Largest investments updated (mid 2024): Never run out of money in retirement.

It has been quite a while since I last blogged about my largest investments.

The last time I published such a blog was in January 2023.

So, it has been a year and a half!

Apart from being lazy, I didn't do very much to my portfolio and, hence, I did not see the need to publish any updates.

However, I think it is about time I do this even if it is just to take into account changes in market prices.

Many things have changed in the past 18 months.

Before we start, I want to share a YouTube video I produced on how not to run out of money in retirement which I feel is an important topic:

Anyway, here is the update.

$500,000 or more

1. CPF

2. OCBC

My CPF savings is a constant.

Being risk free and volatility free, it provides peace of mind.

I have not done any voluntary contributions to my CPF account in the last 18 months.

Instead, I have used that money to buy Singapore Savings Bonds and I shared the reason why here and also in my YouTube channel, of course.

I have also used money in my CPF OA to buy T-bills which grows my CPF OA savings at a faster clip.

In dollar terms, it is quite meaningful as I have quite a large amount of money in my CPF OA.

So, my CPF savings has grown in size in the last 18 months despite lacking mandatory or voluntary contributions.

Next is OCBC which is my largest investment in equities.

Since the last update on my largest investments, I added to my position in OCBC at about $12.30 a share in the middle of 2023.

The market value of my investment in OCBC has gone up significantly as its share price has also appreciated quite a bit.

This is very nice but as an investor for income, I am more interested in the passive income generation.

OCBC has become and will continue to be the most important passive income generator for me.

$350,000 to $499,999

1. AIMS APAC REIT

2. DBS

3. UOB

4. SSBs and T-bills

Unlike the top bracket, there are some changes in the second highest bracket in my portfolio.

DBS and UOB have both moved upwards to join AIMS APAC REIT in this bracket.

The spectacular increase in the share prices of DBS and UOB resulted in their promotion in my portfolio.

There is also the fact that I added to my investment in UOB in the middle of 2023 at about $27.90 per share.

I also added to my investment in DBS in November of 2023 at about $31.80 per share.

Together, OCBC, UOB and DBS account for more than 45% of my portfolio's market value.

Then, there are SSBs and T-bills.

Together, they jumped two brackets upwards from 18 months ago.

Yes, together, they were in the lowest bracket 18 months ago.

I can save money relatively quickly since my passive income exceeds my expenses rather significantly.

I have been socking away money in SSBs and T-bills in the last 18 months.

Money which would have gone into my CPF account was instead used to buy SSBs.

Excess money was used to buy 6 months T-bills, strengthening my T-bill ladder.

This provides me with more passive income without any price risk.

The money in T-bills also come back every 2 weeks which is useful if there are investment opportunities presented by Mr. Market.

$200,000 to $349,999

1. IREIT Global

For readers who have a keen eye, they would have wondered what happened to IREIT Global which was in the higher bracket 18 months ago?

The large decline in unit price since the last update means IREIT Global has fallen in its position in my portfolio.

Having declined more than 40% in the last 18 months means IREIT Global is no longer my largest investment in the REIT universe.

It briefly replaced AIMS APAC REIT as the largest REIT investment in my portfolio 18 months ago.

I made a video about IREIT Global several months ago and the decline in unit price is not unexpected.

Here is the video for anyone who might be interested:

I am still holding on to the investment and will be adding if its unit price declines further.

I find it easier to value IREIT Global because it isn't holding something amorphous.

It is deeply undervalued and more so now that Mr. Market is feeling very pessimistic about it.

In fact, I am getting a bit of that Saizen REIT vibe.

Readers who have been following my blog for many years would know what I mean.

Still, same same but different.

So, do not throw caution to the wind.

I made a video about this recently too:

$100,000 to $199,999

1. Wilmar International

2. ComfortDelgro

3. Frasers Logistics Trust

Membership in this lowest bracket of my largest investments has changed.

Wilmar dropped one rank as its share price declined significantly.

I know Mr. Kuok and Mr. George Yeo added to their investments recently.

