Upside for reit is rather limited can capped by its NAV.

Reit is more a dividend yield play only. If one intends to look for major capital appreciation side, then reit is not good place to be.

I disagree to change the legislation allow reit to be a developer, as if it does, then they are no different than ordinary property company already. I would dump reit because of it.
Their share price might rise because of it, but I don't like it at all.

What we want from reit is dividend play, somehow like owning a property and rent it out. If they are involving as developer, then its risk no longer the same and become higher already, although capital appreciation potential become higher.
If involving as developer then they need to conserve cash which by then they no longer distributing their rental income at 90% level.
I like reit because they will distribute at least 90% of the earning/rental income in order for them to get a tax exemption.

With FD rate is heading 1.5%, (BNM is expected to cut until 1.5%), this factor alone is enough to support dividend stocks.

Atrium yield will be dropping in the coming Q due to Ceva (its tenant) has ceased leasing one of its warehouse. Company need to find the new tenant in order to maintain the previous yield/DPU.

Difficult to say, if Atrium able to find new tenant, then its yield is pretty good though around 12%.
If not, then yield probably will drop to around 6~8%.

That's why its price can't go up (or sink from 0.80 level to now 0.6x) despite having high yield previously because lease is expiring.

If they are getting new reputable and long term tenant with good price, then its price might be boosted by the news.

This post has been edited by cherroy: Mar 1 2009, 05:52 PM

Yup, the more diversifed, the less it relied on a few tenants.

Whether which is worth, depends on individual risk appetide then. It is difficult to make a prediction on getting tenants at current situation which largely depends on how macro-economy situation.

Their annual report, got stated whom and when of their tenants details (not necessary all if too many, they listed out the major one).

You can download the report from KLSE under company announcement.

Edited, here is the file.

This post has been edited by cherroy: Mar 4 2009, 01:24 PM


Attached File(s)
 ATRIUM_AnnualReport2008__361KB_.pdf ( 360.9k ) Number of downloads: 16

Imagine a reit management own a block of apartment with 500 tenants, it is so hassle to go one by one to their house to collect the rental

Commercial and industrial property yield better is the primary reason, not to mention the hassle part of residential tenants issue.

You can own a large warehouse/office then every month collect ten of thousand of hunder thousand of rental, which tenants automatically bank in or having auto stand-in instruction to bank in the money in your account.
On residential, you have go to every unit to collect a few hundred or thousand while still need to fix some basic repairing to your tenants. Which one will you do then?

Somemore people like to buy house for staying in general or majority, not rent. It is very difficult to own the whole block of apartment which solely being rented out only. People won't be interested and difficult to find tenants on it.

Reit is relative new in here. Until now, none of reit has issued right issue before. They mostly just issue new unit to the private investors under private placement or to the property sellers (whom they acquired property from as a form part of payment)

This is what we call carry trade or using other money to earn money for you which if market work out in favour with you, wealth can be built quite fast while sitting enjoying the return without much sweat but with a high risk.

Not only cover the margin interest but extra cashflow as well. Just like Neo18's case, if market just moves sideway, without any appreciation in price and margin interest and yield of those invested reit or stocks, it easily earn extra few ten K of cashflow every years just with 2 main criteria, yield doesn't drop too much and margin interest held steady.

That's why I previously said, new millionaires or new generation of milliionaires will be emerged after this bear market ended.

But this could be the longest and deepest bear market in our life time, so invest at your own risk.



This post has been edited by cherroy: Mar 7 2009, 09:53 PM

My opinion more and less with Jordy.

It is just similar owning a property, the negative cashflow only can result from property maintenance (assessment, quit rent and miscellanous expenses) and property management fee.
Reit is much simpler to understand that construction company account. In fact, the simplicity and 90% distribution which make it easy to understand, and difficult to hide any accounting irregularity.

Property price will be soft in the coming future, no doubt about, but it won't drop too drastically. As compared to 1997, there is distinct difference between 2009 and 1998, for the coming recession, Malaysian and Malaysia company entering this recession with cash rich in general (as seen from FD or bank deposit grow for the last 2 month because of global financial crisis, also most well managed listed company balance sheet), so pressure to sell by existing property holders are not that great compared to 1998. Also interest rate across the globe are super duper low, zero % or 0.25% or 0.5% everywhere, even Malaysia is expecting to have 1.5% OPR before year end, so those fully paid property has no pressure or having little incentive to be sold.
Sell the property now to get cash and park the cash in 1.5% FD is some move that those cash rich people and company won't that interested to do so.

For reit, the most important to look at is the rental income and ability to renew lease or getting tenants which enable to give sustainable good yield annually.

The pressure of properties price going down come from foreclosure properties and newly built property which will drag down the market value of existing properties.
Office space will be oversupply in Klang valley in the next 1 or 2 years after several big project completed. So office space yield might be affected in the next year or 2.

This post has been edited by cherroy: Mar 8 2009, 06:08 PM

Locally, reit borrowing is still not that high, may be under infancy stage, still are under manageable level. Mostly I knew are in the region of 20-30% gearing on their asset owned. Yes, if tenancy drop to a ugly level like only 20% -30% being rented out, then yes, it could be in negative cashflow aka income not enough to pay property maintenance and servicing loan.

Under the listing guideline imposed by KLSE, they can't exceed 50% gearing based on their asset owned.

What does you mean by new project?

Hektar reit consist of Subang Parade, Mahkota Parade (melaka)

Reit is a property management company, not a property developer.

Every company in high leverage is having problem right now, be it reit, construction, property development, manufacturing. Because it is hardly roll over or renew or getting/issuing new bonds for those expiring bonds or loan at current situation.

So those with healthy balance sheet should able to withstand the recession, while those high leverage will be under risk. So whether the reit is under risk or not, simply look at its properties portfolio and its borrowing level should give us an idea their situation.

This post has been edited by cherroy: Mar 11 2009, 10:04 AM

I am looking at it, Below 0.80 look interesting.

Previously less people look at it because it is trading at high premium or high price compared to others. Also, its liquidity is kinda low, so trading is a bit difficult. compared to Axis and Stareit.

I like one of its portfolio, Tesco in Penang.

But I dislike cyberjaya properties, could be over-rated there, if not tax incentive, I don't think people want to open office there as well.
Sorry don't have much insight on cyberjaya area, anybody knows more at the area, kindly please share with us.

If Axreit is getting renewal on most of its lease resulted DPU won't be dropping too much, I don't think it can easily sink.

With the news of Fed also purchasing long term treasuries to push down the yield in order to result in drop in mortgage rate and borrowing cost, globally, we see super duper low interest across, any investment that can carry high yield and able to sustain or not drop too much, it is an attracve force.
Money has nowhere to go right now.

Unless DPU of Axreit dropping due to non-renewal of lease and difficult to get new tenants to fill up then only then we can see it have another round of plunging.

No news until now, they just stated they are in negotiation with some party.

If it is confirmed got new tenants with comparable rate with previous, then you probably will see the price shoot up a few cents.

Basically yes if they can't find tenant for its for the rest of the year.

It is the downside of having a smaller size reit or lesser diversified portfolio, anything happens on one, it will affect largely on overall income.
That's why the more they have and diversified across, the lesser impact based on one or two properties.

That's why Axis reit is always being preferred at most of the time.