Free parking for 1 hour?

A lot of investors look high on CMMT, so willing to pay a little more premium.

Axreit DPU around 15-16 cents, at Rm2.0x, it is still 7.x% yield.

Qcap around 7-8% yield, DPU around 7.2-8 cents expected.

Not necessary, some preference shares do have fixed rate or fixed dividend. It depended on the issuance time

The Starhill Global convertible preference unit info, I gather from research report is like below

It is mandatory converted after 7 years.

30% premium is after 7 years issue.

You never know after 7 years, the premium paid is worth or not.
If Starhill Global is doing well, the its reit price is steady and going up, then it may make money together with 5.65% coupon rate.

If the CPU is carrying zero interest rate, then yes, the deal seems not fair.
At least the RPT is still has some "fair" point unlike some RPT that only has one way ticket.

Yup, there is always pros and con on both side of story.

Remember how Atrium DPU shrink dramatically when one of its 4 properties without tenant, from 2.x cents per Q, down to around 0.8 cent, (whereby the reit price also plunge to 70 cents at that time)

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Added on August 28, 2010, 11:07 amThere is always 2 side of story.

Without acquisition and new properties injection, reit won't possible grow with >90% payout rate.

So either you choose to grow or not.

But for reit size like Axreit, the size is relative small to start with, so to attract more institutional investors to invest, they need to grow, investors particularly foreign one, won't be much interested if your reit size is just about hundred million plus.
DPU won't improve much without new acquisition means stagnation for the reit.

Eg. Axreit vs Atrium.
Atrium DPU remain almost the same at around 8 cents+ since listing
Axreit DPU has grown from 12+ cents to now around 16 cents due to acquisition.

So that's why some forumers willing to see the reit grow as it means more dividend cheque for them, as well as more diversifcation, risk being spreaded across. Just like buying UT vs individual stock.

Yes, acquistion associated with risk as mentioned.
But if the acquisiton can yield fruitful result, then it is deem worthwhile.
It is just like loan or debt. Debt can be both side of story, debt doesn't automaticallly is bad, it can be good debt or bad debt.

If the new acquisition keep on increase the reit leverage level, then, yes it is a worry point, so for new acquistion, the primary risk we need to look for is.
1. The rental/less signed which enable positive cashflow after taking in account the debt raised/interest charged
2. The quality of the properties, whether the properties is located at right location which has lot of demand for lease.

Without new acquistion, risk of management of existing properties also is there as well, it is not for newer acquisition properties.

There is always 2 side of story.
If reit doesn't want to grow through acquisition, there may be some other shareholders complaining stagnation issue, and risk of losing tenants issue like Atrium, that could impact due to little diversification.

Just like Maxis, there are lot of people complaining about little growth prospect, and result share price hardly move at all.

I do understand your raised issue, but less diversification is also a risk as well. Just how management view and strategy for the reit.
So if one doesn't feel comfortable with constant acquistion one, then just stay away from those reit and opt for those conservative with little acquisition one.


This post has been edited by cherroy: Aug 28 2010, 11:07 AM

As reit holder, people don't straight away cheer when the management propose acquisition.
I see little this kind of comment.
Some may be just mis-understand the acquisition issue, may be due to previous acquisition did improve the DPU.

We always need to look in to details of the acquisition, what is the yield, what is the lease, how to fund the acquisition.
Previously we did discuss before some acquisition yield is not something very good while some are indeed improve the overall earning.

Yes, the more asset being injected, the more management fee they can get. That's incentive for them. I don't deny this is a great incentive and potential excessive risk taking.
As said before there is definitely risk involved in new acquistion.
But it is same with banks as well, the more they lend, the more risk they have.
Everything come with risk.
If scare of risk, and don't want to do anything, also not a right mentality to start with.

For stagnation discussion,
Majority people always want some grow, it is nature for people. Just like you are doing business, you would like to have more sales, so that profit can go up.
Just like you buy a property and rent out, yield 8-9%, sound very good, but nature of people is, I want to have second properties to compound my return.
Little people will say, hey it is too much risk (price overpaid, difficult to collect rent) already, so I better stay with 1 properties and doing nothing.

Remember the first day the reit being launched, if it started with 10 properties, then those 10 properties also can be priced overly one. Not limited to the newer acquistion afterwards.
The newer acquistion risk is same as pricing of reit what start time.

Who know current properties price is high or low, nobody knows (although there is some bubbles currently), but it may be higher further in long term future.
Just like last 1 year ago, (a real life experience), everyone said a particular properties at Rm500k is overpriced, insane, but now there is great demand at 700k.
Main reason is our money value is depreciating, not the properties price appreaciting factor. So if there is such acquisition taking place, then it is good acquisition.

Sometimes we need to be fair as well, if the management is doing a good job, and reit holder benefit are looking after, then there is little wrong in doing this.
Some properties are yielding 8-9% with long tenure of lease which is considered as good acquisition.

Some reit are more offensive, some are more conservative, it is allowable within the guideline as long as the management is sincerely looking after reit holders benefit.

To say all reit acquisition is bad, is something too harsh already.

