IMO, i think arreit has limited grow.. Mostly you can receive constant dividend each year.. For me, i think sunreit is better although DY is low now..

thanks for the answer bro..

hehee..

1 question.. why are you choose to buy ARREIT at first? hehee.. because of the consistent dividend yield that they provided?

I am looking at all the REITS in Malaysia, I noticed that most of them have very very high gearing of 60% - 90%, except for one REIT. This high gearing might trigger rights issue and private placement, then we might get dilution if the new investment is not yield accretive. Also if they are not able to roll-over the loan due to reduction of property value, the REITS might be in trouble as well.

Since when Malaysia's REIT have become so risky by being highly leveraged? Hardly anybody see this time bomb ticking....

Anybody have thoughts on this?

This post has been edited by gark: Nov 12 2011, 12:50 PM

ya, still remember that time. so regret did not buy axreit. only got small load of atrium. classic case of WB??

The Cap imposed by SC was formerly 50% , and average gearings were less than 40%.

60% is high ( in risk ) or comparable to SG ?

But time change

I think I am very outdated now.

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Added on November 12, 2011, 1:06 pmYes you are right.

Laymen like us did not know why Arreits bought South City, wondering that time maybe they are the pro.

Now again wondering why they want to sell these properties back to the market.



This post has been edited by SKY 1809: Nov 12 2011, 01:06 PM

Isn't the 50% cap on total asset value and not shareholders' equity?

http://www.sc.com.my/eng/html/resources/gu...its_110713a.pdf

Question. QCapita's Annual Financial Result 2010 mentioned Gearing Ratio of 36%. But using the below formula;



I get 63% [(198m + 116m) / 498m].

Did I calculated something wrong?

No reit can have more than 50% gearing based on its total net asset , this is stated in the reit regulation.

Yes, that's why some reit (particularly in overseas one) went under and need to fire-sale their asset to repay the borrowing, when credit market freeze time during 2008.
This is the risk of leveraging.
It has been talked before, reit needs to rely on more longer term borrowing instead short term roll over borrowing facilities, but still it depends on banks willingness to give as well.

Without leveraging, it is almost near impossible for any reit to have more than 5% yield across, and rental yield even commercial won't exceed more than 8-9%, while this not yet included the management fee and expenses incurred on the properties.
It is same with own owned properties, it is impossible for any property to get >8% yield currently if based on current valuation of properties.
It is near impossible to have a rental rate that can give more than 8% yield currently.

There is no need for private placement to pare down the borrowing if the borrowing doesn't exceed 50% of its total asset value.

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Added on November 12, 2011, 1:52 pmIt is based on total asset which is about 800+ million.

This post has been edited by cherroy: Nov 12 2011, 02:19 PM

Got the 36%. Needed to exclude the security deposits.

(188m + 116m)/844m = 36%

But that wouldn't be called gearing ratio anymore. Feels a bit strange to call it that way.

This post has been edited by Dias: Nov 12 2011, 02:13 PM

I won't call it as gearing ratio
but just a limiting factor for excessive borrowing based on asset it owns.

A lot of international REIT are calculated based on gearing ratio which is debt/equity. If it is calculated as debt/asset, then the figure might look smaller, but it is no less risky. I use total equity rather than total asset, is because when we buy the shares we hold the equity portion and not the asset portion.

In SG for example most of the REIT have debt/equity < 40%. So back to the question, is MY REIT over leveraged?

Your preferred Debt/Equity method may suffer some flaws too.

The moment you issue more shares, then you stand a good chance to borrow more money , but not actually incoming producing.

You do not really care whether assets are really income producing or not, so long got people want to buy your shares during the bullish time.

In the end , reits could be poorly managed, while some insiders make more money personally ( or rather giving room for that ).

Debts over assets are more protective to some extent. Not a full protection, but trying to narrow rooms for exploitations.

This post has been edited by SKY 1809: Nov 12 2011, 03:52 PM

There are 2 type of gearing ratio out there, some using debt/equity, some using debt/asset.
We can't say which one is right, as both are right.

The more important thing to look at is the underlying of its properties portfolio.
The main risk come from its properties owned.

To answer your question, I would say MY reit mostly leverage is reasonable and yes, some a bit high leveraged,
But we have to consider some of them are giving about 7-8% yield.
So it is like reward vs risk.

The one low leveraged is Stareit, but some said not exciting, so there is always 2 front of opinion on leverage.

I use neither, 30% vs 50% in actual fact, sometimes, cannot conclude much out of it.
As long as they are not over-leveraged.

Why using debt/equity? But not asset?
Both set have their arguement, and both can be right as well.

The one over-leveraged one is individual owned properties.
Consider a person earn 3-4k month with little saving/asset, but can get a loan of 200k.
Don't know how many 100-200% leverage...

I more care about how they are financing, how the debt level is and vs their properties portfolio.
If they are using little borrowing to buy poor quality asset, this is not good as well.
While if they highly leverage but owning prime location properties, then it is better than above mentioned.

If refinancing freeze, properties sector crash, cannot get tenant, both crashed together, but the one with prime property has better chance of survive.

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Added on November 13, 2011, 2:23 amI must say I've lost confidence on their management.
Previously, although I know many of the properties in their profile are getting rather poor yield (5% or so only), but since the reit has been trading at below its NTA and with around 8% yield, so it's still not too bad. However, after watching them poorly managed their expansion plan for the past one year, I guess that's it for now, no more confidence.
Anyway, I've already sold all my Arreit early this year. I've been hoping to enter CMMT as the 2nd reit in my profile in a lower price, but couldn't get it until today.


