Saizen REIT: Can we make some money from arbitrage?

Saizen REIT is suddenly getting a lot of attention. This is certainly a far cry from the time when I first blogged about it in 2009.

Now, with a price of $1.10 a unit, many are wondering if they could benefit from arbitrage.

Buy at $1.10, get one round of income distribution and get to receive $1.17 sometime middle of next year.

In a comment I made last evening in my last blog post on Saizen REIT, I said that we might not get $1.17 a unit next year because the buyer will only pay 95% of the consideration with the balance 5% to be retained in an escrow account.

Basically, if the buyer should identify some engineering work required for the assets being acquired, they have the right to draw upon the money in the escrow account for remedial work. They will have 28 days to do this.

We can only hope that there isn't that much engineering work required and that most of the money in the escrow account would be released to Saizen REIT in due course.

There was also a worry about exchange rate and how a weaker JPY in the next few months could affect payment to shareholders in S$.

This is no longer a concern because the very prudent management at Saizen REIT have entered into a currency hedging arrangement.

So, for those who would like to buy into Saizen REIT to enjoy some arbitrage benefit, what should we do?

Anything below $1.11 would be safer. Buying at prices higher than that would be making a wager on the buyer not drawing too much upon the funds in the escrow account.

Finally, take heed the warning provided by Mr. Chang Sean Pey that there is no assurance or certainty that the transaction will be completed. So, trade with caution.


See: Hedging arrangements.

Related post:
Saizen REIT: Firm offer by Lone Star.

The "secret" to AK's success as an investor.

I was talking to a friend over a cup of tea recently and we agreed that most people naturally do not have the temperament to be good investors.

Most of us are not born into a family of good investors. Those who are will have an advantage, for sure. For the vast majority of people, AK included, we might start the journey later in life and we might have to try a bit harder but unless severely disadvantaged, financial freedom is definitely not beyond us.

Having the right philosophy in life is essential as our philosophy will guide all our thoughts and actions. I have achieved what I have today financially largely because of my philosophy in life. Remember the story about the grasshopper and the ant? (See my blog post on being a happy peasant.)

Regular readers would know that I believe in saving money, the more the merrier, of course.




Something I blog about pretty often is the CPF and how we should try to take full advantage of it as Singaporeans. 

I said that if we bulk up our CPF-SA as soon as we could, we would be helping the CPF to help us build a more meaningful retirement fund more quickly. Compounding at 4% per annum over a long period of time without risk would be more magical if there is a larger base to start with.

Imagine compounding $10,000 over 20 years at 4% per annum versus compounding $100,000 over 20 years at 4% per annum. How much we get at the end of 20 years would depend on how much we put in right at the start, everything else remaining equal.

Quite easy to see that, isn't it?




Many of us are probably familiar with the idea that our CPF savings is not going to be enough for us to retire on and that we should save more money. 

Of course, a more sophisticated idea is that we should have investments that will help to fund our retirement and this argument is a very attractive one too.

At this point, let me tell you a story.

One of the stories which I enjoy sharing is how I bought my very first lot of ST Engineering's stock at $1.55 a share donkey years ago. I was attracted to how they were paying 100% of their earnings as dividends to shareholders. 

Back then, when I told some friends what I did and I had more friends donkey years ago, some went:

"Wah! So expensive! That is $1,550 a pop and then there is brokerage fee! You so rich!"

Well, something like that. 

Brokerage fee was more expensive in those days and, yes, one lot was 1,000 shares until not so long ago.

Of course, for us young people who just graduated and drew a salary of about $3,000 a month, $1,550 was a lot of money. Yes, I was a young person once upon a time.

A reader's little niece drew this.

What was even more amazing to many, including my mom, was how I bought more of ST Engineering's stock as its price rose. I remember buying at $1.70, $1.80, $1.90 etc. Well, not at those exact prices but you get the idea. 

I was buying almost every month and I have reaped the benefits of being a shareholder over many years. The very first 1,000 shares I bought are probably free of charge twice over or so by now.

So, similar to my narrative on the CPF and my strategy, it is about saving as much money as possible early in life and putting the money to work as early as possible in life, investing in good dividend payers. 

We don't have to be a genius to do this but the will to save more money right from the start must be strong.








Not too long ago, a fellow blogger whom I respect said that he admires my money habits. He commented that I am probably successful more because of my money habits than my investment acumen. I cannot remember his exact words but his comment is in my blog's comments section somewhere. 

I will be the first to say that I am not a very good investor but I can grow my wealth relatively quickly. This is not because I make a lot of money. It is because I do save a lot of money relatively quickly.

Be much better savers as early as possible in life. 




If we do this, it will allow us to become wealthier faster as it gives us more capital to invest with earlier in life and we will have more time to reap the rewards of being invested (i.e. becoming wealthier). 

If we are able to save much more money than our peers, even if we are not fantastic investors, just by investing prudently for income, all else being equal, we are most likely going to enjoy a much better outcome financially compared to our peers.

Related posts:
1. To be a happy peasant.
2. How did AK create a 6 digits passive income?
3. Greater financial well being is not beyond us.
4. The Millionaire Next Door.
5. Buying a $500,000 watch after 3 years of work.