Cromwell European REIT IPO.

Cromwell European REIT is a mega IPO that will raise S$ 2 billion.

I looked at the distribution yield first. 

7.5% (@ 57 euro cent per unit) to 7.7% (@ 55 euro cents per unit).

Then, I looked at the gearing level. 

34.3% to 36.6%. 

It would have been better if it were below 30% but it is not excessive.

Then, I do what I do pretty often which is to compare with other REITs in the same sector.

Alamak.

This is where the problem lies.







This REIT has a rojak portfolio of 81 retail, office and light industrial properties in 6 European countries (Denmark, France, Germany, Italy, Poland and The Netherlands).

How to do comparative analysis like that?

OK, with IREIT Global taking a pan-European strategy, it could be a good candidate for comparison in future. As of now, IREIT Global still has properties in Germany only.

IREIT Global offers a similar distribution yield (7.6% at 76 cents per unit) but its gearing level is higher at 41.3%.

Of course, we should say that IREIT Global's portfolio consists only freehold properties while the proposed Cromwell European REIT's portfolio has less than 70% of assets on freehold land.

Yield should be higher for shorter leases to make investment sense.







In a rojak portfolio, it is very easy to hide bad assets and let the good assets pull the weight and we have seen this with some S-REITs before.

As this could well be the most rojak of portfolios when it comes to S-REITs, I find hard to analyse.

We might be able to get a clue as to what the sponsor thinks of the REIT by looking at the stake they will be retaining after the IPO.

8.7% (if popular) to 12.7% (if unpopular).

Pretty low numbers.

Cromwell European REIT's distribution yield might look decent and the gearing might look comfortable but I don't feel comfortable with the rojak nature of its portfolio.







It gives me the feeling that the sponsor wants to dump everything into a pot and be done with it.

For me, it would have been better if the IPO offered one asset class in one country or even a few asset classes in one country.

Then, if the REIT would like to expand its portfolio to include assets in other countries, justify why and take it from there.

Or it could offer a single asset class cutting across a few countries and then expand to include other asset classes later on.

It would be more orderly.







It could be the OCD in me but, now, it does not feel as if there is any clear strategy other than the REIT is holding European assets and, hence, the name of the REIT. It feels messy to me.

I have avoided IPOs for years and this will be no exception.

If Mr. Market should go into a depression and offer me a much lower price to compensate for the rojak nature of the portfolio, I could be tempted.

Read article: HERE.
IREIT Global: HERE.
Related post:
Would AK invest in IREIT today?

"Retrenched with almost zero compensation in my late 40s but..."

Serejouir said...
Hi AK,

I am a long time reader of your blog and felt compel to write in and share my own experience after reading about the reader who was jobless for almost a year.

I could not agree with you more on living prudently, avoiding unnecessary debt and investing in income generating tool. To add to that, we should also make an effort to to build up transferable skills.






I'm in my late 40s and single, earning $8-9k a month. I was retrenched in Nov last year, a week before my 25th year anniversary with the company, with almost zero compensation.

Thankfully, I have minimal debt - only a property loan that I co-share with my sis, which we managed to 1) re-mortgage a few months before my retrenchment; & 2) rented out albeit lower than our monthly loan payment at the moment.

Thankfully too, I am not into any of those designer stuff nor eating in those fancy restaurant. While I do enjoy an overseas holiday, 5-star hotel and shopping are not my cup of tea; it is also not a must have that I am willing to get into debt for, like many of my friends.

A quick calculation on the back of the envelop, gave me the assurance that my savings + investment returns can last me for 1-2 years, without having to liquidate any of my investment immediately. 

I would still be able to maintain the current lifestyle while still giving my parents their monthly living allowance.






Nevertheless, I also started to examine whether there are any other "frills"/"good to haves" that I can cut back on, so as to make my savings last even longer as well as in anticipation of a drastic pay cut in a new job.

This thought of financial security also gave me the safety net of having a bit of time on my side to evaluate what I want out of life and to get a job that I would enjoy doing, and not one that I have to work for a pay check.

While investing wisely for a secure financial future, I believe one must also look into investing in ourselves, so as to ensure that we have transferable skills that we can bring with us everywhere we turn to.






I also like what you said about keeping an open mind when it comes to job search.

I spent the last 20+ years in technology/manufacturing sector before I was retrenched.

In March this year, 3 months after I was retrenched, I got a new job in the healthcare sector, a totally new and alien industry to me. 

It was a very steep learning curve for me - job responsibilities were very different but I was able to tap on the analytical and management skills as well as various soft skills that I have picked up all these years. 

I find my current job very fulfilling and I really enjoyed what I am doing. To top it off, I not only did not suffer a pay cut but actually was offered a higher salary!






AK says:

Big "thank you" to Serejouir for sharing his experience and advice.

