V1 http://forum.lowyat.net/topic/479946/+2500

REITS do have the future.

It is one of the effective tools to accumulate your retirement funds.

Lower tax at 10% and with quarterly dividends. The law does force REITS to pay out at least 90% of the realized incomes to you as investors. Average Yield is about 8% p.a ( + - ). Not counting capital gain if any.

In view of more good quality companies recently taken into private ( such as Hume, IOI properties etc ), REITS are of better choice. Many more to come. REITS could be the answer to some of your needs such as earning good and regular ( passive ) dividends./Incomes.

You are more like a landlord of some good properties, without having the burden to collect the rentals on your own.

Highly portable as you may switch from one to another ( charges involved ) . Having a traditional property needs time to sell. Hard to sell by piece. You could do so in REITS by way of 100 units per transaction.

More matured people should strongly consider this form of passive and regular incomes.

Likewise beginners should start their investments by way of REITS, before venturing into other stocks.

Just my view.

Happy Investing to all.

This post has been edited by SKY 1809: Jul 3 2010, 10:21 AM

IMHO REITs are a good alternative to blue chips and unit trust investing, slow and steady but with even better yields.

REITS tend to be less volatile unless there is some unfavourable news (e.g. losing a major tenant). Also sometimes, the bad news can be a blessing in disguise as you are getting a bargain. So for those who have a weak heart can consider this investment vehicle.

The law/rule required Reit to distribute 90% of their income is the main reason why I invested in reit.

Simple reason, why invested in a listed company? because can share a chunk of its profit.
And with real cash being distributed, you are reloaded with cash and can reinvest on your own liking, whether increaese your stake in reit or diversify into other area.

Another one thing is simple business model, when you know the properties have good rental and occupancy then generally the reit income is pretty highly predictable.

While it can have some part of inflation hedge as well as long as the properties is in highly demanded area.
As we know proeprties price and rental rate generally goes up, when inflation.

Downside:
Due to nature of distributing 90% of its income, there is little money left, so repayment of borrowing totally is a long process, and they need constant or periodically refinancing for their borrowing.
Any new acquisition, must either through increase the borrowing or private placement only.

Recently Hektar having a good run. Any good news?

How much impact on REIT if BLR keep on increasing back to 6.5-6.75%?

Bargain for would-be unitholders, heartache for current unitholders who wanted to cash out anytime soon.

Logically REITs are for long term, cashing out due to short term investment objective may not work.

On the other hand, if you do DCA if unit price sinks , you may find your average effective yield goes up in the long run. Unit price may go up if tenant is found.

The exceptional case is they cannot find a tenant at all.

Then you can blame it on luck again

Either that, or the REIT management company couldn't find a replacement CEO after half a year. Lets not forget the due date for ATRIUM to find a replacement for its vacated CEO post is end of April. Until now, I think we still have no news on it. I do have a substantial amount in ATRIUM at ABP of 0.74, which is not a bad price. I am getting very good income from ATRIUM alone, so I would feel bad if I had to let it go close to the deadline.

Anybody has any idea what would happen if ATRIUM still hasn't found a replacement after the deadline?

I don't think the CEO position is a big issue. Company can always apply extension from SC/KLSE to fulfill the requirement.
Atrium is relative small operation company, with 4 warehouses to manage which should be quite easy.

Atrium's concern should be put on lease renewal issue, which one of its warehouse lease is expected to end this year second half, if not mistaken, correct me if I am wrong as I don't know or find any update whether negotiation is taking place to extend/renew the lease yet.

This post has been edited by cherroy: Mar 20 2010, 11:52 PM

I do not think it is so difficult to find a replacement.

Just that they may have someone in mind from within the company.

The reason that they have not promoted him/her up, could due to the expectation not made, or more time is needed to judge their performances.

They just cannot simply promote one just because there is no CEO.

On the other hand , whatever savings if any, would be passed back to you in the form of dividends, as more realized profit .

So not totally bad from investors point of view.

