subconscious prevented me from foolishly investing too much in this Trust.

With gearing at 33.3%, an interest cover ratio of only 4.8x and a distribution yield of less than 8%, I am better off investing in Cache Logistics Trust, AIMS AMP Capital Industrial REIT and Sabana REIT. All of these have lower gearing, higher interest cover ratios and higher distribution yields. Cambridge Industrial Trust is a loser.

See manager's report here.
See presentation slides here.

Industrial rent forecasts strongest for Singapore.

This research paper on Asia Pacific real estate by DTZ Research was published on 23 February 2011. DTZ Research rates properties as HOT, WARM or COLD.  HOT refers to properties severely undervalued. WARM refers to properties somewhat undervalued to somewhat overvalued. COLD refers to properties which are very much overvalued.

It is very interesting to see that Singapore properties are rated as HOT for all three markets researched, namely, office market (-12%), industrial market (-14%) and retail market (-8%).  In more detail, HOT refers to an investment where investors can expect to make returns higher than the risk adjusted rate of return. Markets estimated to be more than 5% under-valued are classified as HOT. To put things in perspective, the office and industrial markets in Hong Kong are rated COLD. Taipei's industrial market is also rated COLD.

As I am heavily invested in industrial properties S-REITs, notably in AIMS AMP Capital Industrial REIT and more recently, in Cambridge Industrial Trust, Cache Logistics Trust and Sabana REIT, I am pleased to have affirmation from DTZ Research when I read this:  "Singapore, a traditional powerhouse in trade and logistics, is expected to be the best industrial performer over the forecast period in terms of rental growth, forecast at 3.6% pa." Refer to page 8 of the research paper. See it here.

Related post:
Higher rents to benefit industrial properties S-REITs.

Cambridge Industrial Trust: Excess rights results.

I checked my savings account and saw the partial return of funds used in the acceptance of rights and application of excess rights in Cambridge's rights exercise.

In total, I have 4 lots of rights units: 2,125 accepted rights and 1,875 excess rights. Add this to the initial 17 lots which I bought at 51c per unit, I have 21 lots now at an average price of 49.46c per unit. Let's just round it up to 49.5c per unit. With a DPU of 4.84c, post rights, that's a distribution yield of 9.78%.

Related post:
Cambridge Industrial Trust: Going for excess rights.

Higher rents to benefit industrial properties S-REITs.

In the last one month, I bought more units in industrial properties S-REITs.

1. I became an investor in Cambridge Industrial Trust again. Read blog post here.

2. I bought more units of AIMS AMP Capital Industrial REIT. See latest blog post here.

3. I became an investor in Cache Logistics Trust. Read blog post here.

4. I became an investor in Sabana REIT too. Read blog post here.

I believe that all these REITs are fundamentally strong and if we are investing for income, these could be very rewarding in the next two years. Distribution yields range from 8.15% for Cache Logistics Trust to 9.76% for AIMS AMP Capital Industrial REIT at current prices. Attractive? Quite.

DTZ Research said that rents for industrial space in Singapore are rising. Although average rent grew 3% quarter on quarter, current average rent is still 17.1% below the peak of 2008.


"DTZ added that industrial rents are anticipated to continue to increase. That is because the annual average potential supply of 7.5 million square feet between 2011 and 2013 is significantly lower than the historical 10-year average demand of 9.3 million square feet." CNA, 07 April 2011.


If we are trying to beat inflation and protect our wealth from shrinking, industrial properties S-REITs are definitely worth considering. I have felt this way for more than a year and I continue to believe in their fundamentals.

Cambridge Industrial Trust: Going for excess rights.

My entry into Cambridge Industrial Trust could not have been better timed. I became a unitholder again in the morning of 11 March at the price of 51c/unit. Of course, we know what happened in Japan on that day.

