Analysing REITS

[Drizzt]

if you look at soilbuild trusts purchase of a 16 year land lease property , the dollar paid for it versus rent generates a good IRR. it really becomes like a leveraged bond. it will boost performance fee, but they will have to keep buying these leverage bonds

[CityFarmer]

Is the S-REITs so bad now?

OCBC warns S-REITs may reap 'almost no total return' until end 2016

SINGAPORE (22 July): OCBC Research warned investors on Tuesday about the performance of S-REITS, urging them to reallocate their capital as they may achieve “almost no total return” from now until the end of next year. More worryingly, investors may be hit by a rapid initial capital loss as prices fall, before subsequently recovering to par on dividend gains.

The broker expects rising interest rates in the US and declining distributions growth to make the risk-reward of the REIT sector "unfavourable”. The prospect of rate hikes will prompt investors to shift from seeking yields to capital preservation.

With this in mind, it recommends that investors practise bottom-up stock picking in the sector and "active capital reallocation into high-end developers and real estate players in strong growth segments" such as high-end homes, logistics facilities and data centres. It likes developers of high-end properties such as Wing Tai, Wheelock and OUE instead. It also likes Global Logistics Properties, which builds modern logistics facilities in China and Brazil where supply is not enough to meet demand from rising e-commerce.
...
http://www.theedgemarkets.com/sg/article...l-end-2016

[CityFarmer]

China-linked REITs average total returns of 5% year to date: SGX

SINAGAPORE (July 23): Nine China-linked Real Estate Investment Trusts (REITs) listed on Singapore Exchange average total returns of 5.3% in the year to date, according to a market update on SGX’s My Gateway portal.

Of the nine, the five best performers are Starhill Global REIT, Mapletree Greater China Commercial Trust, Ascott Residence Trust and Ascendas Real Hospitality Trust.

The other four are Cache Logistics Trust ( Financial Dashboard), Ascendas Real Estate Investment Trust, OUE Commercial Real Estate Investment Trust ( Financial Dashboard) and CapitaLand Retail China Trust.

Year to date, the nine REITs are up by an average of 2% which together with dividends gave total returns of 5.3%.

SGX said these nine REITs have a combined market capitalisation of $19 billion and trade at an average price multiple of 13.8 times.
http://www.theedgemarkets.com/sg/article...r-date-sgx

[Layman A]

Junky analyst trying to talk down the prices only lah .

All the S-REITs are still solid as a ROCK !
The average return of 5% to 8.5% is so much better than the
propaganda Singapore Saving Bond with miserable 1 ~ 2.2% return.

Is the S-REITs so bad now?

OCBC warns S-REITs may reap 'almost no total return' until end 2016

SINGAPORE (22 July): OCBC Research warned investors on Tuesday about the performance of S-REITS, urging them to reallocate their capital as they may achieve “almost no total return” from now until the end of next year. More worryingly, investors may be hit by a rapid initial capital loss as prices fall, before subsequently recovering to par on dividend gains.

The broker expects rising interest rates in the US and declining distributions growth to make the risk-reward of the REIT sector "unfavourable”. The prospect of rate hikes will prompt investors to shift from seeking yields to capital preservation.

With this in mind, it recommends that investors practise bottom-up stock picking in the sector and "active capital reallocation into high-end developers and real estate players in strong growth segments" such as high-end homes, logistics facilities and data centres. It likes developers of high-end properties such as Wing Tai, Wheelock and OUE instead. It also likes Global Logistics Properties, which builds modern logistics facilities in China and Brazil where supply is not enough to meet demand from rising e-commerce.
...
http://www.theedgemarkets.com/sg/article...l-end-2016

[thor666]

Junky analyst trying to talk down the prices only lah .

All the S-REITs are still solid as a ROCK !
The average return of 5% to 8.5% is so much better than the
propaganda Singapore Saving Bond with miserable 1 ~ 2.2% return.

Is the S-REITs so bad now?