This post has been edited by SKY 1809: Mar 24 2010, 07:27 AM

not sure.. but REITS doesnt appeal much to an ordinary Malaysian investor... However, I hope to buy Sunway REIT's IPO coming out soon...

anyway allow me to post a pic just for fun - how the skyline of KL will be transformed....
by nazrey


with many big projects coming up, so REIT has potential? not sure.

This post has been edited by accetera: Mar 21 2010, 12:14 AM

Errr..... buying reit on IPO generally is not a good idea, as most reit IPO history showed. They tend to trade below NAV in general from various reit in the market except may be Axreit only.

Reit is not about having potential or not or growth.
The mindset investing in reit is own the properties and get the rental only, one should be treat it as a fixed income instrument and don't expect much appreciation side from the reit price.
Should treat it difference from ordinary share.

Sorry i would like to make correction on my previous post the latest gearing ratio for UOA should be 39% not 43%.

Refer to UOA ANNUAL REPORT, the average interest for borrowings is 3%. Base on my calculation on the properties yield which is around 8% with respect to latest valuation. It still provides a lot of margin. Lets assume this interest rate rise to 4% within the next 3 years we still have quite a number of margin for that. So i am quite comfortable with UOA NEW acquisition. Base on my own calculation after deducting of the interest expenses the project EPS shoud be at least 16 cents per unit!!!!!!

So for me i will hentam UOA REITS KAO KAO

In the eyes of common investors, the post of CEO is important, and shouldn't be vacated for so long. Although it will not be reprimanded by SC, if left unfilled for too long, I'm afraid it would affect the price of ATRIUM.

If they have someone in mind for the post, then it should be ok.

darkknight81,

I don't get it. How did you get the EPS of 16 cents while the current EPS is around 10-11 cents? Did you take the EPS dilution into your calculation, or did you just ad it up to the current EPS?

The market reaction ( sell down of UOA reit ) does not seem to go along with your analysis.

Even some professional analysts could overlook certain facts from time to time, and hence give a strong buy call. LCL was one such that Analysts did not pay attention to LCL's cashflow, by giving a strong buy.

But if you are pretty sure yourself ( like W Buffett used to be ), you would be very successful in time to come.

Best of luck to you.

This post has been edited by SKY 1809: Mar 21 2010, 04:48 PM

I think he may miss out the dilution on the private placement part, just my guess.

It is unlikely to see reit can achieve EPS grow of 50% with just one or two acquisition through private placement and borrowing.

In normal circumstance, market reaction on the share price is quite effective to reflect whatever news or development. As we see reit price generally well position in the range of 7-8% yield across, which most investors are comfortable with that kind of yield range.

That was what I was thinking as well. But I am still waiting for him to explain

This post has been edited by Jordy: Mar 21 2010, 06:10 PM

Of course i did include the dilution and even the extra interest expenses UOA needed to pay in future and considering the extra interest hike of another 0.5 % even.

Of course if you guys look from the private placement of course the future EPS does not change much. But don forget the RM 270million loan which was raised through borrowings with interest rates of around 3.5% in future (last year borrowings interest was 3% we add another 0.5% for future interest rates hike). So as i said previously the margin is quite high. So in short leveraging is very important in managing reits

This post has been edited by darkknight81: Mar 21 2010, 06:17 PM

In view of many facts and figures are still not available right now.

It is too optimistic to build your investment basing on Best case scenario.

1) Best Case
2) likely or possible case
3) Worst case.


At most you could for 2. Let assume no errors or wrong assumptions on your part.

Just my view.

This post has been edited by SKY 1809: Mar 21 2010, 06:21 PM

My copy of analysis but quite messy haven't tidy up yet.

Actually through leveraging you can see increase in EPS but risk is there. As long as the interest rates and occupancy rates risk is manageable it should be alright. Imagine with additional RM 270 MILLION LOAN at 3.5% interest rates but with yield of around 8% don you think it is possible? Thats why reits EPS can be improve via acquisition or improve in occupancy rates. Correct me if wrong sifus.

