Would AK invest in IREIT Global today?

Reader:
"I read your analysis of IREIT and how your strategy turned out in August 2015. You said that you wanted a minimum of 8% yield to invest in IREIT. So, you waited. At today's price, you would get more than 8%. Would you invest in it today?"





The reader was referring to a blog dated 14 August 2015. If anyone is interested in the background which led to this blog, please read: 
How did IREIT Global's rights issue turn out for AK?

AK:
"Wow! You read that recently? You must be combing my blog's archives! Gambatte! 

"Anyway, back then, my average price was about 66c and, estimating a DPU of 6c today is not unrealistic. So, conservatively, I am getting a 9.1% distribution yield for that investment.

"Actually, as things turned out, less than a week after I published that blog, I increased my investment in IREIT a lot more at 66c and 65.5c.





"On hindsight, I didn't have to go through all that trouble to get IREIT at a lower price during its rights issue but who could have known that Mr. Market would go into a mild depression later in August 2015? I am not saying that it was a bad thing, of course.

"I added to my investment in IREIT again in mid-2016 at 71c a unit which was 7.5% higher than 66c. Even though it was a higher price, I still found the REIT attractive as an investment for income. More recently, I added a bit more to my investment last month, paying 72.5c a unit."

Now, would you invest in IREIT Global today? It depends on what you are after and whether IREIT Global does the job for you.

Related posts:
1. FLT and CRCT added.
2. Projected yield of 8% safe?

Take home loan from bank and buy unit trusts!

For fun and laughter only. LOL.
Hi AK,

I'm new to your site, saw quite a few interesting post from you.. Wonder if I can get some advise and directions to investment...

Have $50k spare cash, now searching for what to invest...

I have a $500k HDB housing loan.

Some financial advisors asked me to switch to bank loan. Instead of using my spare cash to clear my housing loan, look for an investment product which is stable and has a good interest rate which is above the bank loan interest like JPMorgan Funds - Asia Pacific Income and First State Dividend Advantage.

Considering the US situation with the new president, USD is likely to rise with the promising policies to come. Then with the increase value of USD and decreasing value of SGD, would USD linked investments be good. Any recommendation?

I am only talking to myself here.

Hi C,
I don't recommend stuff. I am only talking to myself in my blog.

I like to tell myself not to ask barbers if we need a haircut. Switch from HDB loan to bank loan? These financial advisers work for HDB or for the banks har? Interest rates are going up, then, bank loan interest rates will go up or not?

Financial advisers ask me to buy income focused unit trusts which are likely to be more rewarding than using the money to pay down my mortgage? What are the underlying assets of these unit trusts? Bonds, income generating stocks or REITs, probably. Why they never ask me to invest in these directly har?

I don't know what Donald Trump is going to do to the USA or the US$. I am not very good at speculation. I did a few times before and fell into longkang. Shhh...
Best wishes,
AK

Related posts:
1. Fixed rates, SIBOR, FHR18 or HDB Housing Loans.

2. Nobody cares more about our money than we do.

3. Don't do silly things and we can retire smart too.

Frasers L&I Trust and CapitaLand Retail China Trust added in January 2017.

As REITs will always be relevant to the income investor, I have been thinking of how best to increase my investment in REITs again in an environment of increasing interest rates and I decided I should choose REITs which have a better plan or chance to improve their income.

Hedging interest rate risk is very well and good but this only kicks the can down the road because sooner or later, higher interest rates will hit home. 




So, having the ability to increase income is still key as to whether a REIT will do well with interest rates increasing over time.

Very importantly, I also decided that it is probably a good idea to diversify more geographically and to reduce my portfolio's reliance on Singapore. 

Remember I said this in a recent blog post on Sabana REIT?
However, things will get even more challenging for REITs from here on with interest rates expected to rise further. Industrial REITs here are facing an oversupply of space and a malaise in demand.  (Source: History with Sabana REIT and current thoughts.)




So, although I like AIMS AMP Capital Industrial REIT (AA REIT), for example, last month, I decided to initiate a position at 92.5c a unit in Frasers L&I Trust (FLT) which owns logistics and industrial properties in Australia.

The IPO price was 89c a unit and, to be honest, I was waiting for the price to come down from there before buying some. 

This was because although there are many things to like about FLT, the distribution yield was on the low side for an industrial REIT. 

Unfortunately, the decline I had hoped for did not happen.