However, I am still waiting for $3.00 per share before adding.

Wilmar is very undervalued if we look at the sum of its parts.

However, conglomerates always suffer from conglomerate discount.

So, buying with a larger margin of safety for a person of limited means like myself is not a bad idea.

Wilmar is still profitable and pays a meaningful dividend which means I am being paid while I wait.

This is true for all my investments.

ComfortDelgro and Frasers Logistics Trust are both chugging along fine.

Nothing much to say there.

Sabana REIT and CapitaLand China Trust have dropped out from this bracket.

I reduced my investment in Sabana REIT substantially not too long ago and I blogged about it too.

Don't like how the internalization process seems to be fraught with speed bumps.

Like I said in the blog, it is very different from my experience with Croesus Retail Trust.

CapitaLand China Trust has seen its unit price plunged.

Unfortunately, its fate is tied to that of the Chinese economy which is not in a good place now.

Specifically, the Chinese property sector which accounts for 30% of the economy will be a dead weight for many years to come.

So, this is the update.

Although there are a couple of investments which are underperforming, overall, the portfolio is doing well.

That is what matters to me.

Performance on a portfolio level.

Of course, all of us have different beliefs and we should all do what we feel is right for us.

If AK can talk to himself, so can you.

Related posts:
1. Sabana REIT divestment.
2. Largest investments (4Q 2022.)

More funds came in as yield hits 3.78% p.a.

The latest 6 months T-bill auction saw a cut-off yield of 3.78% p.a. 

Pretty decent although it dipped slightly from 3.8% p.a. we saw in the auction before this. 

Better than the 3.4% p.a. offer from CIMB for a 6 months fixed deposit. 

So, good enough for me. 

Around 96% of non-competitive applications, total S$2.5 billion, were allotted in the latest auction.

Fortunately, I applied for the T-bill not only with funds that came back from a matured T-bill, I topped up with fresh funds. 

So, I got to strengthen my T-bill ladder nonetheless. 

Money from the partial sale of my investment in Sabana REIT is in. 

The plan is to deploy the funds when there is a pull-back in the stock prices of our local banks. 

I will park the money in upcoming T-bills for the time being. 

Just AK talking to himself, as usual. 

If AK can do it, so can you!

Related post:
Sabana REIT: Internalization pains.

Sabana REIT: Internalization pains.

When Sabana REIT's unit holders voted for the internalization of the REIT's manager, some readers asked me what I thought of it.

For the record, I didn't vote for the internalization.

I sat on the fence.

From past experience with Croesus Retail Trust, I guessed that internalizing the manager would be a costly exercise.

I said as much here in reply to readers' comments.

However, if successfully executed, it would result in significant cost savings and greater alignment of interests.

The exercise was smooth sailing in the case of Croesus Retail Trust although it was pretty costly.

That was partially because the REIT's sponsor suggested the internalization themselves.

It was not a demand made by activist investors.

It was suggested partly to unlock value and to address the persistent underperformance of the Trust's unit price.

Later on, Croesus Retail Trust was sold to an institutional investor at a premium to valuation.

I had mixed feelings about the sale.

I lost a reliable passive income generator but I did enjoy an attractive return.

Whether the internalization of the manager played a part or not in the sale of Croesus Retail Trust to the institutional investor is anyone's guess.

Anyway, looking at Sabana REIT, from what has transpired so far and at the recent EGM, it is obvious to me that we are not seeing another Croesus Retail Trust here.

To me, the entire process in Sabana REIT's instance seems to be far more challenging.

It is going to take way longer and cost way more than expected.

Regular readers know that I increased my investment in Sabana REIT significantly in late 2020 and early 2021 after the lowball offer to buy the REIT was rejected.

Sabana REIT was and still is pretty undervalued.

However, I don't like investing in businesses which keep me guessing.

Peace of mind is priceless.

My investment in Sabana REIT has paid me attractive dividends in the last few years.

However, with so much uncertainty now, I have decided to reduce my investment in the REIT significantly while I am still in the money.