This post has been edited by darkknight81: Mar 21 2010, 06:38 PM


Attached File(s)
 UOA.pdf ( 43.81k ) Number of downloads: 63

EDITED VERSION


Attached File(s)
 UOA.pdf ( 41.28k ) Number of downloads: 106

darkknight81,

Has the company actually announced the rental incomes of the 2 properties?

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Added on March 21, 2010, 8:33 pmdarkknight81,

Your calculation is flawed as you have not taken into account the manager's fees, operating expenses, administrative expenses and other misc expenses.

This post has been edited by Jordy: Mar 21 2010, 08:33 PM

Yes , you are right.

If he does not factor in the costs of running the new buildings, then his investments, I would say is based on Best Case Scenario

Obviously unlikely to happen.

He could be penalised ( by the market ) for doing all the hard works.

Hopefully, I am wrong.

P/S > For those who think their computations are to good to be true , then rethink about the Chinese saying " Frog jumping on the Street" , that possibly able to help you to spot your mistakes. I use this method over and over again.

This post has been edited by SKY 1809: Mar 22 2010, 12:24 AM

Nevermind, he is still learning to fine-tune his analysis. What I hope now is that he has not fallen into the trap of his own mistake.

I get what you meant. Thats y i am saying the dividend should be 16 cents in my previous post (you can refer it back) after deducting all these expenses but in my calculation is actually 17 cents as per attached which is the ideal case. I am lazy to take these exact figures into considerations but i understand what you guys meant so i already deducted 1 cents out from it. I am not an analyst i just want a rough estimations. Eventhough you are analyst you also cannot get the exact figures as occupancy rates do determined the overall returns.

For you guys saying is easy but it took time to compile all this figures so i got to make some assumption on this and that. . Even for the interest rates part i assume it to be 3.5% this year but in actual fact it is 3.25 at the moment.

If you really read their annual report you can see the EPS growth for the past few years. So who say reits don have growth? Its all depends on how you manage it.

Thats why i put a lot of "ASSUME" as this is just a rought estimations. I did not get paid for all these .

As i said earlier, leveraging is very important in reits... The margin between the properties yield and interest rates play a very important role. So i believe it is the right time for UOAREITS to acquire two building blocks before the interest rates raise further. The margin is around 4% and with RM 270 Million loan... it is around RM10.8 million extra you see.

Actually no need to calculate much from here we already know the effect on future EPS. Those with some basic in math can calculate this out.

Total new units after private placements is 422871776. So RM 10,800,000/422,871,776 = 0.025 CENTS extra here. Previous EPS is around 12 cents. So including this 2.5 cents should be added up to 14.5 cents.

But this all depends on UOA REITS TOO, maybe they want to allocate more money to pay off their borrowings.

NOTE : Current borrowings interest is only 3.25 i am assuming 4% interest and properties yield i am assuming 8% here which is quite fair. So there are margin here in actual fact it should be more than 10.8 million.

This post has been edited by darkknight81: Mar 22 2010, 08:28 AM

Wanted to topup on HEKTAR after exiting BJTOTO but the price seems to be moving north.

This post has been edited by whizzer: Mar 22 2010, 09:53 AM

Heard from my broker said Hektar is a potential in term of dividend yield at least 8%-11%. Anything do with Bjtoto affect the Hektar price?

Haha.. No relation. Sorry if misleading .
I was just "rebalancing" my dividend portfolio.

Latest for all you REITers from MB attached below

Looks like M-REIT is waiting to bubble.... buy now while still cheep

This post has been edited by whizzer: Mar 22 2010, 10:42 AM


Attached File(s)
 reit.pdf ( 105.17k ) Number of downloads: 177

UOAREITS still no sellers at the moment

Want to buy some more also susah

This post has been edited by darkknight81: Mar 22 2010, 11:21 AM

Eh.. Why I cannot find this M-REIT counter? Sorry. Noob reit investor here.

It stands for Malaysian REITS generally.

