US$30b rescue! T-bill 3.65% p.a.! Banks or REITs? Good?

I am not feeling too good today.

So, if this blog feels a little incoherent, you know why.

I have so many things flying around in my mind now. 

I just need to deposit them here in my blog, my Pensieve.

So, it seems that the U.S. banking crisis is contained once again with eleven big U.S. banks pledging $30billion to First Republic Bank.

This is a significant move to shore up confidence in the U.S. banking system as the individual sums of $1billion to $5billion in deposit are, obviously, uninsured by the F.D.I.C.

It is pretty impressive as it should be quite obvious to anyone that the U.S. Fed is unable to fight high inflation and to bail out the U.S. banking system at the same time.

Choosing to hike interest rate to fight inflation would increase the fallout risk in the banking system while not hiking interest rate might result in higher inflation.

The $30billion joint deposit made to First Republic Bank did not happen because the largest banks in U.S.A. decided all at once that it was in their industry's best interest.

The CEO of J.P. Morgan, the largest bank in U.S.A., Jamie Dimon, together with Jerome Powell and the Treasury secretary, Janet Yellen, seeded the idea. 

Jamie Dimon approached his peers and the $30billion package was born.

So, with the banking crisis contained once more, the Fed will be able to hike interest rate next week with one less thing to worry about. 

This move will follow the ECB, which just hiked interest rate by 0.5% to fight inflation in the EU.

Bond yields sank for many days in a row, because Mr. Market was betting on the Fed choosing to manage the risk of further fallout in the U.S. banking sector rather than to continue hiking interest rate to fight inflation.

There was also a flight to safety as Mr. Market moved money to the relative safety of treasuries.

With the Fed likely to hike interest rate as planned, investors in Singapore should see yield on the short end of the curve rising again. 

So, we should see 6 months T-bill yield going higher from the relatively low cut-off yield of 3.65% per annum we saw in the 16th March auction.

As for DBS, OCBC and UOB, the Monetary Authority of Singapore has issued a statement to say that the exposure which DBS, OCBC and UOB have to troubled Credit Suisse is “insignificant”.

I am staying invested in DBS, OCBC and UOB for income as I expect them to continue to bring home the bacon. 

With higher dividends declared, I look forward to getting bigger portions in future too.

What about REITs?

In the current environment, U.S. banks are going to be more selective and risk averse. 

So, I believe that it could be harder to secure loans or to refinance for some commercial properties in U.S.A. now.

So, I would avoid those U.S. REITs which have very high gearing and which need to refinance in the next 12 to 18 months.

Digital Core REIT, which is a data centre REIT, saw its unit price crashing because one of its largest tenants, Cyxtera, which accounts for 22% of its income has not been able to refinance a revolving credit facility that matures in Nov 2023. 

Moody's downgraded Cyxtera's credit rating to junk as it believes the possibility of default over the next few months is significant.

Only a couple of months ago, there was a chorus of BUY calls for Digital Core REIT by analysts and some finance social media influencers.

It pays to remember not to ask barbers if we need a haircut.

It pays to remember that no one cares more about our money than we do.

Eat crusty bread with ink slowly for peace of mind.

Recently published:
Banking crisis spreads! AK issues warning!

Ticketing for "Evening with AK and friends 2023" is ongoing.

Buy DBS, OCBC and UOB? March expenses and plan.

Long time regular readers of ASSI know why AK was able to do much better on the investment front in 2022.

It wasn't only because AK avoided the highly speculative maze of cryptocurrencies and the high growth, zero dividends high tech space.

AK reallocated resources to enlarge an already relatively large exposure to our local banking sector in his investment portfolio.

Investments in DBS, OCBC and UOB did most of the heavy lifting in my portfolio in 2022, raising my full year passive income above the $200,000 mark.

In 2023, for various reasons, income generated from my investments in REITs as a group will likely take a hit as most have reported lower income distributions.

IREIT Global, Sabana REIT, CapitaLand China Trust and Frasers Logistics Trust have reported lower income distributions while AIMS APAC REIT and Ascott Residence Trust have reported higher income distributions.