Taking back my capital, I will have a stronger war chest to take advantage of other investment opportunities.

So, with this decision, Sabana REIT is no longer one of my largest investments.

I still retain a legacy position from donkey years ago which is free of cost.

Sabana REIT: Sell at 46.5c to Volare Group?

One month ago, I blogged about the offer of 46.5c a unit by Volare Group to increase their stake in Sabana REIT by another 10%.

I have looked at the offer documents yesterday and it seems that those who decide to offer some or all of their investment in Sabana REIT for sale will get 45.04c a unit instead of 46.5c.

The very first section of the offer documents explains what "you will get for your units."

"S$0.465 in cash - S$0.0146 distribution = S$0.4504."

So, it seems to me that Volare Group is using the incoming income distribution from the REIT to help fund their purchase.

Is this offer still attractive?

Well, there are many ways to look at this and if we are to only look at the numbers, netting 45.04c a unit is still pretty attractive.

We don't have to incur any brokerage fee.

Sabana REIT was trading at 42.5c a unit the last I checked.

So, we could offer to sell all or some of our investment to Volare Group and buy an equivalent number of units from Mr. Market if we wished to retain the same level of exposure to the REIT.

This is an arbitrage opportunity to make some pocket money, if we want to take advantage of it.

There is risk, however.

The offer will only succeed if 10% or more of Sabana REIT's units are tendered.

If the offer should fail, this arbitrage strategy would saddle us with more units of Sabana REIT than what we started out with.

So, think carefully.

If I were to do this, I would remind myself of a couple of points.

1. Use only money which has been earmarked for investing for income.

2. Do not buy more Sabana REIT units than what I am comfortable holding in total in case the offer fails.

Personally, I won't be doing it.

Don't I want to make some extra pocket money?

Well, it isn't going to be that significant a gain unless I take a huge gamble.

A huge gamble?

A difference of 2.5c a unit = $25 per 1000 units.

So, I would have to buy some 100,000 units from Mr. Market while tendering the same amount to Volare Group if I wished to make $2,500.

I would have to fork out $42,500 before fees.

I don't have that money in my war chest now and even if I have that money, I would not do it because I am happy with how my portfolio looks now.

If I had a smaller investment in Sabana REIT, I might do it if I had the money but I feel that my exposure to the REIT is appropriately sized.

Appropriately sized?

Mustn't just look at the size of my investment in Sabana REIT.

I remind myself that I already have a very large exposure to industrial REITs with AIMS APAC REIT being my largest investment in this space.

Anyway, this is just me talking to myself as usual.

If anyone is thinking of arbitrage, good luck.

Huat ah!

Reference:
Offer of 46.5c per unit.

Offer of 46.5c per unit for Sabana REIT by Volare Group.

This blog is in response to a reader's comment on Sabana REIT being taken over by a substantial shareholder.

I was replying to the reader's comment but it got pretty long.

So, I am publishing the reply as a blog instead and more people can eavesdrop as I talk to myself.

AK talks to himself:

It seems that Volare Group isn't buying the entire REIT.

Just a partial offer for 10% of the REIT at 46.5c a unit.

It is at a rather big discount to Sabana REIT's NAV but, given the much higher risk free rate today, it is probably not too bad a price.

I remember blogging about what I thought a fair price might be for a buyer to offer for Sabana REIT.

That was in relation to the low ball offer made by ESR REIT at the time.

I suggested a price of 48c a unit.

46.5c isn't too far off and back when I suggested 48c a unit, interest rate was way lower too.

For anyone who is interested, you will find my take on the matter in the following blog:

4Q 2020 passive income.

The fact that Volare Group is going to pay 46.5c per unit in today's high interest rate environment for Sabana REIT supports the argument that ESR was really trying get Sabana REIT for a song back in 2020.

Shame on ESR.

Shame on all the people who said it was a good deal and that Sabana REIT's minority shareholders should accept the scheme.

Yes, that's what they called it.

A scheme.

So scheming.