Meaning Singapore REITS are not covered here.

darkknight81,

The adjusted previous EPS for UOAREIT is around 7.1 cents, so if the new acquisition would add around 2.5 cents, then the adjusted EPS going forward would be just about 10 cents. Anyhow, I have given you the basic guide to calculate the adjusted future EPS.

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Added on March 22, 2010, 1:28 pmSifu Jordy,

You missed out the contribution from the private placement….Thats why your earnings per unit so low…Let me explain to you more clearly. Is my fault of not explaining properly.

245,948,700 units = (EPS 12 CENTS for 2010) = 29.51 Milliion
RM 230 million raise through private placement ( 176923076 new units) assuming yield of 8% (after deducting all the expenses ) = RM 18.4 MILLION.
RM 270 Million through borrowings at 3.5% interest rates (Assuming yield of 8%) that’s means margin of 4.5% = 12.14 Million
EPU = RM 60 Million / (422871776) = 0.14 CENTS.

In conclusion acquisition will definitely increase future yield with 1 condition below:

1. Acquired properties yield must be higher than interest rates and almost equal with current yielding.

I don think i need to explain further on these. Simple maths will do.

This post has been edited by darkknight81: Mar 22 2010, 01:36 PM

Thanks. No wonder I cannot find the counter.

darkknight81,

Correct, I knew that I have missed out the contribution by the placement, but you can add it into my projected EPS. Plus, remember that your RM18.4 million is the gross income, not net. But I agree with your figure now (which is more reasonable) than your previous estimation of 16-17 cents. You could expect about 13 cents EPS after the acquisition (around 12.4 cents with 95% payout). At the price of 1.30, you would expect 8.6% net distribution. Does my refined estimation sound more realistic?

Yes i admitted my previous figure seems too optimistic however i am not agree on your previous post stated the EPU before and after acquisition are equal.

The 1 cents deducted from the 17 cents net rental was really not enough as we need to deduct property operating expenses + Manager's fees + trustee's fees etc and even tax. But i believe these two blocks of building are quite new so the maintenance cost should be quite low.

This post has been edited by darkknight81: Mar 23 2010, 07:58 AM

One concern that I want to point out is :

First thing first , I am not familiar with commercial properties, so comments quite limited.

However, the present UOA premises are located at the centre of the city . The rental rate of RM 4plus seems to be a bit low as compared to the new buildings of rm 5.5 to 6.
"
Bear in mind, the new buildings at Bangsar or Damansara are not so " centre " as compared to places around Jln Sultan Ismail, where the existing building is located.

The other thing is why the occupancy rate of the existing building is low at 70 plus in the centre of KL, whereas Damansara has 87% or so ?

Where could it go wrong ? That is my question .

Mind to share, anyone ?

This post has been edited by SKY 1809: Mar 23 2010, 06:51 PM

Me too and i am from east malaysia some more. This figures i get it from internet too. I think Master Cherroy can explain on this.

darkknight81,

I would like to reiterate that I left the EPS equal on purpose because I have not factored in the contribution from the placement (was too lazy to calculate it). I will only perform a more in depth estimation on counters which I am going to buy.

To add onto your point regarding the maintenance cost, you would have to consider the costs of security (devices and personnel), insurances, cleaning, minor repairs and also utilities. So, the maintenance cost for a high-rise would be high too even if it's a new building.

Thanks Jordy. I think the idea behind reits is "ALMOST" same as we buy a house for investment. We loan through bank and collect monthly payment to repay the debts. In the end we owned the house. It will took few decades to settle the loan same goes for reits.
The yield will improve in future as due to below factors:

1. Increase in rental rates.
2. Reduce in interest payment.


This post has been edited by darkknight81: Mar 23 2010, 01:10 PM

Bought some more Stareits today!!! Follow Cherroy......

darkknight81,

Yes, that is the reason why we buy REITs. Other advantages of REITs are that we do not need to manage our own properties, and we are also able to leverage on the diversification of REITs.

Mind you though that the possibility of reduction of interest rate is very slim at current economic situation, therefore we won't take that into consideration.

