Hmm read it as well, offer price 0.88, yield expected to be 6.5%. Still better than CMMT (5.9%) and Sunway (5.6%) which operates big malls as well, except for Hektar (8.05%) , but hektar is a much smaller player.

However Pavillion REIT is not too bad compared to similar Mall REIT's. But for malls & office combo I still like Suntec REIT with 8.5% yield.

This post has been edited by gark: Oct 24 2011, 07:02 PM

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

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?

I have just read the prospectus... not too bad lar. Let me summarize it for you guys here...based on RM 0.90 institutional price

1. Expected DY = 6.5% based on 100% payout
2. Gearing Ratio = 20.1% (debt/asset), ~28% (debt/equity)
3. Gross Rental Yield =10.3%
4. Net Rental Yield = 6.3%
5. Rental Revision CAGR = ~2-3% per year
6. Loan : Average 4% interest rate based on KLIBOR + 0.8%-1.2% revolving loan (means can change anytime)
7. Occupancy : Mall : 97.7%, Office : 41.4%
8. First Refusal right - Fahrenheit88 Mall, Pavillion Extension & USJ Mall(mana ini? )

Red Flags
- Performance Fee of 5% (this has not been practiced by other REIT) to be implemented >2013
- 5.5% of tenancy expiring in 2011 with average rental of 19.92 psf & 65% of tenancy expiring in 2013 with average rental of 18.12 psf. These will follow the reduced new rate of ~16.90-17.00, so will have -5%-7% impact on total rental income.
- Office building is currently only 41.4% rented out, and at 5.77 psf. In 2013 66% of tenancy with average of 5.97 will be revised to about 5.77-5.80, expected to have slight impact on incomes.


Comment/Verdict
Reasonable dividend yield, very good gearing ratio still have room to grow. Have good future growth in new acquisition. Starting 2013 if performance fee kicks in and rental revision is downwards would have 5%-10% impact on dividend yield unless the manager is proactive at raising rate and/or delay the performance fee. The manager opt to have performance fee in units, so it is a good sign, they are inline with the shareholders.

Based on the above and also relative to peers (CMMT, SUNREIT, STARHILL GLOBAL) this reit has a potential to gain 15%-20% after IPO.

Now we know why Quatar Investment want to sell pavillion mall, because the rental rate is actually starting to reduce slowly after 2009 and will impact in 2013.

Any comments?

This post has been edited by gark: Nov 14 2011, 02:15 PM

Not really, I find the REIT to be reasonable, going to apply the IPO and cabut before 2013 if not much progress...

This post has been edited by gark: Nov 14 2011, 02:18 PM

Already got good public transport nearby, I go to Pavillion via Monorail stop at BB Plaza. Like I say, compared to CMMT (BB Plaza) & STARHILL Global (Star Hill, Lot 10), there are currently giving ~5.5% yield. So if Pavillion REIT is giving 6.5%, then the unit price will appreciate until the yield is similar, so 15%-20% capital gains. Just that we have to beware in the multiple things happening in 2013...

Well it depend in the manager's skill if he can raise rental rates to offset the loss of higher rental once the higher rent tenancy contracts expire... so got 2012 to see the performance of the managers...

You pay GST only if you are a tax resident of SG. Otherwise not applicable to you. Oh BTW SG dividend from REIT have 0% tax... that will compensate your exchange rate.

Yep, if you not SG tax resident, GST is not applicable, so.. GST is taxed on the brokerage and not on the shares.

GST (on brokerage) = 0%
Tax on dividend received = 0%
Capital gain tax = 0%



This post has been edited by gark: Jan 2 2012, 01:07 PM

Also no stamp duty for Singapore stock purchases...

For properties, there is a lot of taxes and restrictions for non-resident to purchase properties...

Purchase Stamp Duty
First SGD 180,000 - 1%
Next SGD 180,000 - 2%
Remainder - 3%
PLUS Additional 10% on the total purchase price...

Selling Stamp Duty
1st Year = 16%
2nd year=12%
3rd Year = 8%
4th Year = 4%

Buy also kena tax, sell also kena tax... Max Loan = 60% of house value... SG properties gonna free fall soon...

But SG REIT is exempted from all above..

---

Added on January 2, 2012, 2:05 pmRemember S-REIT have high yield due to reasons, investors are not dumb.

Most S-Reit have properties which have limited land leases, usually between 20-90 years. Usually the shorter land lease period have higher yields. once a company reaches it's end of lease, they will have to re-new (re-buy using cash/debt/rights) the lease for another 30 years or so or sell off the property cheaper (incur losses).

So these properties are self depreciating, for example a company have a 30 years lease left, the total depreciation will be about 3.33% and the property asset value in calculated to reflect that. Hence a property having a 'normal' yield of 6%, it will be discounted to 9.33%, to compensate for the 3.33% re-investment required to extend the lease in the future.

This post has been edited by gark: Jan 2 2012, 02:05 PM

Only the land belongs to the government and not the building. But land being the most expensive item in Singapore, thus re-buying the land in the future (30 years) it might cost you more than your current purchase price (land &building).

Not all SG REIT is bad.. most of the reit which has price drop is due to rights offer which leads to selldown.

BTW two MY REITs also got rights offer recently, but no selldown, investor do not understand the consequences?

Anyway, SG REIT is quite beaten down already..... some REIT at 8%-10% yield is too tempting... First REIT, AIMSAMPI and LippoMall looks good... In the last market crash some SG REIT went down to -80%, with yield over 25%.

This post has been edited by gark: Jan 2 2012, 07:16 PM

What SKY says is correct, S-REIT have too many history of right issue in which either you pay up or get diluted. Also the property there is subject to big fluctuations. In 2008 especially there are several REITs have rights issue just to pay dividends!

Since their holdings are international, some of the REITs have tough time securing loan for example LippoMall just had a rights issue even though the debt is just 10% of Asset. Why do think they want a rights issue? Even though the yield of thier Indonesian mall is about 10%, the interest rate in Indonesia is about 15%. So the rights issue is done to 'borrow' cheaply from shareholders. Although LippoMall have some SG denominated loans, they are foreseeing the downturn in properties and shore up their book so that they don't face 'margin' call if their properties lose value.

Malaysian REITs seems to be immune to rights issue, or private placement although it will dilute the shareholders equity. Anyway Malaysian REIT is currently in a time bomb, all of them have already maximize their loans (~50% debt to asset) and cannot move anymore unless they have rights issue or private placement. There are several signs already like Hektar having right issue to pay down loans and acquisition, Axis introducing dividend reinvestment... More will come....

In my opinion, SG-REIT is more risky than Malaysian REIT hence commands a higher premium, or rather the risk in Malaysian REIT is not felt yet as it is still immature. The properties are all highly appreciated and may come down soon, if the value of properties drop, banks will ask for more collateral to back up the loan. However there a few good one which are selling at a reasonable discount, but not at mega sale level yet. Look for those with longer lease period and low debt...

This post has been edited by gark: Jan 3 2012, 09:57 AM

Read through a couple of pages back, on discussion on pro/con of S-Reit and the taxes involved.