This offer by Volare Group is an affirmation of Sabana REIT's attractiveness as an investment for income even in today's environment.

Most of my investment in Sabana REIT, around 80%, was made at 35c a unit with the balance made up of a small legacy position and also around 15% added more recently.

So, if the REIT should be 100% taken over at an offer price of 46.5c a unit, I suppose it would not be a bad outcome for me.

To be quite honest, however, I wouldn't be celebrating.

It would most likely be a bitter sweet moment as it would remind me of Saizen REIT, Croesus Retail Trust, Accordia Golf Trust and Religare Health Trust.

All of them were pretty good investments for income with my entry prices but I was forced to take the capital gains as they were all delisted at one point or another.

I am still keen on keeping Sabana REIT as an investment for income.

I don't want to have to look for replacement investments for income. 

After having spent too much time in 2022 reallocating resources, I am looking forward to being lazier in 2023.

Reference:
Largest investments updated.

Sabana REIT: Closer to 52c NAV.

Sabana REIT was trading at a huge discount to NAV when I increased my investment significantly at the end of 2020 and the start of 2021.

Today, it is still trading at a 13.5% discount to NAV.

If we think a 3.1 cent DPU is sustainable, then, at 45c a unit, we are looking at a distribution yield of 6.89% which isn't too bad.

It isn't too bad because we could see DPU increasing in the not too distant future as Sabana REIT's portfolio is under rented.

Of course, there is a possibility that the portfolio could remain under rented.

However, I have a feeling that things are more likely to improve.

I like to see what insiders are doing and I find it very interesting that Donald Han, Sabana REIT's CEO, bought 100,000 units at 45c a unit in late April.

Being under rented means that Sabana REIT does not have to depend too heavily on acquisitions to grow its income.

From their presentation dated 21 May 2022, this could give income a boost:

AEIs and maxing out plot ratios will be very helpful too:

Sabana REIT's financials are relatively strong and this is important as peace of mind is priceless.

It is very fortunate that Sabana REIT did not fall prey to the low ball offer by ESR REIT.

A gem in the rough that is still in the process of being polished, I hope that Sabana REIT will shine brighter in my portfolio.

Of course, whether Mr. Market agrees or not is something else.

If Mr. Market agrees, then, we should see Sabana REIT trading closer to its NAV of 52 cents per unit in time to come.

My bowling ball that thinks it is a crystal ball says a unit price of 48 cents or even 49 cents would not be unreasonable.

The information shared in this blog is taken from Sabana REIT's latest presentation dated 21 May 2022.

See complete slides: HERE.

Having positive vibes about Sabana REIT has nothing to do with the $20 shopping vouchers they sent to me.

Honest!

I hardly leave home but I guess I will make a trip to look look see see.

Recently published:
1. CLCT: Another largest investment.
2. FLT: Another largest investment.

Related post:
Sabana REIT's lesson.

Sabana REIT's lesson and Wilmar's interim dividend.

A few years ago, I blogged about lessons from my journey as an investor with Sabana REIT.

One of the things I said was:

"I remember UOB KayHian was particularly bullish in 2013 and had a target price of $1.30 for Sabana REIT. By that time, I had turned cautious although I was enjoying a distribution yield on cost of between 10.3% to 11.1%..."

See: 

History with Sabana REIT.

In a nutshell, no one cares more about our money than we do and we must always do our due diligence.

Sabana REIT is pretty generous in dishing out lessons and last year saw ESR-REIT making a low ball offer for Sabana REIT which resulted in a fight led by activist investors to scuttle the proposed deal.

I wrote a piece on why the proposed deal was a bad one for Sabana REIT.

Not only did it grossly undervalued Sabana REIT, "Sabana REIT's investors would eventually have to help bear the cost of the mistake that was the merger of ESR-REIT and VIT." 

See: 

4Q 2020 passive income.

Anyone who said anything to the contrary was either misinformed or malicious.

In a recent article in The Business Times, the writer's one liner summed it up well.

"If the proposed merger of Sabana Reit and ESR-Reit last year demonstrated anything, it is that IDs cannot always be relied upon to act in the interest of unitholders."