Yup. Thats why i have factored in by assuming the interest at 3.5% for this year.

One thing you have to be careful with Interest rates.

For short term loan of 5 years used for working capital, many companies do not use their properties to pledge.

Therefore these working capital loan interest rates are higher than any property loans.

Property loan rates so far are among the lowest in the market, as the risk is much lower.

Many banks compete businesses in this area, also resulting lower rates.

I do not know whether SC allow REITS to take property loans since money is collected by way of private placements or through proper right issues for purchase of any property. . KInda double financing to me if property loan is taken again.

The borrowings of REITS are mainly for working capital.

Perhaps you are more of pro REITS, less neutral in your computations.

So be careful.

This post has been edited by SKY 1809: Mar 24 2010, 08:28 AM

Base on their 2009 annual report. It is 3%. Of course i do agree with you guys on the risk of interest hike in future to maybe 7 or 8% also possible. Its all depends on how UOA manage it. For me i will reduce the dividend payout to maybe 7 to 8% yield and allocate more fund to reduce the loan especially when the interest are still low.

This post has been edited by darkknight81: Mar 24 2010, 08:08 AM

Well, if you very serious of investing in REITS.

My advice to you is to know the types of interest rates for different types of loans.

- Car loans
- Personal loans
- Business or working capital loans

( Mostly above BLR )

- property loans, as I say competition makes it cheaper

Also risks play an important role.

I mean these are just the basic stuff to know.

That is all.

The Edge, M-REITs provide opportunities in mispriced assets
http://www.theedgemalaysia.com/in-the-fina...ced-assets.html

Private placement is not a form of borrowing but required SC approval, which the company needs to state the reason for it in order to get it approve. Generally there are guidelines for the use of the money raised when SC approved the private placement or right issue.

So if the private placement stated the money raised is used to fund the acquisition, then it must use for it.

Borrowing/term loan can use for properties acquisition as long as don't exceed the 50% guideline, there is no rule stated borrowing must be solely for working capital, as far as I know. Correct me if I am wrong.

So far how is the interest rates for "ALL REITS" From what i know UOA REITS INTEREST RATES IS 3%. How about AXREIT, ATRIUM AND QCAPITA? You are heavily invested into these 3 counters from what i know.

This post has been edited by darkknight81: Mar 24 2010, 11:11 AM

Yes, you are right.

But if your purchase of property is fully covered by either a private placement or right issue ( like AXreit ) :-

1) there is no need to take a loan again , for what reason you need one ? It is a form of double " financing " to do so.
2) Unless it is for working capital , that is normal.


Frankly, and personally I also prefer REITS to get a longer term property loan ,and the money is standby for their working capital.

1) It could be cheaper if the money could be parked back like those full flexi housing loans for individuals.
2) a long tenure loan may cut down the risk faced by a short term loan borrower.

P/S : I do not think REITS use 5 years short term loans to partially buy properties. Correct me if I am wrong.

Just my view.

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Added on March 24, 2010, 12:22 pmAXreit > quite close to 4.5% for short term loan.

Read somewhere, but cannot recall.

Frankly AXREIT might have more disclosures than others , more transparent in a way.

This post has been edited by SKY 1809: Mar 24 2010, 12:36 PM

Leveraging as i have mentioned before. Borrowing at lower rates to get higher returns in terms of properties yield.

UOA REITS also have its weakness as 100% of its properties are acquired from its mother company so i don think the price are really fair compare with other reits as they can buy up undervalued properties which the owners want to dispose desperately.

Company and individual is different. Company cannot secure individual housing loan like 25 years. Bank don't do it.

A lot of borrowing are under 5 years under commercial paper, term loan and various type of credit.

It is already considered long tenure if company can secure borrowing more than 5 years period.

As I mentioned before, refinancing availability is very important for reit with gearing.

In 2008, we saw a lot of reit under pressure being sold down and some even went under due to inability to get refinancing on matured borrowing, which eventually force them to liquidate their properties, or fire-sale.