With higher dividends declared by DBS, OCBC and UOB, I am hopeful that they, in the worst case scenario, would be enough to offset the weaker performance of REITs in my portfolio.

Not hoping for an increase in passive income, year on year, I would be happy to see passive income in 2023 staying the same as the year before.

March is the first month of the year in which I receive more meaningful sums of passive income.

I have quite a few more bills to pay this month as I have offered to pay more recurring expenses for my parents. 

The recurring expenses to be added to the list are motor insurance and road tax for the family car.

I must pay for my own car's motor insurance and road tax this month too.

Those are the big ticket items this month, which, thankfully, occur only once a year.

Still, I would have some money left to invest with and, as I shared in an earlier blog, I plan to apply for the Singapore Savings Bond offered this month.

I plan to set aside $10K for that.

Then, with whatever money is left from passive income received in March, I had planned to get some 6 months T-bills as short term yields remain elevated and, therefore, relatively attractive for the income investor.

However, when I took a look at the charts of DBS, OCBC and UOB today, they look pretty bad in a good way, if you know what I mean.

For DBS, it is currently testing an important long term support and if it should break, the eventual target could be $32.00 and, if that should happen, I might buy more. 

I would be averaging up in such an instance, of course, which was what I did with my investments in OCBC and UOB in October last year.

If I wasn't already substantially invested in DBS, the current level seems like a good place to get a foot in, especially with a bumper dividend on the way.

For OCBC, I see a positive divergence as the MFI, a momentum oscillator, seems to be forming a higher low as the stock price forms a lower low.

This suggests to me that smart money is still accumulating even as the stock price stays above long term supports provided by the 200 days moving averages.

This could change, of course, and if the longer term supports should break, which seems unlikely in the near term, I would be interested to increase exposure at under $12 a share.

UOB, unlike OCBC, does not have a positive divergence and the stock price breaking a long term support is, therefore, not surprising.

Still, another long term support, the 200 days moving average is at $28.48 and, with momentum staying negative, we could see that tested.

If that should happen, if I didn't already have a significant exposure, I could get some although I would prefer to buy only when I see a positive divergence.

Fundamentally, all three local lenders are well capitalized and well run.

It now looks like Mr. Market could possibly offer me lower prices to increase my exposure to all three local lenders in the not too distant future.

So, instead of putting all the excess money from my passive income in March into T-bills, I might hold more cash instead, just in case.

For readers who have not visited my blog in a while, I published a blog yesterday regarding "Evening with AK and friends 2023." 

You might want to take a look if you are interested in attending.

See:
Evening with AK and friends.

Have a good weekend!

Related posts:
1. T-bills and March strategy.
2. March dividends and SSB.
3. Give parents enough money?
4. UOB and OCBC final dividends.
5. DBS special dividend.
6. Largest investments updated.

Buying US office REITs in 2023? Manulife and Prime REIT?

Not too long ago, I said that restarting my YouTube channel was a good thing and in more ways than one. 

In response to my latest video on US office REITs, a reader left a very thoughtful comment which I am publishing here as a blog for the benefit of readers who do not follow my YouTube channel. 

In case you are wondering, here is the video.  

Reader says to AK: 

Hi, yep, I agree. I sold out at a painful loss, and since then they have dropped further. 

I misread it entirely, thinking that employees would be keen to get out of the house and back into the office cultures. 

Well, that doesn't look like it will happen. This looks like it is a permanent shift in behaviour. 

US Public transport is nowhere near the level of convenience in Europe and Asia, resulting in using private vehicles to commute. With no commute, it further adds to the attraction of WFH. 

Also employees are able to move to states with lower taxes. 

You mentioned that the vacancy rate was 14% (??). I think this is misleading, the physical occupancy level is more important, and I read this is in some buildings well below 60%. 

Once the rental contracts expire over the next couple of years, they will renewed at a much lower space level. 

Inflation is remaining very high in the US and Europe, interest rates, as you say, will almost certainly continue to rise throughout this year, all things being equal. 

