Anyone into Sgp REIT ?
Some of them are paying even better yield than AXREIT e.g.
-MI-REIT at 19.7% : qtrly
-Starhill at 15.3% : qtrly
-LMIR at 13.6% : qtrly
-Cambridge at 13.0% : qtrly

http://reitdata.blogspot.com/
These yield look rather attractive (are they real??)
Appreciate any comments. Thanks

REITS in Singapore generally are highly geared, some are facing cashflow problems at current moment.

Investors dump, hence share prices drop.

So returns look attractive as compared to low share prices.

On the other hand , the risk of going under is equally high.

That reminds me those days where the co-operatives gave 10% int for FD , much higher than the banks.

That attracted a lot of investors to park their hard earned money with them, subsequently all went bust.

Our REITS as I understand are of low gearings, with higher capital base.

So knowing your own risk profile is important. besides the returns.

Just my opinion only.

This post has been edited by SKY 1809: Jul 25 2009, 03:34 PM

Compared to CHHB plantation scheme, I prefer reit which is more liquid and can get back cash in T+3 time and little more transparency.

There is no easy quick out from the CHHB scheme unless you find one buyer willing to take your stake.

SKY is right, you need to see and analyse through their financial book before can conclude those reit yield is the actual yield based on return/profit alone, not from other sources (like depreciation).

Also, those data might from previous year EPS which now company might face tenant renewal difficult as well as rental pricing issue. Just like what happened on Atrium previously, its yield up to 12-13% due to lose a tenant.

High geared reit will enable high yield, but risk wise is also more in term of refinancing difficult risk as well as higher BLR in longer term future. There is no room for interest rate to go down because they are at zero or near zero, the only way for interest rate is either flat or up only.

That's why I prefer to see Axreit pare down the borrowing through private placement instead of through more borrowing.

Cherroy,

Are you talking about the Country Height Grower Scheme. I got some too which is earning 8% annually for 3 years (growing) and after that 11% if palm oil price is at minimum RM 1950/MT.

So far the price is still steady above RM 2K and with the oil price going up, palm oil price future looks good.

I agree with you.


That is why in my own opinion , REITS are attractive than to invest directly into properties. These are are lumpy and usually involving more personal borrowings.

Liquidity is a major issue, besides the properties are taken care of by the REIT management.

To sell reit shares may just need an overnight decision . Wrongly bought, can switch to next one easily.

Again, my personal thinking only.

This post has been edited by SKY 1809: Jul 25 2009, 01:28 PM

It is one of the major advantage compared owning properties directly.

Beh syiok, then tomorrow can sell, and out and cash will be received after 3 days.

Yup, I did buy into CHHB last time, but pulled out within the cooling-off period. I don't really like the feeling of my money being tied down.

The major difference in CHHB and BSDREIT is the way they distribute dividends. CHHB is more towards you owning that plot of land, and whatever yield they are getting, you get a piece of that. They calculate the returns to you in a few ranges (i.e. between RM1,800/MT to RM2,000/MT xx%, between RM2,001/MT to RM2,200/MT xx% and so on).

BSDREIT however is more of you owning the company which has plots of land to rent. Whenever you rent that land out, your tenant (the planters) will pay you rental based on the performance of palm oil price.

While typing, I have this crazy idea that BSDREIT might be "invested" into CHHB Logically if as what georgechang79 says, yield of above RM1,950/MT will return 11%. So now BSDREIT is receiving 11% annually as "rental" and then distribute 9% out to its shareholders. Earning 2% with no money down

cherroy,

Not forgetting that we can keep averaging down when market's bad and earn higher yield when market's good.

For me right now, I could even increase my net yield by almost 2% with REITs

Thanks for sharing with me.

No doubt, on paper CHHB looks good, but past experience urge me to invest in higher liquidity investments.

Cutting loss is one option that i have to consider, than the attractive numbers appeared on the proposals.

I have one timeshare investment with CHHB ( 18k ) for more than 10 years , even if i want to at sell at a discount, hard to get any buyer.

Liquidity is still my preference. An Exit plan/door if i am not happy with it.

