Saizen REIT: Staying calm and rational.

Many would like to know what am I doing next with regards to Saizen REIT. I have replied to readers in this blog and in emails that I am holding my position and waiting for more announcements from the managers.

I would stay calm and think through the situation rationally, knowing the current financial strength of the REIT as well as the possible maximum loss of NAV and income it could suffer if all possibly affected buildings were destroyed. I hope I have done a good job so far. Indeed, I have been sharing my findings and thoughts here in my blog.

It has now been confirmed that, of the 14 buildings visited, all are still standing and have only suffered minor damages. There are also no casualties amongst the tenants. So, the loss of NAV and income which could be suffered is much reduced now. Consequently, any probable negative impact on income distribution to unitholders is reduced. There are 14 more buildings to be visited in Sendai and we will have to await the next report from the REIT's managers.

Technically, price action today formed a white hammer after a gap down to 13.5c with an intra-day low of 13c, a price last seen on 9 Nov 2009.

In my blog post this morning, I mentioned that the selling is overdone and that panic was in the air. I stand firm by my statement. In the following days, we could see the gap covered and we could see the former support at 15c providing resistance. Now, for anyone looking to reduce exposure, that would be a fairly good time to do so.

Do I think that major investors are abandoning the REIT? I do not think so. Saizen REIT has more than a billion units in issue. The total trading volume for today, although higher than usual, is only under 14 million units.

A total of 7,954 lots were bought up today with 4,010 lots bought up at 14c alone. This compared to a total of 5,723 lots sold down today. Total buying up numbers trumped selling down numbers. It is my guess that many investors recognise that the REIT is very undervalued and could be using this opportunity to accumulate at even lower prices. If the unit price were to weaken further, I would buy more.

Saizen REIT: Divestment of Wealth Meinohama.

Saizen REIT divested another property, Wealth Meinohama, which is located in Fukuoka, from the property portfolio of YK Shingen. It was built in December 1998 and comprises 12 residential units and 1 parking lot.

The property was sold to an independent private investor for a cash consideration of JPY 59,500,000 (S$0.9 million).  This was at a 3.1% premium to the property's valuation of JPY 57.7 million.

"The proceeds from the Current Divestment will be deployed towards Saizen REIT’s working capital until such time when they are required for other purposes, including the refinancing of the loan of YK Shintoku (if such refinancing is possible)."  Read announcement here.