In my blog post that day, I said that "If the nil-paid rights should trade at 4c to 5c, it would be quite attractive ... Any price less than 4c would be a steal!" Well, the nil-paid rights are not trading below 4c and I didn't manage to "steal" any. Read blog post here.

I also missed the opportunity to accumulate at 47c/unit when the REIT was still trading CR. You might remember me saying this "What are my plans now? Buy more if its price weakens further? Looking at the daily chart, CIT is trading below the 200dMA. So, I look at the weekly chart for hints of the next support. The rising 100wMA is at 46.5c now and should provide relatively strong support. 46.5c? That is some way to fall from here! Yes, it is but remember that TA shows us where the supports are and not necessarily that they would be tested. If it should be tested while the counter is still CR, I would buy more.

"Buying 16 lots more at 46.5c would mean an average price of 46.11c... Of course, owning more units could possibly entitle me to more excess rights as well." Read blog post here. It never hit 46.5c where I was waiting and the lowest it went to was 47c. Tough luck.

So, since I got 17 lots at 51c, I would get 2,125 rights. I would, of course, round it up to 3,000 rights by applying for excess 875 rights. I will also apply for more excess rights in the hope of lowering my average price. With its unit price closing at 48.5c and hitting a high of 49c in the last session. This rights issue would be the first one I might not be making any money from in quite a while.

Would I stay invested? Well, the REIT's numbers have improved and should be a reliable passive income generator although I discovered something in small print and I replied to a reader on 19 March saying: "I looked at the announcement by CIT's manager again. We have to read the fine print. Tricky. 5.07c DPU would only kick in end of 2012 once the Extension Development Works are completed. Otherwise the DPU is 4.84c, post rights. So, to secure a 10% yield, buying at 48.5c per unit or lower would do it." See comments here. Yes, this was in fine print. Nothing wrong but it would have been better if the numbers were included in the table proper. I almost said something scathing when I read the announcement again.

So, although I am disappointed in more ways than one, I would probably stay vested unless I have a good reason to divest. Worst case scenario? A distribution yield of 9.7% for my investment.

AIMS AMP Capital Industrial REIT: Bought more at 20c.

Back from hot yoga. I think the heat is somewhat challenging. I should try yoga without the "hot" next.  Anyway, time to catch up on my blogging.

Apart from Cache Logistics Trust, I bought some units of AIMS AMP Capital Industrial REIT today at 20c/unit.

Fundamentally, at 20c/unit and a DPU of 2c per annum, I am getting a 10% distribution yield. The manager also released some re-assuring news yesterday:

1. There appears to be no structural damage to the Asahi Ohmiya Warehouse located in Tokyo, Japan, which is located approximately 345 km from the epicenter of the earthquake which struck Japan on Friday 11 March 2011.

2. A sale and purchase agreement was struck on on 21 February 2011 for the sale of the property for a consideration of JPY1.49 billion. Completion of the sale of the Property was originally scheduled to take place today.

3. The Purchaser has no right to rescind the Sale and Purchase Agreement and the completion of the sale of the Property will be rescheduled to the first practicable date following completion of the investigation and any required repairs.
Read announcement here.

This, I believe, is good news as the sale of its Japanese property is something the REIT has been working towards. The apparently good condition of the property after the quake would also mean that the REIT would  not be incurring any hefty repair costs.

Technically, we could see price going lower as the selling down at 19.5c today was quite strong with 6,599 lots sold down at that price. 19c? Possible. Maybe even 18.5c. So, why don't I wait? Well, can we tell for sure if it would go that much lower? I can't. So, I buy some now. In fact, forming a doji today tells a story in which bulls were quite strong at the closing too.

I would also pay attention to the MACD and whether it could form a higher low as price forms a lower low. That would be a positive divergence and could indicate a short term trading opportunity. I have put in a buy queue at 19.5c for tomorrow.