This post has been edited by SKY 1809: Jul 25 2009, 04:07 PM

Hi Jordy,

What do you mean by increase net yield by 2%? How? Magic ah?

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Added on July 25, 2009, 4:26 pm

Do you guys own properties personally for investments? It is true that it is less liquid but investing personally allows you to have higher leverage provided you get some high yield properties. If you have rm100k, you can invest in properties up to a million. Imagine the leverage when capital appeciation is factored in. For REITS, the higher yields are partly from the leverage employed by the REITs itself so in that sense, reits is interest rate sensitive too, just like bonds. If you own properties directly, you can have fixed rate loans removing the interest rate risk in case there is a sudden spike up like in Asian Fianancial crisis. Looking for some views here. Personally, I like reits for its convenience because I don't have to do anything like property owner but I am also thinking hard again which way is better.

This post has been edited by constant: Jul 25 2009, 04:26 PM

As far as I know, all our REITS are only paying the interest portion of the loans taken to purchase properties and distribute the remaining rental income (less operation cost etc) to shareholders. Well, as shareholders I have no complains on that... yielding ~10% pa in dividends. But here's my question... why aren't the REIT managers payback the banks more to reduce the loan borrowed? Thus reducing the debt and gearing level? It'll probably reduce the dividend in the short term, but would be better cushioned from interest rate hike.

I don't know much about twisting numbers and turning it into profits, but the recent financial crisis is very much due to smart financial people twisting numbers and turning it into profits. Perhaps I'm a little old school... like the above mention example, 100k for a 1mil property with no intention to payback the 900k loan (just interest payback) sounds like "playing with numbers".

I doubt that it's possible to achieve the yields that would be attractive to investors without some amount of leverage. Repaying loans in full would indeed cushion REITs from interest rates increases, but more importantly, in my opinion, it would eliminate the risk of being unable to refinance loans when they come due, which is the major risk of REITs going under. Without being burdened with loans, even if the properties of a REIT could not find a tenant, it could stay on the market indefinitely. But again, the cost would be permanently lower overall yields, not just in the short term.

Even if the price of a property increases, it may not necessarily lead to higher rents due to the lengthy terms of leasing contracts, so you might not realize the gained value for a while because you're not selling the property. But if you're prepared to borrow more money against the increased valuation to buy more property or make renovations, you're tapping into the gains and boosting your yield.

It's also not a case of the managers refusing to pay back the mortgage on any given property. It's that it's more attractive to the managers to expand their stable of rentable properties whenever they can raise the money to do so, whether through loans or outright expansion of the trust fund. The managers after all are in it for the money and would like to earn more.

This post has been edited by wankongyew: Jul 25 2009, 10:05 PM

Is there something wrong with ARREIT. Its price stays so low even when all the REITS have gone up so much? Maybe investors are not confident with the either the quality of the management or the properties they are holding. Anyone has any idea?

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Added on July 26, 2009, 6:13 pmActually, the gearing of our local REITS are not that low either. That is why I have also considered investing in SREITs because for the same amount of risk, the returns are about 50% better for some of the Sreits. Cherroy mention the quality of the earnings (not depreciation) but I do not know what he means. Some of their reits are trading at much lower than NAV price. So, instead of being satisfied with the 10% yield in local reits, why not invest in sreits and get 13%-15% returns.



This post has been edited by constant: Jul 26 2009, 06:13 PM

Locally, reit liquidity is low, once there are some fund managers wish/need to dispose, it will cause the price to stagnant or depress considerably of time. Whether the disposal is related to the reit fundamental is another story.

Fund managers has 2 type of decision to make in selling order :
1. Want - See poor outlook of the reit/company fundamental, dispose
2. Need - Asset re-allocation due to fund objective, strategy, redeemption, etc, dispose. which nothing to do with the fundamental side.

Eg. Reit distriubtion can come from not solely come from profit.
A shipping trust

The shipping company is earning 5 cents, while there is 3 cents depreciation incurred. The company basically has 8 cents of cashflow eventually it can declared 8 cents of distribution resulting yield become much higher.

Long term sustainable distribution is 5 cents which one should be looking at, not 8 cents as the ship eventually will be getting old and unusable (which is the purpose of depreciation).