Most reit borrowing cost are around 4-5% as far as I came across.

the risks probably is managing the cash flow ,,,,,,,,,and based on 4-5% cost.... will it burden their financial....

Since the reit business model is simple, cashflow managing actually derived from occupancy rate and tenant's prompt payment.

For reit, if able to have high occupancy and tenant quality is good aka long term lease and prompt payment each month, then 95% of the reit manager job is done. It is already ensure the reit is under good cashflow position and profitable in general.

As in general, commercial properties yield is around 7-8%, so with 4-5% borrowing cost with high occupancy with prompt payment from tenants, then don't need to work out the math also can rougly know the cashflow situation.

So as mentioned before for reit, the priority concern is more about lease issue.

Yup simple math will do actually provided the occupancy rates can be improved or at least sustain and finally make sure interest rates does not surge to sky high like 1998. Very easy to monitor i like this type of investment.

This post has been edited by darkknight81: Mar 24 2010, 03:39 PM

snap this Gearing ratio from the report from maybank.


This post has been edited by whizzer: Mar 24 2010, 04:42 PM

Starhill gearing very low Lots of room for leveraging

Now i know why Master Cherroy pick up starhill liaw.

This post has been edited by darkknight81: Mar 24 2010, 05:21 PM

According to the schedule by Maybank IB, Tower REIT has 9m ST debt and Total Debt is 114m. But why is the ratio at 92%?

Gearing and cashflow are important to REITS.

Cannot just simply assume they would have the cashflow.

First, under the accounting method, you need to provide ONLY the interest accrued to the profit and loss accounts.

Whatever profit ( realized at the end of the day), you can safely pay out 90% as dividends.

However, for actual cashflow you need to factor in the whole instalment amount. The total instalment amount ( term loans ) if for short term loan of 5 years is fairly big. OD could be exceptional, but some may attach with a sinking fund condition.

There could a a mis match, meaning short of cashflow . though the law may allow you to pay out 90% of the realized profit.

The balancing act to me is not as easy as Investors thought. To say about Leveraging is much easier than in practice.

Just my view

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Added on March 24, 2010, 6:26 pmIt means 92% of the total loan is in the form of short term

This post has been edited by SKY 1809: Mar 24 2010, 07:44 PM

Hey.. You right. Maybe maybank calculator koyak at that point

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Added on March 24, 2010, 7:01 pmAlso.. looks like it has the highest asset value. I wonder how much would be left after the rationalization ?

This post has been edited by whizzer: Mar 24 2010, 07:01 PM

But ST debt is only 9m out of the total 114m, it couldn't be 92% right?

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Added on March 24, 2010, 7:23 pmI favor Tower REIT which is valued 30% under it's NAV, the most undervalued among all.
But I wonder why there is so little discussion here.

This post has been edited by kbandito: Mar 24 2010, 07:23 PM

some typo errors made by Maybank.

You can discuss it too.

Why must you wait for people to discuss your reits ?

You can bring it up here, to share more with us.

This post has been edited by SKY 1809: Mar 24 2010, 08:14 PM

As long as the rationalisation or selling of its properties at or around its NAV which is expected to be, NAV won't change.

In fact those rationalisation process will realise the capital gain/properties valuation appreciation which is distributable if they wish to.
But just my wishful thinking which I don't think it will. My view only.

Invest in Reit, the primary concern is about yield, not about how much undervalued on its NAV (although it is an important as well, just it is secondary to the earlier factor).

It is not about short term debt vs long term debt at current point situation. As at current point, bankers are willing to lend and credit facilities are available, so short term debt or long term debt is not much an issue. Long term debt will become short term when come or near to its maturity as well, it is all about timing. As long as refinancing is achievable with ease, this is a none issue. And focus should shift to secured interest rate on the loan.

Reit share pricing is primary towards yield issue, not on NAV. So you see reit price generally pricing at around 7-8% across. They follow the yield instead of NAV.

Reit is not popular here, so seldom being discussed in general, no surprise, as many investors here still not fully aware and fully understanding about reit due to the fact reit is boring and somemore low liquidity which make reit volume is low and price generally move little.