So, although FLT's distribution yield of  7+% doesn't seem very attractive when compared to AA REIT's 8+%, I decided that there are enough positive factors such as relatively low gearing and a portfolio of mostly freehold properties in Australia for me to invest in the REIT.

(30 November 2016)

Of course, regular readers would know that although AA REIT has been a fantastic investment for income for me and is likely to remain decent, apart from the challenging leasing situation in Singapore, I am also unwilling to add to my already rather significant investment in the REIT.

Other than FLT, I have another new investment in my portfolio. 

Again, this has a portfolio of real estate outside of Singapore.

Some readers might remember that I have been waiting for a chance to get into CapitaMall Trust (CMT). 

I remember I spent quite a bit of time blogging about it once upon a time: here.




However, from then till now, CMT's unit price did not decline enough to be persuasive, I feel. 

Translation: AK is "giam siap" and wants to buy at a much lower price. 

What? 

You need a translation for "giam siap"? 

I blur.

After much consideration, I accepted the offer from Mr. Market to invest in Capita Retail China Trust (CRCT) instead, paying $1.40 a unit. 

Just a few months ago in September 2016, CRCT hit a high of $1.66 a unit. 




Why the big decline in unit price? 

It was probably due to a 10.6% drop in DPU, year on year. 

A new tax in Beijing and a weaker RMB were the reasons. NAV also declined by almost 12% to $1.56 per unit.

Offering a higher yield than CMT even now and having ownership of a portfolio of shopping malls in a market with arguably more room for growth (in terms of organised retail activity) than Singapore's, I decided CRCT is probably worth investing in. 




After all, a 10.6% decline in DPU doesn't warrant an almost 15.6% decline in unit price unless we are expecting a more severe decline in DPU. 

In fact, I think that DPU should recover somewhat as CRCT's non-Beijing malls could pick up the slack over the course of the year.

Having said this, I am reminded of a longer term risk, that land lease in China is typically 50 years and that could explain why Mr. Market demands a higher distribution yield for a retail REIT in China compared to one in Singapore. 




I do not know if, like in Hong Kong, land lease could be renewed easily. This is one risk to bear in mind if we choose to invest in CRCT.

(September 2016.)

Another risk we should be aware of is financial in nature. CRCT's loans are mostly S$ loans but its income and valuations are in RMB. 

This arrangement is similar to Lippo Malls' and I blogged about it before (See blog: here). 

A decline in RMB against the S$ could see both gearing and interest expense affected in a bad way.




Although I have said that CRCT would likely see income increasing over time, this is going to be a gradual process. 

So, to be prudent, I am keeping my investment in CRCT relatively small.

CRCT's 4Q2016 results.

As CRCT distributes income half yearly, I will be receiving DPU of 2.37c (4Q2016) and 2.36c (3Q2016) for a total of 4.73c in March. 

Annualising the DPU gives me a distribution yield of 6.75%.

Again, why did I choose to invest in FLT and CRCT in an environment of rising interest rate which would impact their cost of doing business eventually? 

You blur? 

I also blur.




Xizhimen Beijing. Just next to the train station.

A tale of two HDB flats by Darles Chickens.

Chinese New Year is a time of family bonding, catching up with friends and also gossiping.

What? Gossiping is not a Chinese New Year tradition? Alamak. 

Oh, it is something we do daily? OK lor.

Since this is the Year of the Chicken (What? Not Chicken? Is Rooster? Rooster is not a Chicken meh?), I present to you "A tale of two HDB flats" by Darles Chickens.

Gossip Tale #1

A: Charlie's family sold their 5 room flat. 

B: Aiyoh, why like that? Bad times need money har?

A: They downgraded to a 3 room flat and they no longer have a home loan to worry about. Fully paid.

B: Wah! Quite smart hor?
Gossip Tale #2

X: You know Dickens from our primary school class? I met him recently.

Y: Oh, what happened to him?

X: His family upgraded from 3 room to 5 room flat already, you know?

Y: Wah! Must be doing well!

X: He says now they are stuck with a big loan and he must help to pay.

Y: Why like that?

X: Actually, when they sold their old flat, they could have paid for the new flat in full. Their old flat sold for very good price.

Y: What happened to the money?

X: His parents took a home loan for the new flat and spent the money from selling the old flat.

You think this tale can become classic like Charles Dickens' novel or not?

Alamak! Who threw a shoe at me? Who? Who?

Related post:
How did AK amass so much money?