Yes, I agree reit is not the same as natural growth company, but turn back the issue, if you work a company, and the company said to you, the company is not a growth company, and resulted your paid cannot be raised or raised too much, don't you feel demotivated? if you look from the property management company.

As reit holder, you vote or reject the acquistion resolution if the price paid is too much, yield not good, or company take too much leverage on it.
You approve the resolution, if the properties acquisition is fair, yield is attractive, and there is little funding issue.

Reit holders are deciding the acquistion can go through or not, not the property managers, so all reit holders decide.
So cast your vote and right, if not opt to and feel uncomfortable with acquisition, as simple as that.

Cheers.

Tenant too concentrate also no good, as if the tenant doesn't want to rent time, the reit may suffer huge loss of revenue. As some anchor and major concentrated tenants that rent your bulk of properties, sometimes not easy to find overnight or in short period of time, or may not easy to fill up the gap left behind.

Frankly speaking, except the benefit of growing and expanding which give more diversification and sizeable issue. I don't feel any excitement in this proposal.

New share being issued at market price, which is below NAV will dilute existing NAV, as well as, yield of 7.x% which dilute a bit current DPU, or current yield as well if without leveraging.
But to be fair, the lease is pretty long, so secure some long term lease issue.

The one more shrewd in dealing acquisition and generate improvement is Axreit, which existing private placement can be done on a premium vs its NAV, which yield wise is pretty good.

Just my view.

Axreit pare down a bit their borrowing by private placement, which they are in the process of issuing another private placement.
But since Axreit is issuing private placement at a premium, then dilution issue is not there for the NAV, instead it increasing it.
Although the first tranche during 2009, the private placement was around 1.3x if not mistaken, but lately, the private placement price is quite good.

It means that KWB sold their Arreit to PKNS at 0.95, doesn't mean market share price must be transacted at 0.95.
It is between them only.

I don't quite sure how market will react to the proposal.
Market may like it a bit, as larger size could mean attractive to fund managers.
So probably can notch up a bit few cents. Just my pure guess but don't think it will or should go to 0.95. As at 0.95, the reit yield is around 7.5% gross, which is not attractive compared to others. But largers reit size one, tends to have lower yield as I mentioned before, there are more fund managers are eyeing on it.

But for me, I hardly excited about the proposal, except the reit now become bigger and more diversified.

I not yet studied into the properties they acquired.

This post has been edited by cherroy: Sep 2 2010, 11:05 PM

If new acquisition is done purely on borrowing, the yield actually can go up. As borrowing cost is around 4-6%, while rental yield is >7%, so you earn more through levarege, while there is no new shares issued.

But if the acquisition is done on new shares issuing at existing price, then yes, there is dilution of yield occurs, if the yield of new properties is lesser than what its yield currently.

So they did it with mixture of borrowing and new shares issued, so it may cancel out each another.

But for sure, NAV will be diluted in the process.

It is private placement, not right issue. It is not open to all unit holders, but on the basic of subscription of targetted investors, which normally being issued in big chunck particularly or normally fund managers, instituitional investors.

Buyers of Axreit in the market or existing Axreit doesn't have dilution effect as private placement price is at premium on its NAV, provided the private placement money raised being used to acquire good yield properties aka higher than existing yield the reit has.

Yes, but new assets acquistion drag down the whole reit yield as well as NAV, which is not something to cheer about, but got more diversification which offset the disadvantage.

So take 1 lose 1, breakeven, that's why I said, there is nothing to cheer about.

Because the new properties only come with slight over 7% yield, compared its overall yield of >8%.

Leverage means that its improves the total earning eventually could translate into higher DPU, aka yield.
But the deal is partly financed through new unit issuance, so effect (the higher leverage that improve the DPU) is cancelling each another (the effect of lower yield of new properties through new share issuance hence dilution effect)

The total of unit is increased now, through new 122 million unit

The major difference is the acquisition is done through borrowing, which eventually being pared down through issuing of private placement at a good price (at a premium of its NAV).

The major issue, is the new shares issued at what price.

I don't dare to say which is better.

But I prefer Stareit, although I own both, I am more on Stareit compared to Arreit.
Mainly Stareit has little borrowing to achieve currently yield.

The improvement come from the borrowing part, but soon or later, I suspect (my guess only), there will be new private placement, or new shares being issued as well, as >40% borrowing is quite high level and near to the threshold set by the guideline.

Do not 100% trust on projection figure, it is just projected only, the reality may not the same. Previously some forumers also posted some report projection of Stareit is projected to have 8-9% yield, which never is the case until now.

Borrowing cost might escalate due to OPR rising or higher refinance cost in the future (which we never can assure of) or maintenance cost might be higher due to inflation as well.

All projection figure cannot be considered as ultimate guideline, look at some report on JCY projection profit figure as recent eg.
Although Reit projection shouldn't run too far away, we don't take those projection figure as 100% accurate.

I am starting losing faith on projection figure by a lot of reports, which can be flip floping a lot one and most importantly, some are overly optimistic one.
Even buy and sell recommendation also can change within week.
I am not saying those report has no credibility, just take it as reading materials and info input, but do not trust 100% on it.

Better watch the real and up to date Q result.

Just my 2 cents.