Apr 11 2010, 12:30 AM
QUOTE(wwloon32 @ Apr 10 2010, 10:25 PM)
The Al-‘Aqar KPJ REIT recorded additional contribution to the income from the revaluation of properties in conformance with Financial Reporting Standard 140 (FRS 140) requiring the revaluation of all properties annually. The revaluation, announced on 31 December 2009, increased the valuation of the nineteen properties by RM 17 million, concurrently increasing the Al-‘Aqar KPJ REIT’s market value to RM 962 million.
The real estates shall be revalued at least once every (3) years from the date of the last valuation (or such other times as required under the Securities Commission Guidelines on REITs), or at any time where the Trustee, the Manager or the independent auditor appointed by Atrium REIT reasonably believes that there has been a significant change in the value of real estates.
They can revalue any time , any properties or annually revalue. Difer from one and another. Did you see the Stareit income statement for 2008, they don't have valuation fee? I wonder what the guideline trying to tell me, are REITs setting their own revaluation policy?
Regarding the ex-date, deduction of unit price is a pain. Imagine you brought Stareit and its IPO price is above RM1, now there is only RM0.86 left, that is the distribution amount you collected past years. It makes sense that price seems "attractive" when distributed profit hasn't changed much, but the price drop and drop. Example, Stareit pay 6 sen of dividend, with 5% on the very beginning, but till today, it still pay 6 sen, but it yield 8%, because the price droped and the more it drop, the more it seems more "attractive", but the truth is there is an unrealised loss and if you sell them they will incurred realised loss. And a particular truth is, now Stareit propose to reposition their REITs into a Hospitality REITs, that is not something that you want since IPO and you have two choices, either selling at a loss or continue to go along.
Story never end there, AHP2 may another sad story. There maybe more out there, only three REITs manage to have 120% gain since their IPO, 7% annualised gain on unit price, over the period of 3 years. Adding dividends, only these three manage to reflect their "appreciation" on properties, their high "yield" and their "expected" return that deflect inflation. Out of 12 REITs (excluding AHP2), 3 dipped below their IPO price despite the roaring market. The medicore 6 only manage to cling around 100%.
To make REITs a steady option to invest, at least REITs should reflect strong unit price. If one were to find an so called attractive yield of 7%, then he/she maybe dissapointed that the unit price dipped below purchased price, yielding 14% even though distributed income remain same. That is a loss of 50% of unit price, which I believe some of REITs perform during 2008-2009.
NAV doesn't reflect to share price, so does the yield too, the more the yield, the less the unit price, while the distributed income remain same.
And as you said, rental yield 7%, if one have RM1 and borrow another RM1 with 4% interest, it only have to pay 4 sen while collecting 14 sen, net income 10 sen, that already 10%, but the fact is REITs only manage to have a 7% of return on equity, that mean even though they borrow RM1 and have RM1, they only manage to earn 11 sen on a total of RM2, pay 4 sen of interest and another 7 sen for unit holder. That only 5.5% of return on total asset. Or they may pay more interest, which maybe perceived as more riskier.
One should have the right concept before invest in REIT. If you are looking for quick capital appreciation, REIT may not be the right place for you. Technically, property will increase in value, but under certain circumstance, it will not. The real estates shall be revalued at least once every (3) years from the date of the last valuation (or such other times as required under the Securities Commission Guidelines on REITs), or at any time where the Trustee, the Manager or the independent auditor appointed by Atrium REIT reasonably believes that there has been a significant change in the value of real estates.
They can revalue any time , any properties or annually revalue. Difer from one and another. Did you see the Stareit income statement for 2008, they don't have valuation fee? I wonder what the guideline trying to tell me, are REITs setting their own revaluation policy?
Regarding the ex-date, deduction of unit price is a pain. Imagine you brought Stareit and its IPO price is above RM1, now there is only RM0.86 left, that is the distribution amount you collected past years. It makes sense that price seems "attractive" when distributed profit hasn't changed much, but the price drop and drop. Example, Stareit pay 6 sen of dividend, with 5% on the very beginning, but till today, it still pay 6 sen, but it yield 8%, because the price droped and the more it drop, the more it seems more "attractive", but the truth is there is an unrealised loss and if you sell them they will incurred realised loss. And a particular truth is, now Stareit propose to reposition their REITs into a Hospitality REITs, that is not something that you want since IPO and you have two choices, either selling at a loss or continue to go along.
Story never end there, AHP2 may another sad story. There maybe more out there, only three REITs manage to have 120% gain since their IPO, 7% annualised gain on unit price, over the period of 3 years. Adding dividends, only these three manage to reflect their "appreciation" on properties, their high "yield" and their "expected" return that deflect inflation. Out of 12 REITs (excluding AHP2), 3 dipped below their IPO price despite the roaring market. The medicore 6 only manage to cling around 100%.
To make REITs a steady option to invest, at least REITs should reflect strong unit price. If one were to find an so called attractive yield of 7%, then he/she maybe dissapointed that the unit price dipped below purchased price, yielding 14% even though distributed income remain same. That is a loss of 50% of unit price, which I believe some of REITs perform during 2008-2009.
NAV doesn't reflect to share price, so does the yield too, the more the yield, the less the unit price, while the distributed income remain same.
And as you said, rental yield 7%, if one have RM1 and borrow another RM1 with 4% interest, it only have to pay 4 sen while collecting 14 sen, net income 10 sen, that already 10%, but the fact is REITs only manage to have a 7% of return on equity, that mean even though they borrow RM1 and have RM1, they only manage to earn 11 sen on a total of RM2, pay 4 sen of interest and another 7 sen for unit holder. That only 5.5% of return on total asset. Or they may pay more interest, which maybe perceived as more riskier.
So, why invest in REIT? Those people who have additional fund and want to invest in property for long term with intention to collect rental income are the one looking for this investment class. In fact, they are even more happy if the price of REIT fall below their buying price, as they can add more unit every year with even cheaper price, but in the same time increase in yield return.
Assume you buy a house for 100K and can rent for 8K each year. Now, someone from same row want to sell a same unit of house for 80K, would you buy it? I will buy it, as I know the house can rent out for 8K each year and in future people will realise its true value. I will not explain more, this is the secret of rich people making money.
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