Source: 

The Business Times.

I am sure Sabana REIT is worth more today and will probably be worth more in the future as it continues to unlock value in its portfolio.

Of course, a rising tide will lift all boats too and Sabana REIT will be a beneficiary.

Recently, I also replied to comments from some readers on Wilmar's declining share price.

I actually increased exposure to Wilmar, adding on weakness in its share price, averaging up.

I believe that Mr. Market is undervaluing Wilmar even at today's price.

"Wilmar reports higher 1HFY2021 earnings on better selling prices and volumes; to pay interim dividend of 5 cents." 

Source: 

The EDGE.

The cyclical component of Wilmar's business will do well just like other cyclical businesses as the economy recovers.

However, Wilmar is much more than that.

I said this in a blog about Wilmar before:

"There are not many companies in the world like Wilmar when it comes to agricultural products and their distribution. 

"Wilmar has amazing breadth and depth of operations. 

"Its distribution network is extensive, established and still growing."

See:
Accumulating Wilmar on price weakness.

I said that investors in Wilmar must be of the patient variety and I still feel that way.

While I wait for Mr. Market to pay what is Wilmar's true value, I am happy to be paid while waiting.

Will Mr. Market pay Wilmar's true value and if it does happen, when?

Your guess is as good as mine, of course.

Related posts:
1. Wilmar was $7.11 a share.

2. Little book of value investing.

"It may move up toward its real worth today, next week, or next year. It may trade sideways for five years and then quadruple in price. There is simply no way to know when a particular stock will appreciate, or if, in fact, it will."

History with Croesus Retail Trust and current thoughts.

When I found out that Croesus Retail Trust could be privatised, I had a feeling of deja vu.

It wasn't too long ago that something similar happened to Saizen REIT and, because of that, I lost a significant income generator.

Now, it seems that I may lose another significant income generator.




As I invest primarily for income, this creates a headache for me, especially when it is a relatively big investment in my portfolio. 

Mallage Saga, a CRT mall in Saga.

Some might remember that Croesus Retail Trust is one of my more significant investments as I shared this in a blog earlier this year.

In any case, the news got me nostalgic. Hence, this blog.





I first blogged about Croesus Retail Trust in July 2012 and, it was obvious, I was not too enthusiastic about it then.

See:
Croesus Retail Trust: IPO planned.


However, all investments are good at the right price and I became an investor in late 2013.

See:
Croesus Retail Trust: Long position.

I like to think that patience will be rewarded and I guess I was in this case.

Then, some readers were worried about Croesus Retail Trust and I wrote a piece titled:
Croesus Retail Trust: Motivations and risks.

When Mr. Market was feeling depressed, I bought more as I believed that an attractive investment just got more attractive. 

When Croesus Retail Trust offered rights units, I bought more because they were going to use the money for reasons which I liked.

See, for example:
22 for 100 rights issue (at 61c each)






Rights issues are not necessarily a bad thing and this is a topic I have blogged about many times in the past.

For example:
REITs and rights issues: Dilutive?

Over time, Croesus Retail Trust became a very significant investment that it is today for me.

I like what I see. 

So, I stay invested.





Oh, if you think this blog title sounds familiar, it should be because it is a play on this blog:
History with Sabana REIT and current thoughts.

Of course, regular readers would know that a big part of my investment in Croesus Retail Trust was funded by the proceeds from selling my investment in Sabana REIT years ago.

See:
Added more Croesus Retail Trust and reduced Sabana REIT.




I made pretty good money from my investment in Sabana REIT and I have made good money so far from investing in Croesus Retail Trust.

Even though I would prefer to continue receiving income from Croesus Retail Trust, if it should be privatised, then, I would probably enjoy (with misgivings) another round of capital gain.

Croesus Retail Asset Management Pte. Ltd. (the “Trustee-Manager”), as trustee-manager of Croesus Retail Trust (“CRT”), wishes to announce that it has been approached in connection with a potential transaction which may or may not lead to an acquisition of all the issued units in CRT (“Units”). 