I had also entered Stareit on this prospect of valuation appreciation from disposal. In your opinion, what are the possible risk to this? One that I can see is that we maybe forced to pay a premium for YTL resort properties.

This post has been edited by whizzer: Mar 25 2010, 12:26 AM

Valuation appreciation is already reflected in NAV (from Rm1 to Rm1.20), just the selling of the properties will realise the gain.

The primary risk is about newer properties injection, which not yet being disclosed.
Since there is no info on it, we don't know the future yield which is the primary risk of time being.

REIT is a very good alternative to FD. But I rekomen anyone to maintain AT LEAST an FD equivalent to 1 month's net salary as 'emergency fund'. The rest of your surplus cash you don't intend to invest for long-term can park in REIT to eearn superior yields.

Whatever loans taken by REITS, the proper way by right should be settled off every now and then when the loans are due. It should not be " Refinancied " let say every 4 years or so.

The refinancing method used by REITS indicates there is a major weakness in the system, possibly they are earning insufficient cashflow to pay back the loans taken when due . Meaning they are just merely serving the interest when due.

This could be the downfalls of REITS in Singapore, I guess. And the downfalls of certain industries from time to time , cannot be attributed solely to the banks for non supports. LCL is one such I can think of.

Companies have to manage their own cashflow very well. And the job falls under their management , not the bankers.

Under normal circumstances, loans such as revolving credits or ODs that are needed for working capital of an entity , will be renewed, as the financing of working capital is an on going process.

But it should not amount to 30 or 40% of the gearing ratio.

And for commercial property loans taken by the companies, banks do allow a longer tenure of 10 years to pay back , possibly up to 15 years ( needed to reconfirm on 15 years )

There is a saying that long term assets should be financed by long term debts, the proper way. Those who are involving the the financial management of the companies would agree to this point.

Just my view.

This post has been edited by SKY 1809: Mar 25 2010, 08:35 AM

Borrowings for UOA (UNITED OVERSEA AUSTRALIA) reits are term as revolving credit which they have to choice to decide how much they are going to pay on that particular month.

The way they calculate their interest are base on

A% + COF.

COF (COST OF FUND) will vary from time to time.

This post has been edited by darkknight81: Mar 25 2010, 08:14 AM

deleted.

This post has been edited by SKY 1809: Mar 25 2010, 08:34 AM

Why is Axis carrying such a premium compared to its peers? Other REITs have fractional price to nav per unit and comparable yields.

Are people placing a premium on the property diversification alone.

I would say yes. If you look at others, Hektar purely on suburban retail, while UOA on office properties. Axis quite diversified. And the number of properties they have also quite big compared to the others, thus its risks are quite distributed. Hektar only have 3 properties, imagine if something were to happen to either 1, 33.33% (assuming equal contribution from each mall) of its income gone.

Also, generally REITs are priced around their yields. Axis is about 7%++, while Hektar and UOA about 8%++. So, the difference is not really that big in that sense.

Btw, only these 3 REITs are within my coverage, so I'm only comparing among them.

too add something beside what prince hamsap said, AXIS REIT is also the only Islamic REIT in Malaysia. I don't know what is the criteria of a ISLAMIC REIT, alot of syariah fund are shareholder in AXIS REIT.

Not true that AXREIT is the only ISLAMIC REIT. The others are ALAQAR & BSDREIT.

thanks for the correction,want to say AXIS REIT is the first ISLAMIC REIT.

There are still lot of arguments in the market of what is called a true Islamic Reit.

So one should not use this Islamic factor as an overweight to buy.

Things like sin businesses , traditional banks earning interest and coffee/entertainment outlets selling non halal food and drinks should not be allowed to operate in REITs Premises. Some argued that.

This one was brought up in certain forums elsewhere.

Just my view.

This post has been edited by SKY 1809: Mar 28 2010, 11:34 PM

Islamic REIT:

Haram activities (vice, alcohol, entertainment, conventional banking, among others) are not allowed in the properties in their portfolio, or if I'm not mistaken there's a limit i.e. not totally prohibited. Can any muslims here advise?