So whenever we look at reit, we should look at the real profit or EPS they are generating. Any extra is a bonus and could mean (not a must) unsustainable over the long term.

Sometimes it is quite tricky when you interpret the word " returns " in REITs or in Unit Trusts investment.

First of all , DPU could mean Distribution Per Unit that could include Capital Repayments. Like the case of shipping trust the DPU as mentioned by the MOD clearly include an element of capital repayment ( out of timing different from dep ). It is diff from Dividend Per Share ( out of profit ).

For example, Although you might dep a big portion of a ship, you might be able to sell the ship at 200% of the original cost early last year , resulting a realised profit. But this depends on the economy at that moment. Maybulk was doing that.

REITS in Singapore could play on the DPU , might include some capital repayments, to show a good return as you say. ( the Shipping Trust was doing that , and in my opinion involves a bit of Creative Accounting ) A high DPU may cause NAV to drop if it involves cap repayments. A common practice for UT companies.


Low NAV in Singapore, as I understand factored in a big drop of prop value in Singapore . Singapore also depends a lot on foreigners as tourists. So yields could become attractive if share price trade lower in that sense.
And the sensible or senseless dumping of REITS by investors of cashflow fear could create a deep discount. Tenant In Arrears also going up.

The other thing you need to consider is the tax issue, 10% withholding tax for Malaysia, I have no idea for Singapore REITS .

Personally I think it is better to be prudent unless you have examined all the facts , and decide it is a good one.

The final decision is yours.

This post has been edited by SKY 1809: Jul 26 2009, 09:16 PM

"Is there something wrong with ARREIT"

I have commented on ARREIT's holdings when panasonic88 brought up this counter. Basically, they are holding on to aged buildings which they do not care to refurbish I think. Location wise, they're mostly unstrategic. I only like one of their holdings (out of a possible 14), which is SEGi Kota Damansara.

"So, instead of being satisfied with the 10% yield in local reits, why not invest in sreits and get 13%-15% returns"

Compare their previous years of returns with the current ones. The yield which you are looking at is backwards yield. Property prices in Singapore has fallen very badly (in the region of 30% - 60%) because they have created a mini property bubble there. So as valuations fall, their stock prices will definitely fall. That is why you see their yields are higher.

We want consistent returns of 10%, not a one-time return of 13%.

Yes, i agree about the liquidity part of REIT which is why i dump 2/3 of my portfolio into it. However sometimes it pays to diversify and try out new stuff which leads to CHGS. My reasons are

Advantages
1) Land price appreciation when it turns from forest land into palm oil plantation in Gua Musang.
2) First 3 years it takes for palm oil to mature, am getting 8% interest from CIMB
3) Yearly dividend at April depending on the palm oil price and land output.
4) Valid for 23 years. After that the tree is old and need to replant anyway... no juice liao
5) Seasoned management team

Disadvantage
1) Management fees (0.1%) + transfer fees.
2) Takes 3-4 months to sells land plots due to demand and may need to sell below market price.
(based on my colleague info who sold her land last month)
3) Minimum plot is 1/4 of acre
4) Fluctuating commodities prices can be a problem especially if there is a overproduction of palm oil.

Status
Now i get yearly 8% + land appreciation of 45% ( Bought at 5500, now valued at 8000) so it is a pretty good deal for me.
I am not promoting CHGS, do your own investment studies first. More info can be found here http://www.chgs.com.my/

regarding the NAV, i think , for example, if a company go under, property sold, the money will be used to pay off the loan first, only the rest returned to shareholder.

by that, it means if a company have NAV higher then the current share value, we need to take into consideration its borrowings/gearing.

example, if the current NAV at RM1.00 per share and gearing at 40%, share price at RM0.90, if company goes under, shareholder get back only RM0.60. Thua losing additional RM0.30 even though trading RM0.10 below NAV per share.

it's always, bondholder first, shareholder second.

do correct me if i'm wrong.

I wouldn't deny the land appreciation part (mainly due to the promoter increasing the price). The problem you would find here is when you want to liquidate your holdings because they have no buyback policy.

I think NAV is just like NTA and is already net of loans.