Related post:
My investment portfolio.

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.

"REMOVE SABANA REIT MANAGER" FB PAGE.

This blog is in reply to Jerry Low's comment:

Source: HERE.

Hi Jerry,

Saizen REIT was not a shitty counter. It was just misunderstood and it was thanks to the misunderstanding that I was able to accumulate a sizable position relatively cheaply so many years ago.

In fact, I thought Saizen REIT had a very competent manager who ate their own pudding. 

Of course, the REIT was a fantastic investment, as it turned out, for me and many other investors. I shan't say more since regular readers should be quite familiar with the narrative.

As for Sabana REIT, I did blog about it quite regularly for a few years as it was a big part of my S-REITs portfolio for the same number of years. 

Although I agree that the REIT has a mediocre manager who strikes me as mostly self serving, to be fair, it was a rewarding investment for me. Having said this, I am aware that that there are fellow Sabana REIT investors who are less fortunate. 

As always, I am quite happy to help people to help themselves. If my blog has helped to educate retail investors to some degree, I am glad. 

In the end, however, I must let readers make their own decisions and I won't push them in any direction. I am not allowed to and I don't want to.

Although I am sympathetic to those who have lost money investing in Sabana REIT, I believe that they must take responsibility for their own action or inaction as investors. 

If they happen to form the majority of Sabana REIT's investors and if they choose to be apathetic for whatever reason, then, they have to accept whatever the consequences might be.

By replying to your comment in the form of a blog, I am helping to spread the word about the activism that is taking place now. 

However, please understand that I do this because I believe that more people must be made aware of how investing in REITs for income is not as easy as they might think and they must know that REITs are not risk free investments. 

I am not doing this to be a part of the activist movement against the manager of Sabana REIT.

With best wishes,
AK

If you are a Sabana REIT unitholder and if you are interested, here is the link to the FB page:
https://www.facebook.com/groups/1586399528054150/?qsefr=1

By the way, as requested by some readers, tomorrow, I will be sharing a check list for investing in REITs.

It will be part of an advertorial which was planned weeks before. If this is of interest to you, please visit my blog again tomorrow. 

Investing in REITs for income is simple enough to understand but it might not be as easy to do it well.

History with Sabana REIT and current thoughts.

The last time I had a substantial blog on Sabana REIT was in October 2015. It was titled "Sabana REIT: What is a fair price and what could they do?"

Actually, I thought I would never have another substantial blog on the REIT again but a rights issue happened. Never say never, as the saying goes. 





Despite all the bad stuff that we have heard about Sabana REIT and, yes, I contributed to the noise too, it is reasonable to think that all investments are good at the right price. I try to keep an open mind (and hope that not too much rubbish gets in).

Anyway, it is no secret that Sabana REIT was, once upon a time, a very big investment in my portfolio. It was one of my big 5 investments in S-REITs. When I first invested in the REIT, it was in the pink of health and not ailing like it is today. 

I didn't get in at its IPO because it was priced at $1.05 a unit and its NAV was 99c a unit. I got in a few months later at 11% lower than its IPO price which meant I got in at a discount to NAV and also with a higher distribution yield of about 9.3%. Gearing was a conservative 26.5%. (See related post #1 at the end of this blog.)





I was, honestly, waiting for a chance to accumulate Sabana REIT on further weakness as the numbers were good. That chance came a few months later in the form of the Fiscal Cliff in the USA. I increased my investment in the REIT, paying 88c and lower per unit which meant getting a higher distribution yield and an even bigger discount to NAV. (See related post #2 at the end of this blog.) This was in 2011.

Two years later, I remember UOB KayHian was particularly bullish in 2013 and had a target price of $1.30 for Sabana REIT. By that time, I had turned cautious although I was enjoying a distribution yield on cost of between 10.3% to 11.1%. In fact, at that time, I said this:

(See related post #3)

Months after they bought a half empty building, I reduced my stake in Sabana REIT. This was in late 2013. I was channeling funds into Croesus Retail Trust instead. (See related post #4 at the end of this blog.)

