T-bills, AIMS APAC REIT and IREIT Global. My plan.

This is the transcript of a YouTube video I produced recently.
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Q2 and Q3 are usually good quarters for me in terms of passive income.

After setting aside money for personal expenses, parental support and gifts, the plan was to use some of the money to increase exposure to T-bills.

I still find 6 months T-bills to be quite attractive.

Of course, regular readers would understand why.

I have always had a soft spot for risk free and volatility free CPF which pays between 2.5% to 4% per annum.

Oops.

My apologies, it should be 2.5% to 4.01% per annum.

So, with similar characteristics, it is no surprise that I am attracted to T-bills these days like a bee is to honey.

The latest 6 months T-bill auction saw a cut-off yield of 3.84% per annum.

I said in an earlier blog that I would be happy if cut-off yield remained the same at 3.85% per annum.
3.84% per annum is enough to make me quite happy.

Anyway, like I said, I had planned to use some incoming passive income to increase exposure to T-bills.

That plan has to be put on hold now.

I would have to be contented with simply recycling money from maturing T-bills into new ones.

This is because of two rights issues which are coming up.

AIMS APAC REIT and IREIT Global are two of my largest investments.

So, together, I would have to put aside a relatively large amount of money for the rights issues.



For AIMS APAC REIT, we are likely to see a slight near-term reduction in DPU.

This is because part of the plan is to use the funds for asset enhancements and possible redevelopment of existing assets.

Nothing immediately income generative.

With more units in issue, including those issued for the private placement, existing shareholders could see roughly a 6% decrease in DPU if we subscribed only to our rights entitlement.

We can apply for excess rights which would increase the income we receive from the REIT if we are successful, of course.

However, as my resources are pretty limited, I am alright with receiving a bit less income from AIMS APAC REIT post rights issue for a while.

For me, this is not a terrible outcome as I have said many times before that my investment in AIMS APAC REIT has been free of cost for some time.

All income distributions from the REIT are really free money for me.

So, I will subscribe to my rights entitlement and just enough excess rights so that I do not end up with odd lots.



As for IREIT Global, they do not have any private placement in their fund-raising exercise.

So, there is no risk of DPU dilution if we do not apply for excess rights.

They are raising funds using a combination of debt and rights issue.

I also like that the funds they are raising will be used to purchase income generating assets right away.

This is why I said that IREIT Global is really inviting existing shareholders to invest in more properties.

The sponsors will be doing this alongside shareholders as they hold about 50% of the units in issue.

Therefore, I find their rights issue to be more interesting than the one by AIMS APAC REIT.



I also like that at 45 cents a unit, we would be getting a distribution yield of around 8% which is pretty attractive.

Of course, this is not without risk and volatility, unlike T-bills.

However, for me to forgo increasing exposure to T-bills for this rights issue is not a tragedy.

Remember, I am just talking to myself here.

It should be quite obvious to anyone that this is a plan that seems fine for me but it might not be suitable for others.

If AK can talk to himself, so can you!

References:
1. AA REIT and IREIT: Rights issues.
2. When to dismantle T-bill ladder?