My ARA Asset Management fixed deposit adventure.

When I shared my full year results end of last year, I mentioned ARA Asset Management's offer of $1.78 a share and how it translates to 35% to 78% capital gains for me if the offer is to be accepted.

At the time, I had a fixed deposit maturing and ARA Asset Management's share price was at $1.71. So, I decided to plonk the money from the fixed deposit into their stock. 

It looked like it would be a sure win, an arbitrage opportunity, and I would get a 4% "interest rate" so to speak within half a year or so.

At the time, I knew some shareholders thought $1.78 was too low a price and I knew there was a possibility that the offer would not be accepted. No issues, I thought. I could keep the investment and receive 5c dividend year after year which would give me a yield of around 3%. 

However, at the back of my mind, there was a very small voice which asked if I really want a much larger position in ARA Asset Management and with a yield of only 3% to boot in case the offer is rejected by shareholders?

That voice did not go away

Today, I decided to accept a yield of about 2.6% from Mr. Market. After costs, it would be a bit lesser. I closed my "ARA fixed deposit" and received what is very good "interest income" for a 2 months fixed deposit.

I thought of this position as a "fixed deposit". So, like a fixed deposit it should behave.

I still retain my original investment in ARA Asset Management. What I divested was my more recent "investment".

Related post:
2016 FY passive income non-REITs (Part 2).

AIMS AMP Capital Industrial REIT and free money for AK (3Q FY2017).

Many years ago when I decided to reduce my investment in industrial S-REITs, I was faced with the choice of reducing my stake in either Sabana REIT or AIMS AMP Capital Industrial REIT as both were the largest investments in my S-REITs portfolio. 

Yes, they were both about the same size.  

I decided that AIMS AMP Capital Industrial REIT was better run. 

So, Sabana REIT was given the boot.





Today, AIMS AMP Capital Industrial REIT is my largest investment in the S-REITs universe and a rough back of the envelope calculation tells me that with all the distributions collected over the years, my investment in the REIT is going to be free of cost very soon. 

Free? 

Yes, free!

This is massive for me not only because I like free things but because it is such a massive investment in my portfolio.





If an investment is 2% of our portfolio and it has become free of cost (like Sabana REIT is for me), ho hum. 

If an investment is 20% of our portfolio and it is going to become free of cost soon, it isn't ho hum x 10, is it? 

It is like my position in Sabana REIT x 10 being free of cost. 

OK, somehow, using Sabana REIT as an example doesn't seem very appealing but I am sure you get the idea.





Although doing well now, AIMS AMP Capital Industrial REIT is facing headwinds and things might get tougher in the next year or two but it has a competent manager that is focused on improving value for stakeholders. 

That is very comforting.

On hindsight, I am glad I decided to get on board with Mr. George Wang so many years ago and I look forward to receiving soon to be free money every quarter for many more years to come.

·         DPU of 2.77 cents per unit for the quarter (increase of 0.7 per cent from last quarter);

·         Increased gross revenue and net property income for 3Q FY2017 by 1.5 per cent and 2.7 per cent respectively q-o-q;

·         Executed 19 new and renewal leases in 3Q FY2017, representing 82,149.3 sqm (13.1 per cent of net lettable area);

·         Portfolio occupancy of 94.0 per cent, above the industrial average of 89.5 per cent;

·         Achieved TOP of third redevelopment property at 30 Tuas West Road on 27 December 2016, on time and below budget, delivering better financial returns than previously announced. Partial income contribution from the property will commence in March 2017 quarter, with full quarter income contribution in 1Q FY2018;

·         Increased Net Asset Value per Unit to S$1.48 from S$1.47 in the preceding quarter mainly due to recognition of the development profit of 30 Tuas West Road.

·         84.0 per cent of the portfolio’s interest rate is fixed taking into account interest rate swap contracts and fixed rate notes with weighted average debt maturity of 2.1 years;

·         Reduced overall blended funding cost (including funding of the Australian asset with Australian dollar loan) of 3.7 per cent from 4.2 per cent a year ago;

·         Aggregate leverage as at 31 December 2016 is at 34.6 per cent.

Related posts:
1. AA REIT: A private tour.
2. My history with Sabana REIT.