I also don't know if the office buildings can even be sold. They might turn into derelict blocks, reminiscent of the rust belt. 

Maybe some can be repurposed into condos, but otherwise I can't think of a use for them. 

Just my thoughts, FWIW. 

AK replies to reader: 

Working from homes (WFH) in the US instead of going back into offices does look like a structural shift and it is, therefore, more permanent than temporary. 

You have also rightly pointed out that the public transport systems in the US are not well developed. I have tried them before on my yearly visits in my younger days and I was unimpressed with both buses and trains. 

Nothing like Japan, Hong Kong or Singapore. 

As for the vacancy rate I mentioned in the video, from my research, it is a national average. 

I am inclined to agree with you that the number is probably much higher for some older office buildings which might not be as well positioned. 

US office REITs are likely to continue struggling which is why if we want to invest in them for whatever reason, we want to look for those with strong balance sheets to see them to the end of the tunnel. 

Thank you very much for sharing your experience and insights. Much appreciated. 

Related post:
Largest investments updated.

Reallocate as interest rate rises in a slowing economy.

Interest rate is rising.

PM Lee recently warned of a possible recession in the quarters ahead.

Put rising interest rate and a slowing economy together, we get a rather gloomy picture.

The evil which is inflation is preferred to the evil which is deflation.

Although inflation is the lesser evil, it isn't as benign when it is heightened which is what we are seeing now in the world.

We can reduce inflationary pressure either by increasing supply of goods and services which are in demand or tempering demand for such goods and services.

As it is difficult to increase supply right away, central banks are trying to tame inflation by increasing interest rate in an effort to reduce demand.

Increasing interest rate increases the cost of debt.

Credit is the lifeblood of commerce and most businesses are leveraged to some degree.

If the economy is healthy, businesses can pass on the higher cost of doing business to their customers and higher finance expense that comes from higher interest rates are naturally a part of such cost.

However, it becomes more difficult for many businesses to pass on such higher costs to customers if the economy is suffering from malaise.

Heightened inflation, rapidly increasing interest rates and low economic growth is not a good mix.

In such a situation, even very strong companies will not be spared a slowdown as most entities would be less ready to part with their money.

Already, we see some big name MNCs both in the old and new economies warning of very difficult quarters ahead.

Only the fittest will survive but even they might not emerge unscathed from such a toxic cocktail.

As an investor for income, I believe that businesses which are able and willing to pay a meaningful dividend should be favored.

To make sure that dividends are sustainable, these businesses should also provide necessary goods and services and have stronger balance sheets.

They too will take a few punches during hard times but they should be able to roll with the punches.

I think staying invested is still the way to go but, like I said, I should mostly be invested in businesses which are able and willing to pay dividends even during hard times.

So, with this in mind, I have taken a hard look at my largest investments since they impact the performance of my portfolio the most.

The strategy to increase my investments in DBS, OCBC and UOB during the COVID-19 induced bear market has turned out well and sticking with this strategy makes sense to me especially with interest rate rising.

I am also interested in increasing my investments in ComfortDelgro and CLCT on weakness as they seemed to have lagged in price recovery while their businesses look more attractive to me in recent times but for different reasons.

I am leaning more towards ComfortDelgro which has a stronger balance sheet and also because looking at the numbers which have improved, there is a fairly good chance that future dividends will be higher and could even go back to pre-pandemic levels.

CLCT's plan is to increase the proportion of new economy assets in their portfolio and I foresee more fund raising in the future.

So, I will increase my investment in CLCT slowly and not bulk up in a hurry.

REITs are required to pay out at least 90% of their operating cash flow to investors to enjoy tax benefits and this is a source of comfort to me.

The REITs in my portfolio are rather conservative when it comes to debt and in the case of IREIT Global, some of their rental income is linked to the German consumer price index and higher inflation could see a greater increase in income.

In my list of largest investments, the only entity which did not pay a dividend during the last bear market was Centurion Corporation.

Amongst my largest investments, Centurion Corporation also has the weakest balance sheet apart from Wilmar International.

