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

Thanks. This sounds more assuring. That means at least, the CPUs are like a kind of bond which should earn 5.65% interest if not converted.

It is mandatory converted after 7 years.

got my arreit cheque thru the post!

Oppss, sorry for that mistake. Didn't go through the announcement

But still 5.65% is kind of low. They seem to have not found the right investment for their stash. Even the conversion will be at 30% premium, seems that STAREIT is at the losing end.

We have hope that YTL are more caring with their RPTs unlike GenM

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.

I dun understand when forumers here seem to be very happy when their REITs are on acquisition trial investing more and growing bigger. I am very contented if the REITs I am investing in remains as it is forever and continue paying me my yield. Tell me what I am missing here pls.

With each acquisition comes the risk. Risk that they are overpaying, risk of mismanagement etc. I do not want that.

i think some people would call that moving forward....

if certain reits don't grow.. or acquire more properties and so on.. they will be like stagnant.. and
then ppl will start to think are they incompetent not to be able to manage more properties and so on...

i think its good that they grow and have a bigger nicer portfolio..

Actually, your argument is like the argument of whether its a half full or half empty glass of water.
More acquisition actually reduces certain risk (e.g. major tenant moving out).

There are other REITs that don't have much acquisition (e.g. ATRIUM). If you don't belong in the acquisition school of thought, then you have a choice to get those less aggressive ones with good yields. However, bear in mind for those small REITs like ATRIUM, the risk for non-lettable property is very high & impacts the share price tremendously. Happened to them before (its also a buy signal for me).

This post has been edited by whizzer: Aug 28 2010, 10:28 AM

Buy PROPERTY Assets are BIG decisions, not main main to please investors like you.

Properties do face Asset Bubble Threat from time to time. It happened to Japan and US , coming to China.

One forumer did mention that no matter how bad our economy is, our valuers tend to value the properties higher and higher. His doubt is more or less accepted fact and practice in Malaysia.

This post has been edited by SKY 1809: Aug 28 2010, 10:46 AM

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

Hi cherroy,

Thanks for your views. Your argument is that if REITs do not acquire more assets, they will "stagnate" and also foreign funds dun want to buy. These are the exact reasons I want to own such reits. It is better for the foreign funds to even throw and reduce their holdings pushing price lower. The lower the better for me. As for stagnation, what is the worry of stagnation? Pls be more specific. What "stagnates"? If the management can keep acquiring "yield-accretive" properties, it is good as it can increase DPU, but chances of overpaying, undertable, figure-manipulation is high on every purchase. There is no need to acquire assets to "grow", REITs are not traditional companies looking for growth. There is natural growth in capital appreciation of existing assets.

All these acquisition are hypes. management must be seen to be doing something to 1) justify their pay. 2) they want to increase assets under management to increase their manegement fees and bonus. There is no need to. Just maintain existing props. as long as the reits have about 10 diverse properties, I argue that there is NO NEED whasoever to acquire UNLESS there is very good value buy.

It irks me when forumers make comments like "hooray, AXREIT to increase assets size". What the hell? Do they know what they are talking about?

prices r sky high now and "knowledgeable" parties are selling their assets to REITs. Dress them up with good figures and pay some undertable to valuer, and voila, you have an "yield accretive" props!

If inetrest rate spikes up, and properties go down, these REITs will DIE. But not those reits who sit tight and make no acquisitions!

Do not be caught up in the hype! Atend every AGM and tell the management to stop buying any properties.

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.

guys,if you have a look at thestar business middle section,there are some write up there regarding stareit . Seems like they are on buying spree with purchase of a resort in france,japan and pangkor laut

Hi Cherroy,

Your points sound reasonable.

When you say "Reit holders are deciding the acquistion can go through or not, not the property managers, so all reit holders decide.", how is the process? Is it the acquisition must go through some kind of resolution? The managers cannot decide at all? Thanks for explanation.

I agree with what you say. I just dun agree with many of the other posts here regarding expansion being surely good for the reits. But seriously, managers shouldn't be pressured to 'do something". It can be counter productive. Warren Buffett says," when there is nothing to do, do nothing."

constant,

REIT management company will need to first propose the new acquisition for shareholders to vote. Nothing can be decided by the management companies themselves.

Who says that expansion through new acquisition is surely good? I for one do not go for that motion. If the yield for the new acquisition is below 8%, I will definitely go against the decision. But I will take into consideration the current DY for the counter. If the yield for the new acquisition is lower than the DY, then I will go against the proposal. If you are familiar with real properties in the country, you can even value the property yourself (that is if you do not trust the valuers).

As for AXREIT, I have confidence in the management because they have vast experience in the field. They started out as a developer before venturing out to starting Malaysia's first REIT. So I believe the chances of them making a wrong decision is slim. The only worry that most investors have with AXREIT is their habit of dealing in RPTs.

Hi Jordy,

Thanks for explanation.

And, what is RPTs?

constant,

RPTs = Related Party Transactions.

Hello all, I m true newbie on the reit investment. Jus finished browse V2 & kind impressed for all the comments, knowledges, opinions, arguments, etc., from certain sifus here, I dont mentioned who & who sifus they are but yor time & contribution here, really appreciated.

btw, I jus wonder why no recommendation abt Arreit?
Look at http://mreit.reitdata.com/, the DY is quite attractive compared to others?
maybe something hiding beyond my recognition? Hope to get your advice

I hv invested alittle arreit recently for startup & why been choosen bcoz price rather low compared to others (except Starreit; I feel unconfortable abt Starreit the new diversified-move to hospitality sector....bcoz jus feel hospitality=airline biz, which easily affected by global circumstances, e.g. sars, h1n1, &so on. Corrent me if wrong!)

back to Q, any research abt arreit, kindly post here!
thxs.