Something on Cambridge Industrial Trust:

Cambridge Industrial Trust rated 'buy' by DMG. Stock trades at 10% FY2011 yield, attractive relative to its peer average of 7.3% and its pre-crisis yield of 6.7%. DDM-based target price of 61 cents. MAINTAIN BUY.
Tuesday, 15 March 2011

© 2011 - The Edge Singapore

Earth shattering news: Yoga, CIT's rights issue, Japan's earthquake and Saizen REIT.

This is a momentous day. I went for my first Hot Yoga class! Yes, were you expecting me to talk about the correction in the USA or the earthquake in Japan? Well, jokes aside, I have not stretched myself in so many different directions and curled myself up in so many positions in ages, if at all! It was all done in a room set at a temperature of 38 degrees centigrade. I lost almost a kilo after the session. Had a dinner of salad, fish and rice after the session just to continue feeling good about myself doing something healthy for a change!

Anyway, when I came home, I saw 15 comments in my blog awaiting moderation and, of course, response. Wow! That's a record but one that is not taken note of by any analytical tools. I guess people must really be spooked today by all the happenings in the market, including Cambridge Industrial Trust's (CIT) rights issue.

OK, if you can't tell by now, this is going to be a mish mash of a blog post. I am going to talk about all the stuff that's on my mind and maybe more. I am still feeling very warm from yoga, despite having showered twice, once at the yoga studio and once at home (after replying to all the comments in my blog). Full from a very healthy dinner, I am feeling very drowsy at this moment.

Now, first off, CIT. I got in at 51c this morning and I blogged about it here. The sell down after lunch was rather unexpected. Well, so was the earthquake in Japan. These things happen. As long as we got in at a fair price, there should be no regrets.

What are my plans now? Buy more if its price weakens further? Looking at the daily chart, CIT is trading below the 200dMA. So, I look at the weekly chart for hints of the next support. The rising 100wMA is at 46.5c now and should provide relatively strong support. 46.5c? That is some way to fall from here! Yes, it is but remember that TA shows us where the supports are and not necessarily that they would be tested. If it should be tested while the counter is still CR, I would buy more.

Buying 16 lots more at 46.5c would mean an average price of 46.11c. With a DPU of 5.07c, post rights, it would be a distribution yield of almost 11%! Of course, owning more units could possibly entitle me to more excess rights as well.

Next, the biggie: earthquake in Japan. This has been described as the worst earthquake in Japan in many years. In my memory, the last big quake was the Kobe earthquake in 1995 and that measured 7.2 on the Richter scale. The earthquake in question now measured 8.9 on the Richter scale. It is a catastrophe that has triggered tsunami warnings "for countries to the west and across the Pacific as far away as Colombia and Peru". Read report here.

For investors of Saizen REIT, we are concerned as to how much of the REIT's portfolio is affected. Saizen REIT currently owns 146 buildings of which 28 are in the affected areas. These buildings jointly account for about 15% of the REIT's income and 15.5% of its NAV.

In a timely report by its co-CEO, Mr. Chang Sean Pey, it is revealed that "the asset manager of Saizen REIT are in the process of contacting the local property managers in Sendai, Koriyama and Morioka to find out their well being and to assess the impact of the Earthquake on Saizen REIT’s property portfolio.....(and) will continue to make appropriate announcements as and when it receives updates on the above matter." Read announcement here.

There is not much else we can do but to wait and I won't lose sleep over this. Why? The unit price of the REIT fell and hit 15c at one point before closing at 15.5c which is a support I just blogged about yesterday. It is where we find the upturned 100wMA now. Read blog post here.

Fundamentally, if Saizen REIT did not insure any of the buildings concerned and this is very unlikely, we could expect a revised NAV of about 22.67c/unit and a reduced DPU of 0.88c, bearing in mind that this could be 50% higher if not for the amortising nature of its loans. These numbers do not include potential contributions from YK Shintoku which is in default of its CMBS. Weaker numbers, no doubt, but not catastrophic.