However, Wilmar International is in the business of food production and distribution which, in my opinion, is recession proof. 

Given their size and market dominance, they should be able to charge higher prices.

Wilmar also has good options available to unlock value for shareholders and they were paying dividends even during the pandemic.

I increased my investment in Centurion Corporation as Singapore decided to live with COVID-19.

For those who are interested in my thoughts on the matter, read:

1Q 2022 passive income.

In an environment of rapidly increasing interest rate and slowing economy, however, with a rather weak balance sheet, it could be harder for Centurion Corporation to bring home the bacon.

In my original blog on why I invested in Centurion Corporation, I crunched some numbers on how rising interest rate could impact Centurion Corporation's interest cover ratio.

For those who are interested, read:

Added Centurion Corp to portfolio.

Of course, if they are able to increase asking price per bed meaningfully to balance the increase in the cost of debt, then, they should be OK.

Although they would be able to do so easily in a healthy economy, it might not be so easy during times of economic malaise.

Wait, didn't Centurion Corporation do quite well even when the economy was unhealthy?

Yes, they did but they didn't have to deal with rapidly increasing interest rates.

I don't know everything and I might be missing a few things here.

So, I have decided to only reduce my exposure to Centurion Corporation and not go to zero.

As my total passive income held up quite well during the two years when Centurion Corporation suspended dividend payouts, I doubt reducing my investment would have any meaningful impact in terms of passive income generation which makes this decision an easier one for me.

Although Centurion Corporation still looks undervalued to me as it trades at a huge discount to NAV, to be honest, this discount could reduce as valuation of their assets could take a hit.

It would be interesting to see how the management navigates the challenges ahead and how they might unlock value for shareholders.

They are trying to sell some assets in the USA now which if successful should help in reducing leverage and unlocking value.

To this end, I believe they should ramp up their effort and sell more assets.

Like Phua Chu Kang said at the onset of the COVID-19 pandemic, "Things different already."

In the grand scheme of things, this is a relatively minor shift of resources but because I am more inactive than active as an investor for income, it might seem like a big event.

Remember, mentally unstable AK is just talking to himself, as usual.

Have a plan, your own plan.

Recently published:
Avoid this in a rising interest rate environment.

Related posts:

1. Rising interest rate flashback... 

2. Largest investments 1Q 2022.

3. Investing with peace of mind.

Rising interest rate flashback to 2016.

Rising interest rate worries many people, including investors.

How like that?

Deja vu.

Taken from my 2016 interview with The Fifth Person:

History doesn't repeat itself but it rhymes.

Same, same but different.

I will stay calm as I stay invested in good income producing assets.

Stay calm and game on!

Gambatte!

Related posts:
1. Dumping all my S-REITs.
2. Benefiting from interest rate hikes.
AK's YouTube channel.

How to invest in REITs?

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. 

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: 

1. Ascendas Hospitality Trust: A nibble. 

2. Eagle Hospitality Trust: My philosophy. 

3. Saizen REIT is undervalued. 

4. Croesus Retail Trust and current thoughts. 

5. Sabana REIT and current thoughts. 

6. REITs and rights issue.

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! 

Recently published: 

Why AK invests in REITs?

Why AK invests in REITs?

Quite a few recent comments were about REITs.

So, a blog on why I invest in REITs is probably a good idea.

Some people are worried that impending rising interest rates will mean REITs doing poorly.

After all, REITs are all leveraged to some degree and higher interest rates will surely burden REITs.

However, compared to us directly investing in a property, REITs are probably more conservative when it comes to borrowing money with allowed gearing capped at 50%.

We are allowed a higher gearing level in the purchase of a property, in comparison, with 70% or 80% LTV being the norm.

Of course, property valuation has to be trustworthy but that is another topic.

If you are interested, maybe, read this blog:

Eagle Hospitality Trust: Financial engineering NAV.

So, if we are worried about rising interest rates and REITs doing poorly, we should also be worried about investing in real estate in general.