Being retrenched is tough, no matter how we slice it. However, if we are prepared, we will be less badly affected.

So, remember, if Serejouir can do it, so can you!

Gambatte!

Watch the video. He was retrenched after working as a manager for thirty years.







Related post:
Jobless for almost a year and losing my mind.

Total and Permanent Disability (TPD) Insurance.

Reader:
Won't you be also concern for yourself? The TPD part.
Medical is already covered for everyone aka Medishield.
I believe most people say not afraid to die, but afraid cannot die.

AK:
Why should I be concerned?






Reader:
Sick and disability. I imagine this 2 are for everyone to think about. Sorry I don't mean to pry. But sought your thoughts on what's necessary to insure for own self. If not necessary one then don't have to pay for it.

AK:
If we have dependents, we need life insurance. Buy term. We also need the following:

For hospitalization, H&S.
For critical illness, CI insurance.

If you are still reliant on your earned income, then, TPD coverage is relevant to you.

It is relatively costly but it will give you peace of mind while you are building your portfolio or until you are able to tap your CPF savings.

Reader:
The insurance agent out there won't really think for customers. We have to be our own agent. But sometimes can't get the "logics" yet. Thank you again.

Best insurance is still: THIS. 






Of course, not everyone is able or willing to be an investor. 

For many people, building up their CPF savings is probably the best way to bolster retirement funding adequacy.

For them, if a meaningful lump sum is available for withdrawal from their CPF account at age 55, having TPD coverage till age 55 could be sufficient.

Otherwise, some amount of TPD coverage till age 65 is probably a better idea as the earliest CPF Life would start paying a monthly income for life is at 65 years old.






Whether we need TPD coverage and to what age we need it will depend on when we will be able to work when we want to and not because we need to.

Yes, if you are a regular reader of my blog, this should sound very familiar.

Related posts:
1. Term Life.
2. H&S (Medishield).
3. Critical Illness.
4. Eldershield.
5. CPF Life.
5. Start with a plan...
6. Work because we want to...

"Jobless for almost a year and losing my mind."

Reader:
I stumbled on your blog last month when searching for ways to make my savings last longer. 

There are many other blogs on money but your blog just feels more real to me. 

We are about the same age and also single but, unlike your frugal ways, I have always had the good life.

To be honest, I used to laugh at people like you. 

As I have been jobless for almost a year, I don't laugh now.

I really regret now. 

Looking back, I really did not need to spend so much money on my flat, my car and on looking good.

Still servicing loans, my savings is running low and I have been avoiding meeting friends recently. 

I have been telling everyone I have been travelling for work a lot.

I think I am losing my mind.







AK:
Your situation seems pretty bad but it is not the end of the world.

HEALTH:
I am not a doctor but it sounds to me that you might be suffering from depression or on the verge of going into a depression. 

Go to a government polyclinic or IMH for consultation. 

Inexpensive but effective. 

I am quite serious about this because depression is very dangerous (hyperlinked to IMH website) and could lead to death.







This is from IMH:
A person who experiences five or more of these symptoms for more than two weeks may have a depressive illness:

Persistent sadness; or feeling down or gloomy

A loss of interest in activities previously enjoyed

Weight loss or weight gain; or decrease or increase in appetite

Difficulty falling asleep or staying asleep; or sleeping excessively

Feeling agitated or restless

Feeling tired and lacking the energy

Feelings of worthlessness or excessive guilt

Difficulty concentrating or having trouble thinking

Frequent thoughts of death or suicide





JOB SEARCH:
While you continue searching for a new job, please remember that with all the disruption that is going on, it is possible that we might have to accept lower pay and a job very different from what we used to have especially if we are structurally unemployed.

The world has been changing rapidly and it makes financial security a much higher priority than ever before especially when job security has become more elusive.





MONEY:
Sell your car. 

It is a luxury you can no longer afford. 

Take public transport instead.





Since you are single, you might want to consider renting out spare bedrooms if you have any. 

If you do not have spare bedrooms or if you do not like the idea of sharing your home, I don't know how big your mortgage is but if it is draining your resources rapidly, you might want to consider selling your home too. 

Getting a housing option that will cost only a small fraction of your current home will help a lot. 






Remember, unless our home is fully paid for, it is a liability. 

Even if it is fully paid for, if it does not generate income, it is an asset with attached expenses (i.e. operational expenses).

We want to keep our expenses low (especially when our income is compromised). 

So, downsizing (especially if it leads to right sizing) is a sensible option.






People often feel invincible during good times and only truly appreciate their financial fragility during hard times.

You are suffering now but your situation is not hopeless. 

Do the right things and right your life.






Related posts:
1. Do 3 things to Recession proof your life.
2. Do 3 things to be Mentally and financially prepared for retrenchment.