So, stay calm and rational, wait for the management's report and if the market should overeact on the downside, I would buy more. That's what I'm doing and I am going to enjoy the weekend. You should too. :)

Mapletree Logistics Trust, Saizen falls on Japan quake
Friday, 11 March 2011

© 2011 - The Edge Singapore

GLP slumps on Japan quake; company checking properties
Friday, 11 March 2011

© 2011 - The Edge Singapore

Cambridge Industrial Trust: Friends again.

I chose a rather amusing title for this blog post (some might even say cavalier) and it shows that there are no forever friends or forever enemies in this world.

I was wondering if there would be a sell down of CIT's units today but I guess market participants are savvy to the benefits of this rights issue. The buy queue at 50.5c is very long.

So, I had a choice of either buying up at 51c or just wait and see how much the nil-paid rights would trade for later this month. The biggest attraction of buying up at 51c is that it would allow me to apply for excess rights which would bump up the distribution yield for me if I should be successful in getting some. Going by past experience, chances of success should be rather high.

Now, I am, once again, a CIT unitholder. I bought up 17 lots at 51c/unit today. This is a small investment to get my foot in the door, so to speak. This would guarantee me 3 lots of rights as I would basically apply for excess rights to round up the odd lot. The average price per unit would be (51c x 17 + 42.9c x 3) /20 = 49.785c. With a DPU of 5.07c, it would mean a distribution yield of 10.18%.

Without the attraction of possibly getting some excess rights, I would not have bothered to buy up at 51c today. So, assuming that I am awarded 1 lot of excess rights (on top of what is required to round up the odd lot), that would bring my average price per unit down to 49.457c which would mean a distribution yield of 10.25%. I hope I would be able to get more excess rights than just 1 lot.

I will also be keeping an eye on the price of the nil-paid rights when they start trading. In my last blog post on the subject, I mentioned that the rights should not trade higher than 7c. It would not make sense to buy at a higher price than 7c. In fact, at 7c, I would not bother either because it would mean a final price of 7c + 42.9c = 49.9c which is higher than my expected average price, post rights.

If the nil-paid rights should trade at 4c to 5c, it would be quite attractive as that would translate to 46.9c to 47.9c per unit which would have a distribution yield of 10.58% to 10.81%. Any price less than 4c would be a steal!

Related post:
Cambridge Industrial Trust: 1 for 8 rights issue.

Cambridge Industrial Trust: 1 for 8 rights issue.

As a retail investor and minority shareholder, I prefer a rights issue to private share placement as it allows me to participate in the enlarged capital base of the business entity. Cambridge Industrial Trust (CIT) is having a rights issue to help fund three acquisitions in Singapore. I won't go into the details. You can get all the details here.

Foremost on my mind is how can I benefit from this rights issue. Although I am no longer invested in the REIT, I will not let my past experience stop me from a possible money making opportunity. Rights issues have, so far, been profitable for me.

The rights are at an issue price of 42.9c each. 1 rights unit for every 8 units of CIT owned.

Current price is 50.5c/unit. 

Current DPU is 4.89c. Current NAV/unit is 61c. Current gearing is 34.7%.

Post rights, DPU will be 5.07c. NAV/unit will be 58c. Gearing will be 35.9%.

Therefore, if we are after a 10% distribution yield, getting units in CIT at 50.5c or lower would secure that for us. So, we could either buy some units at the current price and take part in the rights issue or we could wait to see how much the nil-paid rights would go for when they start trading later this month. Since the rights are at an issue price of 42.9c, the nil-paid rights should go for 7c at the highest. It would not make sense to pay more for them.

If the unit price of CIT were to be hammered down for some reason or if the nil-paid rights were to be sold at very low prices when they start trading, we could have ourselves a bargain.

Important dates:

Last day of CR: 15 March 2011.

Trading of nil-paid rights: 23 March to 31 March 2011.

Last date for acceptance and payment: 6 April 2011.