Personally, I will sit out the IPO and wait the market price to adjust itself and see how afterwards.
As 6.x% is not attractive enough.

IPO is rather weak across lately. So I don't expect market to trade at premium to its IPO especially consider that it only carries 6.3% as you mentioned.

Just my personal view.

I knew roughly some in my memory.

Axreit start off around 1.50-1.60, if not mistaken, this can't remember accurately
Qcapital around 0.8x-0.90
Amfirst 1.00
Stareit around 1.02 or 0.99, forget a bit already
Atrium 0.99 or 1.00.

I stand for corrected as this is somehow can straight away retrieve from my memory one.

But Sunway Reit probably may start off with a few cents premium if IPO is good and manage to find many cornerstone instituitional investors to support it. As Singapore investment arms, PNB, EPF and some insurance fund also potential to become the cornerstone investors of it.

I forsee may be start off with flat in IPO and a little few cents above IPO, then as time goes on, probably ease off to around 7% or more yield unless the reit can improve their earning and DPU and show high potential in rental revision upwards afterwards.

Just my personal opinion though.

The property valuation is carried out and done by independent properties valuer.

It depends on how one views on this.
A nudge or not, I don't know, even got a nudge at least must come from somewhere that is realistic based on the existing available paper and market condition, and transaction that had been done surrounding etc issue.

But we invested in reit primary looking on its yield and earning ability, not on how much the value is given.
Share price also behave towards its earning ability and not towards what is their worth.

That's why whether the properties is being revalued or not is not a concern for reit holder.

The concern for reit holder is always how much rental can get?
Is the lease is going to be renewed and rental rate being revised upwards or not?

This post has been edited by cherroy: Jun 8 2010, 10:23 PM

We as reit holder always look at realised income figure only, as it is those realised income that enable reit holder to get a piece of distribution.

Any positive revalaution will register as income, but it is not a realised income, it won't boost the DPU.
The primary concern is always the quarterly or semi-annual distribution/dividend.

Market won't give a damn how much the revaluation is, as reflected by share price movement. But share price will shoot up, if the DPU is going higher and higher.

Reit gives at least 90% of their realised income, so the most left is 10% cash remaining, so low cash is the nature of it.
As you are not running a business in reit, you are just holding a property and collect rent only, there is little need to be in high cash position.

Why we like or want to invest in reit?
Because any profit made is distributed.

Unlike ordinary stock, company can withold forever their cash position without rewarding shareholders at all disregard the size of cash.
Also, with profit needs to be distributed, it minimise the chance of profit (realised income) figure being "cooked".

Reit is not as same as businesses.

There is no need for reit to raise cash unless for newer acquisition of properties, while newer acquisition of properties should increase the reit income in the future to offset the dilution part of story.
If not, the acquisition through dilution is not bringing benefit to the reit holders.

Axreit has been undergone 2x private placement, but it didn't dilute the DPU, instead it increases the DPU overtimes, through newer properties and more diversified.

I can tell from real experience, (residential properties)

Real rental properties are not easy to manage, quite troublesome sometimes, depended on your luck and quality of tenants.
Real cost after deducting expenses like maintenance fee, quit rent, assessment, repairing cost, the real return could be below 5-6% as well. A strate title already can cost you a few thousand buck.
Illiquid, sell a property may takes months or up to half to a year before actually receiving all the proceed from the sale.

Direct property investment good thing is that, the value of the property is depended on the property market itself, not like stock market sentiment, that could affect the reit price.
And you have total control on the property.

You can leverage on reit by using margin account.

Personal loan is a big no no.

Margin can last indefinitely.
Margin mean use existing share or reit as collateral to get more loan money.

For me, I consider as "downgrade" become more hassle.

Reit is an upgrade version, and comfortable version.

Also risk involved is higher than reit.

But it depends on individual appetite on this issue, nothing right or wrong.

Fyi, residential rental market is not that lcurative compared to commercial.

Invest a new or own properties, risk involved :
1. Developers abandon the project
2. Particular properties out of favour, due to whatever reason, little people interest in those area. We had seen many completed/OC passed shoplot being abandoned due to non-strategic location, due to whatever reason, no single tenants interested.
3. Particular property has low demand, cannot/difficult to sell.
4. Tenants don't pay, and don't want to move out either.

I no doubt you worry about trust is logic, just invest into own property, means there are more factors involved, and risk involved.

While for individual less wealthy, the max one can invest into own properties, won't more than a few.
A mistake of 2 in choosing the property, could means significant impact as well, particular those property cannot be sold out, abandoned one.

In reit, you could spread the investment into a few, while even one play foul, it won't impact individual as severe as 1 mistake in real property.

While in reit, market is liquid in general, you still can get out with losses in reit share price only, but for real properties, once the property is not in demand, you cannot sell at all. That's where why I said risk is smaller.
Also, existing law is not protecting enough for purchasers if anything happening.

Rent being paid or not, can see through the cashflow statemet.
Cashflow statement is something not easy to play with.

Account playing, any company can do, not limited to reit.
RPT, so does with ordinary listed company. In fact, RPT is worst in some ordinary listed company than reit.
Properties well maintained or not, it depended on the management company, rental market won't lie.

So as you said, the most important aspect in choosing reit is the management company prudent in managing the properties.

At least reit will distribute 90% of the income to us as shareholders, and cannot foul play on this issue. Unlike ordinary company, can report millions or billion of profit, but keep those cash in company, then suddenly kaboom, those cash gone.

