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I shared how and why I reduced my investment in Sabana REIT substantially and the much lower level of passive income received from my S-REIT portfolio last year was mostly due to this. I retain a very small position in Sabana REIT as a reminder or incentive for me to track new developments, if any. The REIT could become a good investment again in future if the management get their act together.
I feel that although the distribution yield looks relatively attractive for Sabana REIT now, investors want to be cautious and remember that there are only a few months "before the expiry of 11 master leases (and) the Manager is working towards renewing or securing new master leases for 7 of them. The remaining 4 will likely be converted into multi-tenanted buildings." Occupancy level will most likely fall and DPU will most likely take a hit, all else remaining equal.
I am still rather happy with AIMS AMP Capital Industrial REIT. They are doing the right things to add value for unitholders, especially in the way they go about re-developing their properties to max out their plot ratios. I really like how they secure pre-commitment before embarking on such projects and I like the fact that insiders have a meaningful stake in the REIT too. This REIT is definitely one up on Sabana REIT.
I haven't really made any changes to my portfolio of S-REITs (from July 2014 to June 2015) apart from initiating a long position in Soilbuild REIT. The expectation that the REIT would benefit from commercial entities moving their activities (like call centres and IT departments) to business parks should pan out nicely.
So, although industrial properties S-REITs are expected to face challenges from more supply of industrial space in the next 2 years or so, Soilbuild REIT should weather this relatively well.
What about my investment in Saizen REIT? Well, there is some talk on how residential property prices in Japan have gone up in recent times because foreigners are more enthusiastically investing in Japan again. There is also some talk about how prices have gone up too much because rentals have not gone up in tandem. So, some are saying that prices must come down and maybe they would.
Now, perhaps, it is timely to remind ourselves that Japanese residential property prices continually fell for two decades and the fall in prices had been much sharper than the fall in rental in those twenty years.
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| Something I blogged about in December 2009: here. |
The increase in property prices since the introduction of Abenomics is just a bump in comparison to the fall off the cliff in those twenty years. Saizen REIT remains very undervalued and should be a natural beneficiary of the recovery of the Japanese housing market.
My three largest investments in S-REITs are still:
1. AIMS AMP Capital Industrial REIT
2. First REIT
3. Saizen REIT
They account for the bulk of my passive income from S-REITs.
I also have smaller long positions in the following S-REITs:
4. Sabana REIT
5. FCOT
6. Suntec REIT
7. LMIR
8. Cambridge Industrial Trust
9. Cache Logistics Trust
10. Keppel REIT
11. Soilbuild REIT
Half year (2015) passive income from S-REITs: $45,626.80.
On a monthly basis, this works out to be $7,604.46 a month. The slight improvement compared to 2014 is probably due to the addition of Soilbuild REIT to my portfolio.
Although interest rates are expected to rise in the near future, it would be a mistake to think that S-REITs will all go the way of the Dodo. Remember that S-REITs might be bond-like but they are not bonds.
S-REITs are really property leasing businesses and they are more likely to do better compared to bonds in a rising interest rate environment. S-REITs are, generally speaking, still relevant instruments for income investors.
Related posts:
1. 2014 full year income from S-REITs.
2. AK says create your own Dividend Machines.
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