In the next 6 months after that, I reduced my investment in Sabana REIT by more than 90%. 

Innotek Limited was going to divest 15 million units. Gearing level had shot up. DPU had declined. Interest cover ratio had declined. 





These were things that set alarm bells ringing in my head and I published a blog listing a total of 7 weaknesses and uncertainties in Sabana REIT. (See related post #5 at the end of this blog.)

Sabana REIT's condition got worse over time and its unit price drifted lower and lower. It was like watching a patient in a hospice wasting away.

As I did not overpay for my investment in Sabana REIT, I enjoyed a double digit distribution yield for about 3 years. I also enjoyed a decent capital gain of about 11% on the units which I sold. 





Less than 10% of my original investment remained and it was practically free of cost and still generating an income for me (although a shrinking one). 

So, you can imagine why I was pretty ZEN when the REIT announced the recent rights issue.

42 rights units for every 100 existing units and at 25.8c per rights unit. That sounds OK, I thought.

Source: Sabana REIT & Innotek Limited.

Of course, for many other shareholders, it wasn't OK. That was the straw that broke the camel's back for them but that is another story for someone else to tell. (See link to the article in The Straits Times at the end of this blog.)






I took up my entitlement and also applied for excess rights. I figured that, post rights issue and the proposed acquisitions, the REIT would probably be able to offer a DPU of around 3.5c. At 25.8c per unit, that is a distribution yield of 13.5%. Pretty attractive.

However, things will get even more challenging for REITs from here on with interest rates expected to rise further. Industrial REITs here are facing an oversupply of space and a malaise in demand. That Sabana REIT is arguably the weakest performing industrial S-REIT does not inspire confidence.

It is natural to wonder if Sabana REIT could see a big decline in DPU again this year, dilution from rights issue not withstanding. 






This is, of course, speculative but assuming a decline of about 30% in rental income in the next year or two which is plenty, we could be looking at a DPU of 2.5c then. This does not even consider the increase in finance expense from expected hikes in interest rate.

Given this possibly next to worst case scenario, I was not interested in increasing exposure even at 34c a unit when the REIT saw its unit price plunged upon going XR.

However, at 25.8c a unit, a reduced DPU of 2.5c would translate into a yield of about 9.7%. Good enough? I think so.

At 25.8c a unit, I believe, there is probably sufficient margin of safety to increase my investment in Sabana REIT. I also listened to the more cynical side of me which believed that the rights were probably priced at a level at which the sponsor would not lose money.






Conditions have to be extremely depressing and the management must be more incompetent than incompetent for investors (and the sponsor) to lose money at 25.8c a unit, all else remaining equal.

In terms of value, as a percentage of my total investment portfolio, post rights issue, Sabana REIT remains relatively small at less than 2%, a far cry from the days when it was as big an investment as AIMS AMP Capital Industrial REIT which accounts for about 20% of my investment portfolio today. 

When we contrast Sabana REIT against AIMS AMP Capital Industrial REIT, the difference in performance is stark. (If you are unfamiliar with AIMS AMP Capital Industrial REIT, see my recent update: here.)






With money made in the past and a significantly smaller exposure even after the recent rights issue, it becomes easier to understand why I am not losing sleep over Sabana REIT's terrible performance.

When I was added recently to a Facebook group made up of shareholders who want to remove Sabana REIT's manager, I could feel their anger and pain. 

Beyond the buzz, however, it would be good to learn something from this. Hence, this blog.

http://www.straitstimes.com/business/angry-investors-want-reit-manager-kicked-out

Announcement:
http://infopub.sgx.com/FileOpen/Sabana_REIT_Rights_Issue.ashx?App=Announcement&FileID=433514

Related posts:
1. Sabana REIT: Initial position.
2. Sabana REIT: Why did I not panic?
3. Sabana REIT: Target price $1.30.
4. Croesus RT & Sabana REIT.
5. Weaknesses & uncertainties.