I very much prefer investing in REITs because:

1. I do not want to take on more debt.

2. I do not want concentration risk.

3. I do not want to deal with tenants.

Regular readers know I do not borrow money to invest in stocks.

I know some will argue that some debt is not a bad thing and I agree because a judicious amount of debt can make good decisions deliver better results.

Of course, the opposite is also true as debt will magnify the damage resulting from bad decisions.

There is no telling when a seemingly good decision could turn bad and I do not want to take the chance especially in retirement.

In fact, investing in REITs already exposes us to debt since REITs are leveraged.

I just don't want to take on more debt on a personal level and like I said, REITs are relatively conservative when it comes to leverage which helps to give me peace of mind.

See:

Gear up to get more passive income?

Unless we are very rich, it is unlikely that we can buy more than one or, maybe, two properties on our own steam.

This creates concentration risk and if we should end up buying a property which is hard to rent out or resell, we could be in trouble.

The truth is that most of us are not experts when it comes to real estate investment and we usually rely on "experts."

Concentration risk also includes counter party risk.

So, even if we should rent out our property, if the tenant stops paying rent for some reason, rental income goes to zero.

When we invest in REITs, we invest in a bigger number of buildings and we are collecting rent from a larger number of tenants.

See:
$500K stuck in bad property investment!

and

Condo investment has been a drag!

REITs are professionally managed.

I don't have to look for tenants.

I don't have to deal with their demands or complaints.

I don't have to deal with the upkeep of the properties.

The only thing I have to do is to check my bank account once every quarter to make sure these REITs pay me a share of the rental income.

I should also mention that it is rarely possible to buy properties at a discount to their valuation.

Properties are rarely mispriced like some were in the USA  during the early days of the Global Financial Crisis.

However, it is often possible to buy REITs at a discount to their NAV and a relatively big discount at times.

If we look at my largest investments in REITs today, most of my investment in AIMS APAC REIT was made when it was trading at a discount to NAV more than 10 years ago.

My investment in AIMS APAC REIT has been free of cost for some time and it is still generating income for me.

IREIT Global is a more recent investment in comparison and I increased my investment in the REIT substantially at a discount to its NAV and it is still trading at a discount to NAV today.

Sabana REIT grew from a small legacy position to a more substantial position after the low ball offer by ESR REIT was rejected and the purchases which resulted in the relatively substantial position I have now were made at a big discount to NAV.

I could go back a few years and it was the same with Saizen REIT, for example.

See my response to Felix Leong who said I was plainly lucky:
Saizen REIT: Right prices and luck.

Investing in bona fide income generating assets can hardly go wrong.

When there is mispricing, we could possibly make more money.

When compared to real estate, mispricing is not as rare when it comes to REITs.

In recent years, I increased my investments in non-REITs but it wasn't because I felt that REITs were no longer relevant to income investors.

Investing in income generating non-REITs is just a way to avoid concentration risk.

Yes, REITs reduce concentration risk but having 100% of our portfolio in REITs also creates concentration risk.

OK, before I confuse myself further, I better stop.

Remember, this is just AK talking to himself, as usual.

It is never my way or the highway.

References:

1. Dumping all my REITs.
2. Largest REIT investments.

3. 4Q 2021 passive income.

Recently published:
Lost on Alibaba and $200K left...

AIMS APAC REIT or IREIT Global?

This is a short blog in reply to a reader's comment in my last blog which was about my largest REIT investments. 

Read the reader's comment: HERE. 

My reply: 

When it comes to AA REIT's unit price, I can only say that Mr. Market will do what it wants to do. 

I do not know why the unit price is where it is but I do know that AA REIT should continue to generate stable income for me. 

If there is a dip in DPU, it is probably going to be temporary, everything else being equal. 

In the grand scheme of things, over a longer period of time, inflation should see prices including asking rent going up. 

As an investor for income, I do not usually invest in REITs for a few months only or even for just a couple of years unless I find out it was a mistake which has not been the case for AA REIT. 

Why did I add to my investment in IREIT Global and not AA REIT? 