2ndly, their financing must be by syariah-compliant instruments/banking.

AXREIT coming down.

No disrespect to Islam, but won't that restriction limit the range of properties and potential tenants AXIS can get? Some of their occupancy rates aren't 100% and what if Carlsberg or whatever comes calling

NAV do change when properties are revalued, there is an unrealised gain in most REIT.
The primary concern of yield should also add by the earning power of REIT, since most REIT distribute 90% of their income for tax free purpose.

If gearing should be a problem , consider wise that any equity may require to pay an hefty 8% return for unit holder, compare to 4~5% of interest.

If you check back the previous thread ( v one ) , one of their buildings was ( is ) vacant for quite some time.

Also , Islamic reits may restrict themselves to Islamic borrowings only , loans could be in short supply when the economy is not doing so well.

This post has been edited by SKY 1809: Mar 29 2010, 01:56 PM

The NAV part posted is when Stareit disposes its properties at NAV then NAV will not change due to the disposal of properties.

Don't know what is your meaning especially on the bolded part.

There is no requirement or mandate to pay unit holder 8% or whatever %.
Any distribution is given based on 90% of its profit or income.
Lower income low distribution.
No income, no distribution.

Unit holder is not lendign money to reit company, unit holder is the one 'own' the company.

This post has been edited by cherroy: Mar 29 2010, 02:50 PM

Starhill REIT NAV doesn't change much when the propose disposal because they already revalued it. In fact, in the proposed disposal, there is a loss of 50 million. REITs are allowed to dispose their properties for no less than 90% of the last six month valuation.

There is a policy for Stareit to distribute 90% of it realised income, that is 8% yield for unit holders. If they wish to expand, one way is to issue more unit and meet the expected yield of 8% too, or dilute earning that may lead to liquidation that happen to AHP2. So, instead of yielding so much money, I think they should have borrow it somewhere else with only 4% interest.

What I'm uncomfortable about Stareit is I'm not sure (once it turns into a hospitality REIT owning only hotels and resorts) how it gets income to pay us dividends.

For industrial, retail and office REITs, it's pretty straightforward. They have tenants, and tenants pay rental.

How about hospitality REITs? I presume they have to rely on individual visitors and tourists, and there are bound to be dry seasons - which in turn, could affect dividend payments.

Correct me if I'm wrong.

Moolah,

REIT is a "trust" (or custodian) for the properties. It does not operate the properties under its trust. It is a management company which leases out all properties under it, be it hospitals or hotels. Therefore, the trust will only be earning rental for all its properties.

Although STAREIT owns hotels, but it doesn't operate the hotels. In fact, it leases its hotels to its parent company (in this case is YTL) which in turn operates the hotels. So the cyclinal nature of the business only affects YTL's account. STAREIT will still be earning the rental even if the hotels are facing a downturn.

That's right. It's a chance to go for it. Imagine if there is 1 billion and after reposition, the 1 billion investment give 10% of earning, there will be much increase in earning. On top of that, Stareit still owns JW Marriot and The Residences . So my thought is I pay for the 1 billion and I get the free JW Marriot and The Residences to keep.

90% is not a policy for Stareit, 90% because if reit is not distributing 90% of its income, it won't be able to enjoy the tax-exempted status.

There is no policy of 8% yield or whatever yield number being guaranteed or promised by any reit company. As income is depended on tenants and lease income.

Stareit is earning about or near 7 cents per unit for the previous year so, at its old NAV of around RM1.00 (before revaluation), it is not a 8% yield either based on NAV.

Don't confuse with the yield of current Stareit's market price around 8.x%.

90% distribution income never equal to 8%.

Also, the realised gain of capital revaluation on disposal, is not the same as operating or rental income. Capital gain is tax-exempted in the first place, there is no mandate or requirement, 90% of the realised capital gain must be distributed to get the tax-exempted benefit like rental income does.