OCBC warns S-REITs may reap 'almost no total return' until end 2016

SINGAPORE (22 July): OCBC Research warned investors on Tuesday about the performance of S-REITS, urging them to reallocate their capital as they may achieve “almost no total return” from now until the end of next year. More worryingly, investors may be hit by a rapid initial capital loss as prices fall, before subsequently recovering to par on dividend gains.

The broker expects rising interest rates in the US and declining distributions growth to make the risk-reward of the REIT sector "unfavourable”. The prospect of rate hikes will prompt investors to shift from seeking yields to capital preservation.

With this in mind, it recommends that investors practise bottom-up stock picking in the sector and "active capital reallocation into high-end developers and real estate players in strong growth segments" such as high-end homes, logistics facilities and data centres. It likes developers of high-end properties such as Wing Tai, Wheelock and OUE instead. It also likes Global Logistics Properties, which builds modern logistics facilities in China and Brazil where supply is not enough to meet demand from rising e-commerce.
...
http://www.theedgemarkets.com/sg/article...l-end-2016

I am in between on this. Hold both ascott and mlt and seeing their gearing go up, revenue per unit/sqft go down. Not likely 0 return for particular reit but if looking at s-reit sector as a whole, there might be that possibility. Some of the reits are particularly weak... Take caution.

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[AQ.]

One trend that I am seeing (which I do not like) is the increasing use of perps for funding.

Accounting wise these are treated as equity, but the problem is that most people are pricing perps using the yield-to-call i/o yield to perpetuity - the assumption is that the issuer will call less they face a step up borrowing rate.

So the moment one does not call (hence effectively turning into a true perp and equity), funding costs will prob spike up as perceived credit quality weakens.

ART seems especially keen to use perps to get ard the gearing restriction.

Beware of headline gearing ratios.

[Layman A]

Yeah, using perpeptual securities as a funding means to get around the gearing restrictions set by the MAS is always something to watch out.

I remember some years ago Malpletree Logistics raised some $350 millions 5.35% perpeptual securities, and was hammered badly by the buddies here.

It’s seems that MLT management has forgotten about the episode and going for another round of shopping spree in Australia recently …..

Although the Coles warehouse in strict terms … is not a bad deal, considering the current favourable (almost parity) AUD/SGD exchange rate . But I hope MLT management don’t get carried away, and do some major destruction deals that damage the value of the trust permanently .

Thanks for the kind reminder.

One trend that I am seeing (which I do not like) is the increasing use of perps for funding.

Accounting wise these are treated as equity, but the problem is that most people are pricing perps using the yield-to-call i/o yield to perpetuity - the assumption is that the issuer will call less they face a step up borrowing rate.

So the moment one does not call (hence effectively turning into a true perp and equity), funding costs will prob spike up as perceived credit quality weakens.

ART seems especially keen to use perps to get ard the gearing restriction.

Beware of headline gearing ratios.

[thor666]

ART is having a sponsor mandate of 6b assets. At credit rating of Baa3.. Not so positive. I expect 1 round of rights issue from them.

For MLT, I do not think the management will be doing destructive deals. First off the list is proposed divestment of tampines st 92.. Mgmt had shared to reduce exposure to SG and increase elsewhere, especially in CN. Of course, am taking words at face value, so DYODD/ YMMV.
You may want to hop over to the MLT thread for my AGM minutes if interested.


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[Layman A]

Thanks thor666

I do have some holding in MLT, and have been monitoring them closely. So far so good.

What I am worried is the management get carried away and do foolish thing in the future. Anyway, if I sense that something is not right, I will dump them for good, just like what I have did with Lippo Malls.

ART is having a sponsor mandate of 6b assets. At credit rating of Baa3.. Not so positive. I expect 1 round of rights issue from them.

For MLT, I do not think the management will be doing destructive deals. First off the list is proposed divestment of tampines st 92.. Mgmt had shared to reduce exposure to SG and increase elsewhere, especially in CN. Of course, am taking words at face value, so DYODD/ YMMV.
You may want to hop over to the MLT thread for my AGM minutes if interested.


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[opmi]

Looking at AREIT latest ppt slides. Big oversupply for light indu coming in 2016. only 30%+ committed. Meaning vacancy will go up.