You are right in your suggestion that it was due to IREIT Global's rights issues and the fact that my resources are limited. 

Also, I want to add that price is not the same as value. 

At $1.60 a unit, AA REIT was trading at a big premium to NAV but its unit price has retraced to a level that is closer to its NAV which means it is a better time to buy now than it was before. 

However, IREIT Global is still trading at a pretty big discount to its NAV which helps to make it a more compelling buy.

Warren Buffett famously said that whether socks or stocks, he likes buying quality merchandise when it is marked down.

Could be the case here.

Source: IREIT Global.

When we take into consideration that IREIT Global holds freehold assets while many of AA REIT's assets are in Singapore with relatively short land leases, the value that IREIT Global brings to the table now shines brighter. 

Having said this, it is important to bear in mind that AA REIT and IREIT Global might both own buildings but they are in different sectors. 

They are also in different parts of the world. 

Not putting all our eggs in one basket is probably a good idea.

Of course, AK is just talking to himself here and, depending on our motivations, it might or might not be relevant to us. 

Related post: 

Largest REIT investments updated, December 2021.

Largest REIT investments updated, December 2021.

The last time I had a blog on this topic was in April 2020.

Back then, Mr. Market suffered a dramatic breakdown and took quite a long time to recover.

After almost 2 years, it still looks like it will be a while more before we are out of the woods, no thanks to the new Omicron variant of COVID-19.

The world is the way it is because there are too many greedy people, too many selfish people, too many ignorant people and too many malicious people.

Very unfortunate but very often bad things happen because of irresponsible human behavior.

If we are not careful, we might see Singapore becoming a "true democracy" with people against vaccination marching in the streets which, of course, would give the virus opportunities to infect even more people and possibly mutate again.

I feel that having a choice is a good thing but social responsibility is more important because we live in a society.

If we are not part of any society, if we live all alone on an island, then, we are free from social responsibility.

Personal freedom of choice is plain rubbish if we choose to put everyone else at risk.

It is similar to what I said before in many blogs in the past about being financially responsible because we shouldn't be a burden to society.

Some readers might remember my blogs on those protestors in Hong Lim Park asking for their CPF money to be "returned" to them.

See:
CPF: So near and yet so far?

Anyway, before I digress further which I am inclined to do, here is the update.

Largest REIT investments (each $100,000 or larger in market value.)

My largest investment in a REIT used to be AIMS APAC REIT (formerly AIMS AMP Capital Industrial REIT.)

It has been overtaken by my investment in IREIT Global which used to be smaller in size.

IREIT Global is now my largest investment in a REIT as I added to my investment several times when Mr. Market went into a depression because of the COVID-19 pandemic and also due to rights issues to help the REIT fund acquisitions.

Just like AIMS APAC REIT, I believe IREIT Global to be well run.

Recently, for example, they were able to quickly fill up all 5 floors of a property which were being given up by an existing tenant. 

I also like that the REIT's insiders have a big stake in the REIT.

So, it is unlikely that they would do anything to hurt unitholders' interest.

See:
IREIT: Good time to buy now?

My second largest investment in a REIT and probably my oldest is AIMS APAC REIT.

Most institutional investors would gravitate towards bigger names with a pedigree such as Ascendas and Mapletree when it comes to industrial REITs.

However, I am a retiree and distribution yield is an important consideration as I am very much interested in cash flow but I try to be careful not to be blinded by high yields.

I have been invested in AIMS APAC REIT since the Global Financial Crisis and, looking back, it has been good to me as an investment for income.

Just like IREIT Global, insiders have a meaningful stake in AIMS APAC REIT and it is unlikely that Mr. George Wang would do anything to hurt unitholders' interest.

There is talk that ESR which has been gobbling up REITs in Singapore is planning to gobble up AIMS APAC REIT as well, having grown their stake in the REIT.

However, unlike ARA Logos, I doubt Mr. George Wang would consider a deal that is less than fair to AIMS APAC REIT if such a deal should ever be proposed.

See:

Should we invest in AIMS APAC REIT?