This post has been edited by yok70: Nov 13 2011, 02:23 AM

A person earn 3-4k is more advisable to debt/equity? As it is same with you are owning the property if you invested in REIT. Too bad I not even in the range of 3-4k.. I am in 2k range..

So actually I am more into debt/equity now.. Any advise ? Actually I got no debt.. but thinking to borrow loan to invest in REIT which can get me 7-8% dividend...

Actually this is just more look like you use credit card to swipe something you want.. But this is just apply on I borrow loan to buy REIT that I am interested in.. After I clear all the debt, the REIT stock are my passive incomes...

This might be stupid thinking.. But try to correct me please.. Learning stage.. Hope to get more ideas by reading all the senior comments.. to get a better path for my future..

That's an interesting thought. Yes it surely is great if we can all chip in our thoughts on this idea. Few things that come to mind is:

1. What is your cost of borrowing? What if the cost of borrowing go up (unless you are on a fixed interest loan)?

2. Repayment of your loan would usually be monthly, while dividends are at most every 3 months, some every 6 months. So how do you plan to service the loan?

3. While the reits so far have been quite consistent on their performance (yield), risk would be if your reit don't perform to expectation.

4. Perhaps if you spread your reits to 4 or 5 perhaps it may lessen the risk. Or perhaps to buy some Singapore reits too to balance up, but then it may not work out if you need to withdraw your dividends to service your loan due to currency exchange losses which may be quite significant.

I am also thinking about this, but not sure if this venture will pan out. So guys, please share your thoughts.

1. You are right. It is probably the cost of borrowing. And since we are borrowing for investment, that means it is most likely a personal loan and I honestly do not think you will get a low low interest ones.

2. This. Monthly payment have to be taken into account thus one have to be able to service the loan, which means the amount that you can loan is also limited.

3. It is one thing for REITs not performing to expectations, one have to take into account what if they do not even give back enough to cover your loan + interest for profit. If you take away those and you only make say 1% profit, is it worth that risk to loan say, RM30K for make RM300?

1. I have company bank who can offer me some low rate interest rate is around 5%.. It is a fixed loan..

2. If you plan to service the loan, you must at least have a stable income (salary) to pay your loan.. Every month like how you pay your housing loan, car loan, credit card loan. It is just like the loan let you owned something, after you clear all the loan. The thing owned by you.

3. I will mainly concentrate on MY REIT first.. SG one still not in concern...

hahahaa in my opinion.. I just want to pre-have something who will force myself to get something first... heheee.. one of the motivation who i can give myself.. work hard pay off the money then you owned it when I am 30years old plus?

p/s: I am still 21 this year.. hehhee 9years for a loan is just like how you owned your car! hahahaha


1. No matter the interest high or low, as long as it is affordable. I will grab it. Hehee.. Depend on your risk appetite bro..

2. Building is hard.. hahaha thats why I have to start from small wealth build too...

3. Okie, for this question.. Let's say if the REIT is not working good and keep on stable generate me above 6% above divvy.. I guess I will bear this risk and bet on it...


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hehee above is my stupid thinking.. any better way ? you are welcome to suggest me...

Anyone like Pav IPO? Share share your comments.
As for me, I like the Pavilion mall, but have doubt on the office tower. Anyone knows more on the office tower?

yes, there are people doing this not only in reits but also real properties. who are not serving their housing/properties loans? yeah, it can be done but must have self discipline...... this is easy to said than DONE !!!! but the cost of borrowing play a tricks on your plan too, pay attention on the interest rates for ur personal loans .....

4. self discipline is important too

i google and found this:
http://mystockfolio.blogspot.com/2011/10/p...-it-can-be.html

it said:

"PAVILION REIT IPO includes the shopping mall, as well as office tower. In future it might include Fahrenheit 88 and the expanded area.
From information from prospectus:
Pavilion Kuala Lumpur Mall
Net Lettable Area (sq ft) 1,335,119
GFA (sq ft)(excluding car park) 2,202,557
Appraised Value as at 1 June 2011 (1) RM3,415,000,000
Occupancy Rate as at 1 June 2011 (2) 97.7%
Contribution of the Subject Properties by Appraised Value 96.4%

Pavilion Tower
Net Lettable Area (sq ft) 167,407
GFA (sq ft)(excluding car park) 243,288
Appraised Value as at 1 June 2011 (1) RM128,000,000
Occupancy Rate as at 1 June 2011 (2) 41.4%
Contribution of the Subject Properties by Appraised Value 3.6%"


So why pavilion tower occupancy rate so low? Is it new? Is it good since lots of room to improve? Or is it bad since bad management to find tenants?

it also said:

"Anyway, after listing, it will be Malaysia largest retail REIT. PavilionREIT also has a strong book, Based on Pavilion REIT’s Consolidated Pro Forma Statement of Financial Position, Pavilion REIT’s debt to asset ratio upon Listing will be 20.1%. ( as seen on the prospectus)"

"Using latest 2010 record, Rental income=256,699,000, NPI=202,874,000. Total Liabilities in earlier pg is RM805,216,000. TL/Income=3.96, below 5 still in a very healthy position. Meaning using NPI of 202,874,000 every year, it can pay off all TL within 4 years time."

sounds quite nice.

"NAV according pg64 will be RM0.94"
also sounds fine.

Any comments?

This post has been edited by yok70: Nov 14 2011, 01:40 PM