If really worry about the foul play issue, ordinary listed company stand 10x bigger risk than reit.

This post has been edited by cherroy: Jun 11 2010, 02:17 PM

The real appreciation side of story is always land, not the properties itself.

Yes, case by case, different investment approach has its own good and bad, so does reit vs real own properties.

But for me, as working class, that have little time to deal with those troublesome documentation, dealing with problematic tenants, travel half to 1 hour just to collect rental each month, reit is better in term of conveniences and risk issue.
As buying a property could mean extension time spent of reseach, exploring the issue, legal cost etc involved, too hassle and less diversified.

Reit investors majority is reallly big one, instituitional investors.
As it is a form of fixed income instrument for them.

We have lot of people made good buck of money through reit, particular Axreit.

Our forumer, Neo making quite a lot through reit as well.

Commercial properties particularly office space is expected to be under some stresses due to over-supply problem. While with economy downturn and severe recession previously, company is more "thrifty" in term of hiring, expanding office space rental etc. Rental market is not very strong.

The physical properties appreciation has something to do low interest rate environment, speculation and inflation expectation/threat.

Residential yield is low to start with, so not attractive enough.
Even one invested on their own on residential properties, the net yield, after deducting all the expenses like assessment, maintenance fee etc, the net yield could be around 4-5% only. Not to mention property manager need to charge 1% on the management fee side, so chance is left is 3-4%. You want to invest in a reit that carry 3-4%? Might as well put in FD then.

Unless you are runnning at high leverage, then only residential properties seems viable, if not, there is no incentive for people to invest in residential reit.

Reit every year give you around 7%.
While capital appreciation side, you need to see your entry price.

It is different league to compare reit price appreciation with physical properties price appreciation. As even physical properties appreciation, you cannot liquidate a single cent while reit you can do it anytime.

Reit price primary affected by its yield.

Actually don't look at physical properties appreciation price tag alone, you need to take in net cost or net gain. In order to realise the physical properties gain, you need to sell, legal fee, stamp duty, RPGT, involved, which easily cost a few thousand up to ten of thousand.

People always neglect the net expenses incurred but only looking at surface figure only.

The right mentality of investment is to get a piece of return that is higher than FD or conventional tools like bonds with some risk involved.

Investment is not for "get rich" or "get rich quick".

Claim or not claim, I/we don't care, what we care what is the risk we are taking, what expected return can be.

In reit, we expect some yield for 7-8% which is 2x FD rate can offer, with any capital appreciation side is a bonus, and not something take for granted.
If FD is offering 7-8%, I/we might dump reit as well.

People only talk about good side of story of real physical properties investment, like who become millionaire become invested in properties, who gain 40% yield because buy at right location right timing etc.
But there are still a lot of people that buying some properties under abandoned project (which bank still charge loan interest), shoplots that grow grasses only, little tenants want to rent, buying lots in shopping mall that never fill up more than 30-50% etc.

There are also a lot of people bought properties at 10K, but now worth 150k, after 20-30 years, but if calculated carefully, the real/net return rate is worst than FD. But still people proclaim, it is a successful investment, see invested in properties 10K become 150K, or become millionaire, in fact it is not a successful investment.

This is always little point in comparing which investment is better than the others, it never has any conclusion because there is never "best/better" investment than the others. They just has some pros which one may like and comfortable with it.

This post has been edited by cherroy: Jun 11 2010, 04:40 PM

Yup, nearly forget about the tax issue as well. Net yield for physical properties could be 5%, but after deduct income tax, it become 4% (if 25%) only. Reit only incurred 10% witholding tax.

The catch are always several factor
1. Liquidity, I rate liquidity is one of most important aspect of financial management.
2. Real hard asset ownership feel, reit cannot offer this.
3. Want lazy -> reit. Want hand on -> real properties
4. Diversified, reit is offering better option in this
5. Control, real property better. Reit, you need to trust the property management company solely, how to manage.

Actually it is not right to conclude reit has lower gain and physical properties has higher, because everything is still on going process, as even your existing physical properties has appreciated 30%, ,until you sell it, it never a gain. Who's know today prime properties can be nobody want one 10 years later.
In real situation, it did happen, although not on prime location in KL/PG etc. But this is really happening on some township.

Also physical real properties could gain 30% this year or next year. But can it be no appreciation at all for the rest 5-10 years and normalise the total return? The answer can be yes as well.

It is not normal to see properties price to appreciate more than 15-20% pa in general.

If FD is 10%, then reit price will be adjusted to a yield around 15%. Market is always efficience in this kind of adjustment.

10% FD rate may never occur in our or my life time again.
and also, I don't wish it to be happening.

1998 FD rate was 10%+, which I had seen some people dump FD 5 years at a rate of 10.xx% + Free Astro subscription for 1 year inclusive hardware installation.

Yup, 6.8% is a bit low.

But the quality of the properties like Gurney plaze is a strong selling point, as the properties is
1. in strategic location, land value for sure appreciated in the future as situated or surrounded by luxury condo, with multi-million properties surround.
2. Strong rental market, fully occupied, and potential rental increment in the future.
3. Mall is well maintained and crowded.

Even Qcapital is higher.

Ain't just posted in your qouted one..
Not mean to recommend, but Qcapital half year distribution will be coming after this month, around 3.5-3.8 cents is expected.

Axreit also about 8%, but current at Rm2.00 is about fully value.

These are 2 my favourite at the moment.

Capitalreit also look interesting.

Sure you cannot find, because it is not listed yet.

Almost identical to Sunway reit, around 6.8% also.