ESR-REIT gives ARA Logos short end of the stick?

My third largest investment in a REIT was Ascott REIT-BT and that was due to my earlier investment in Ascendas Hospitality Trust. 

As I expected the COVID-19 pandemic to have a rather long lasting impact on the hospitality sector, I decided to sell down my stake significantly some time back. 

For many months after that, I did not have a 3rd REIT which was greater than $100,000 in market value in my portfolio.

Of course, that changed when I significantly increased my investment in Sabana REIT after ESR's low ball offer to take over the REIT failed.

Sabana REIT is now my third largest investment in a REIT, making a comeback after many years of absence.

See:

Sabana REIT's lesson.

AA REIT, IREIT and Ascott REIT-BT.

AHT's investors getting a bad deal?

I do have investments in other REITs but my investments in IREIT Global, AIMS APAC REIT and Sabana REIT are my largest now, being the only ones which are above $100,000 in market value.

Together, I estimate that they generate a bit more than S$70,000 in passive income annually for me.

I have been saying for quite a while that I want a more resilient income generating portfolio and to be less reliant on REITs for income.

However, for income investors, REITs remain a relevant tool and this blog shows my continuing reliance on REITs for income.

Still, I like to think that I have a more resilient income generating portfolio now as I increased my investment in the local banks so that together they were at one time larger than my investments in IREIT Global and AIMS APAC REIT combined.

Since I increased my investment in IREIT Global due to its rights issues, my investment in the local banks together have become smaller than my investments in IREIT Global and AIMS APAC REIT combined but probably not by very much.

Anyway, I get the feeling that I could ramble on and, so, I should really end the blog.

Till the next blog, remember to stay vigilant and be socially responsible as we try not to give COVID-19 any room to grow.

Related posts:

1. Sabana and IREIT to the rescue.

2. Dividends from DBS, OCBC and UOB.

3. Largest REIT investments, April 2020.

Should I invest in Far East Hospitality Trust?

My last blog on ComfortDelgro attracted some very thoughtful comments from readers and if you are interested, read them: HERE.

I said in reply to a comment that I have been trying to build a more resilient investment portfolio for a few years by now. 

Most of this effort has been centered on increasing the size of my investment in the local banks.

I believe that I have strengthened my investment portfolio's resilience in the most recent bear market this way.

This short blog is in reply to the latest comment by a reader in the abovementioned blog.

The reader's comment was about Far East Hospitality Trust.

My reply:

Yes, just like SIA and even SIA Engineering, the hospitality sector has been hard hit by the COVID-19 pandemic.

With the latest Omicron variant, it doesn't look like things are going to improve by much anytime soon. 

Buying into hope might be just as painful as buying into hype if things go very wrong. 

I significantly reduced my investment in Ascott REIT-BT some time ago. 

However, I still retain a smallish position and that exposure to the hospitality sector is enough for me. 

Having a larger exposure to the hospitality sector might give outsized returns if the pandemic subsides soon, of course.

As the ongoing COVID-19 pandemic has shown, however, a larger exposure does not make for a more resilient portfolio especially if we are mostly investing for income.

This is especially the case when we are buying into REITs and business trusts which pay out almost all their operating cashflow to their investors. 

This is unlike businesses which pay out a fraction of their earnings as dividends to their investors.

With interest rates more likely to rise than not in future, we might want to invest in businesses that will benefit from rising interest rates instead.

As always, it is never my way or the highway.

Have our own plan and we should keep it grounded with realistic expectations or at least try.

Of course, even the most well thought out plan could go wrong.

If we must gamble, make sure the bet will not sink us financially and degrade our lifestyle if things do not go our way.

AK is just talking to himself and seems to have gone off topic.

Anyway, remember that the COVID-19 virus is still here in all its mutations.

Continue to be cautious and stay safe to keep all of us safe.

Omicron Covid variant spreads 'more than twice as fast' as Delta - BBC News

References: 

1. AA REIT, IREIT Global and Ascott REIT-BT.

2. How to size our more speculative positions?

3. Smart money exiting US hospitality sector?