The diversity of opinions in this world is what makes it colorful and interesting. Everyone is free to express his opinions on diverse subjects. We should remember, however, it is not just what is said which is important. Of equal importance is how it is said.
I have been following a series of posts on the subject of REITs by a certain local blogger. Are his posts on REITs objective? I don't think so but I respect the blogger's right to express his opinions and I am sure readers will arrive at their own conclusions. However, I do hope that this blogger would exercise restraint and not make insinuations beyond what is civil.
In his latest post, he took a quote from the writings of another blogger:
"For those existing investors who could raise the capital to subscribe for their rights, they are returning most (if not all or more) of the dividends they had collected back to the REIT. Don’t let the discounted price fool you as you are essentially paying just to maintain your percentage shareholding in the REIT." -Lion Investor
The blogger whom I am taking issue with went on to say:
I can't agree more with the truth on "the discounted price fool" as I recently overheard some joys near the Temple of Cows over AIMS AMP Capital Industrial REIT's right issues - discounted price fools?
Firstly, Lion Investor was expressing an opinion about how we should exercise caution and not let discounted price of rights fool us into thinking we are getting a good deal. The word "fool" is used as a verb. The blogger in question has twisted it and used it as a noun. Calling people names isn't very nice, is it?
Secondly, going beyond language, let us objectively evaluate what Lion Investor has said and consider the proposed rights issue by AIMS AMP Capital Industrial REIT in the same vein. Are we paying more money just to maintain our "percentage shareholding in the REIT"?
In the case of AIMS AMP Capital Industrial REIT's rights issue, the objectives are clearly communicated.
We are putting down more money to participate in the REIT's income accretive activities which would benefit us as unit holders.
We are paying more money but NOT just to maintain our percentage shareholding in the REIT.
See: AIMS AMP Capital Industrial REIT: Rights issue.
At a level that is of greatest importance to most, unit holders could choose to participate and enjoy a higher yield in future or unit holders could choose to sell away their nil-paid rights when they start trading.
This was what I said:
REITs are income instruments. Therefore, we must remember that we are investing in REITs for regular income. The DPU per unit would decline from 2.15c to 2.08c, post rights. This is a DPU loss of 0.07c a year. It is not dramatic. We would also be able to sell away the nil-paid rights when trading starts. At an exercise price of 15.5c and with expectations that price would see a modest decline to 21c per unit, post rights, we can expect the nil-paid rights to trade at around 5.5c each. Selling these away would bag 30 months' worth of DPU (post rights) straightaway! Now, is that such a bad thing?
On top of that, our current investment would still make an annual DPU of 2.08c! This is provided that everything remains constant, of course.
Accept and pay for the rights or sell away as nil-paid rights, either way, unit holders end up winners. There will always be detractors but as long as we are clear headed and know what to do in any given scenario, we will be fine.
Unit holders could sell away their nil-paid rights as compensation for dilution and their remaining units in the REIT would still enjoy a very high yield.
Unit holders who choose to accept and pay for their rights would see their future income increase in dollar terms and at a higher yield. They are paying more money for greater returns.
Respect has to be earned but sometimes we accord respect to people based on seniority. Respect should also be reciprocated. Being civil is a great way to start.
Related post:
AIMS AMP Capital Industrial REIT: Sell the rights.
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