Tea with AK71: Mechanical car parks.

I am back in Singapore. Got home at 2am and slept at 3am. Woke up at 8am. Unpacked, read the news a bit and replied to comments here in my blog.

Thanks to everyone who sent me well wishes for my trip and apologies to those whom I did not manage to reply to till this morning.

I did not look at the stock market or my blog while I was on holiday in Japan the last 10 days or so. When I looked at my watchlist this morning, nothing has really moved. My portfolio's value has remained almost unchanged.

It is interesting that the HDB is thinking of introducing mechanical car parks for older estates where there is little or no space to build more car parks. I took some photos in Japan of such car parks.

In fact, land shortage is so chronic in Japan that they even have mechnical parking for bicycles!

Some families who own two cars but have only enough space at home to park one car also mechanised the space so that they can park two cars instead of one!

It will take me a while to get back to speed with life in Singapore but it is good to be home. :)

ASSI celebrates second birthday!

In another week, my blog will be two years old. Yes, time flies, doesn't it?

It seems like just a few weeks ago when I started this blog out of curiosity and boredom. Never in my wildest dreams would I have imagined how it would grow into what it is today.

I took this photo almost a year ago with my Samsung camera phone. Still a favourite of mine. Nice blue lights for Christmas!

I will be going away for a couple of weeks on another vacation. I will probably not be looking at the stock market or blogging in the meantime.

So, this is a big "thank you" in advance to everyone who has been encouraging me on my blogging journey thus far. Merry Christmas and Happy New Year!

ASSI is featured in NextInsight.

Today, ASSI is featured in NextInsight.

Two blog posts on my passive income generated from S-REITs this year have been republished. Comments from three readers as well as my replies are also highlighted.

AK71 is happy. :)

To see the article in NextInsight as well as to find out which three readers and their comments are mentioned in the article, click here.

Drum roll, please. ;)

REITs: Leasehold properties.

I have had quite a few exchanges with readers regarding REITs and their properties' land leases, if any. Readers who follow the comments section of my blog would be aware of this.

After a while, I realise we could just be running through the same points again and again. So, I am putting up my thoughts in a proper blog post written as a reply to a comment by a reader, Marti:

Hi Marti,

Yes, land leases should not be looked at in isolation. Like you said, if shorter leases are coupled with very high yields, they could still make great investments.

So, properties with shorter land leases if for any reason should be in great demand could command higher rents while freehold properties if for any reason should be lacking in demand could have lower returns. So, investing in the former might make sense as there is also time value of money to consider especially if the difference in yields is stark. We get back more money in a shorter period of time instead of a dragging out of much smaller payouts (although we could receive them forever).

So, if a property has say 15 years left to its lease but is able to generate a 20% return per annum, it would still make a fairly good investment. In situations where people feel that it makes more sense to rent than to own properties, this could come to pass.

I don't think an argument that REITs with properties with shorter land leases should offer higher yields to make investment sense is a persuasive one unless we assume that the managers do nothing to their portfolio of properties under management from IPO to the time their properties' land leases run out. How likely is that?

REIT managers will very likely divest older, less productive properties and acquire newer, more productive properties. They will very likely, conditions permitting, undertake development of properties and have AEI. Asset renewal keeps overall age of leasehold properties younger while development properties and AEI improve distributable income, all else remaining constant.

The issue of whether REITs have leasehold or freehold properties and their implications is not unimportant but I feel that it could have been given too much prominence in some quarters and by some people at the expense of a more holistic approach in the analysis of REITs.

We want to keep things simple but not simplistic.