What's my take on MIT and GLP?

A reader sent an email asking me what is my take on the IPOs of Mapletree Industrial Trust (MIT) and Global Logistic Properties (GLP).  My reply was:

"I don't have enough data on hand to make an informed commentary on these.  That's why I have kept quiet about these although I have friends who would like me to blog about them.

"However, IPOs are not usually available at a bargain, especially in these bullish times. So, generally, I would avoid IPOs.

"With MIT, the expected yield of 7.6% seems ok. I do not know what is the NAV per share. I know it is using some of the proceeds to pay down debts to bring its gearing level to 30% to 35%.  Exact figures, I do not have.

"With GLP, it is being offered at a 10% premium to NAV. It does not even have any income distribution guidance. So, we don't know what is the yield.  What would be its proforma gearing level?  Too many unknowns. I would avoid."

Mapletree Industrial IPO priced at top of range. Mapletree Industrial will sell units at $0.93 each, which translates to an annualised dividend yield of about 7.6%.
Monday, 11 October 2010

© 2010 - The Edge Singapore

Singapore’s GLP confirms IPO price of $1.96 a share
Monday, 11 October 2010

© 2010 - The Edge Singapore

Saizen REIT's properties: Would I buy?

Saizen REIT reported on 8 Oct that they have managed to sell another property in its YK Shintoku's portfolio.  Villa Kaigancho was sold for JPY 250,710,000 (S$3.9 million) which was at a 3.9% discount to valuation. 

The proceeds would go to repaying partially YK Shintoku's CMBS. After this repayment, the remaining balance of the YK Shintoku CMBS is estimated to be approximately JPY 6.3 billon (S$99.1 million). See announcement here.

Saizen REIT has been announcing a slew of sales in recent weeks and I mentioned that this is a good sign as it signals the return of buying interest.  

Saizen REIT owns freehold residential real estate in Japan.  

I have also mentioned before that although the real estate values in Japan have been declining, rental rates have declined at a much slower pace. Buying residential real estate in Japan now and being a landlord is a very lucrative proposition.  

So, would I buy Saizen REIT's residential real estate in Japan, assuming that I have the spare cash and if I were allowed to do so under Japanese laws?  Without a doubt, I would.

Take for instance Villa Kaigancho located in Hakodate, comprising 50 residential units, 1 commercial unit and 24 car park lots. The buyer paid JPY 250,710,000 (S$3.9 million) for an annual revenue of JPY 41.4 million (98% occupied).  That is a gross yield of 16.5% per annum!  Remember, the property is freehold! 

In Singapore, if we invested S$3.9 million in a condominium, we would be lucky to get a 6% gross yield per annum!  Sadly, I do not have that kind of money.

Related posts:
Saizen REIT: Divestment of properties.