SPH Reit

[Freestylers09]

heard v v over subscribed ?

[1fast1]

I might buy. My portfolio is very REIT heavy.

[Windwaver]

i recall vaguely that the clementi mall deal was overpaid... and anchor tenant was ntuc fairprice!

 

now they are gonna bring in the suckers to pay for their mistakes

 

Yeah, SPH has got to bid high in order to win that. They desperately wanted to diversify their business.

[Felipe]

Not much faith in reits now

[Nullifi3d]

I might buy. My portfolio is very REIT heavy.

 

Is that considered a good thing or bad? I'm into REITs for dividends only.

 

[Felipe]

Yeah, SPH has got to bid high in order to win that. They desperately wanted to diversify their business.

Dey losing badly on classifieds. Unless propguru sell to them but I doubt it

[Windwaver]

can buy from Credit Suisse, DBS and Oversea-Chinese Banking Corp trading account.

 

but don't rush for IPO first be patient, cos normally buying it from IPO is not really that worth it.

 

At 0.90, it is not worth it. I expect it to drop to 0.85 or lower. Interest rates are expected to rise within next 2 years. Probably there might be a short uptrend but with plenty of other REITs, I can't see why this is attractive

[1fast1]

Is that considered a good thing or bad? I'm into REITs for dividends only.

 

I'm into Sg stocks only for the dividends, so REITs make sense.

 

For capital gains there are much better options in other markets like the US.

[Maseratigood]

the current sph is like the smrt under saw of yester years.

 

veering away from their core competency. (although 154 or thereabout is far from competent)

 

errrh, i am a bit unsure if someone ask me sph is serving who?

 

One thing should be clear though, their old man must be proud.

 

On hindsight, I am not sure why those bosses can smile so heartily in the photo session as if they are groomed for real estate and make it big rather than to provide food for the soul or mind.

 

shutty times is a long way from Le figaro, le monde or le parisian.

Regional Bangkok post or SCMP are way better. Aren't they ashamed?

hey, pride of sgp in its own way

[Maseratigood]

Not much faith in reits now

Thanks to REITS for pushing up rentals while doing next to nothing to create real varieties in shopping experience....

[Sabian]

I'm into Sg stocks only for the dividends, so REITs make sense.

 

For capital gains there are much better options in other markets like the US.

But if interest rates rise, the dividends may not make up for the share price (capital) loss?

[1fast1]

But if interest rates rise, the dividends may not make up for the share price (capital) loss?

 

Perhaps in the short term, but I don't expect the paper losses to be permanent (I don't expect to need to sell these stocks in the foreseeable future). They will eventually come up again, at least to the point where the accumulated dividends would've still netted me a profit, albeit a smaller one. I'm pretty much into only buy-and-hold dividend paying stocks on SGX.

Edited July 18, 2013 by Turboflat4

[Sabian]

Ok. I have 3 problems with REITs.

 

1. The straight jacket mandate they are in: Pay out 90% of earnings as dividends to unit holders.

 

2. The way the REIT mgr's compensation is based on AUM rather than actual dividend per unit. (Just don't like when the REIT mgr's interest isn't aligned with the unit holders, but I think some mapletree listings have addressed this)

 

3. The parent retains a token amount of shareholding in the REIT and gets to call the shots as if it holds a majority stake.

 

There are other conservatively run stocks that operated with REIT-like returns but without the 90% straight jacket ruling (Hotel Grand Central, Lee Kim Tah comes to mind, boring but predictable, run by steady and experienced hands). Sometimes, you may want to hold some cash for opportunistic purchases.

 

Paying out 90% every year sort of forces you to raise funds:

A) By issuing new units and dilute your existing unit holders

B) Take up loans and incur additional interest expense and face refinancing roller coasters (like in 2008, granted their gearing has been brought down but who's to say they won't binge again when the animal spirits return?)

 

If whatever they dump into the REIT was so wonderful, they would never list it and "share" it unless they can get a better price by listing it than what they can generate internally had they kept it to themselves.

 

Likewise for the OUE Trust. Has anyone pointed out the remaining lease left for Mandarin Hotel?

 

Anyhow both REIT and Trust IPOs were 2x subscribed? Not exactly a vote of confidence.

 

And the last 2 rounds of pummeling the REITs received (I know everything got hit but REITs really bled) that were preceded by the 2 slight hints of tapering is a preview of what awaits bond-like instruments when rates normalize, unless the assumption is that rental rates now are at an all time low.

Edited July 18, 2013 by Sabian

[1fast1]

Very detailed and interesting post, Sabian. I have nothing on your financial savvy - I am just a humble amateur retail investor. But I'll try to respond to some of your points.

 

Ok. I have 3 problems with REITs.

 

1. The straight jacket mandate they are in: Pay out 90% of earnings as dividends to unit holders.

 

I *like* this. I buy Sg stocks purely for dividend income. I don't even really scrutinise the paper value very regulary, nor do I lament the fluctuation of the total stock holdings when the SGX statement comes in the mail. What I do care about is the regular cash injections into my bank account via GIRO. The fact that REITs are basically forced to redistribute their rental returns to people like me is a plus point as far as I'm concerned.

 

2. The way the REIT mgr's compensation is based on AUM rather than actual dividend per unit. (Just don't like when the REIT mgr's interest isn't aligned with the unit holders, but I think some mapletree listings have addressed this)

 

This is a little bit worrisome, and I hadn't actually considered this before. You mean the typical REIT manager's variable bonus is determined solely by the current market (sale) value of the real estate that's under ownership? If that's the case, I agree that his interests are not quite aligned with the shareholders, but isn't it also true that rentals generally go up and down in tandem with property prices? That should mean there's a strong correlation (at least) between the two, if not a direct causation, which will still lead to market forces acting in such a way as to increase everyone's returns. The only issue I can perceive is if a REIT manager acquires overvalued properties simply to inflate his AUM, and then fails to secure a proper rental yield (reducing shareholder returns). But I guess the parent company would step in and fire that sort of manager, wouldn't they?

 

3. The parent retains a token amount of shareholding in the REIT and gets to call the shots as if it holds a majority stake.

 

I don't actually have a problem with this, as long as their management is sound. Do you have any specific reasons/past examples to show why this would be a bad idea? I don't consider myself to have the first clue about business management - I don't even attend shareholder AGMs/EGMs. So I take it on faith that other, more qualified, smart people are doing the managing.

 

There are other conservatively run stocks that operated with REIT-like returns but without the 90% straight jacket ruling (Hotel Grand Central, Lee Kim Tah comes to mind, boring but predictable, run by steady and experienced hands). Sometimes, you may want to hold some cash for opportunistic purchases.

 

Fair enough, I will consider some of the stocks you mention, and thank you for the recommendations. I still have plenty of liquidity to play with, so it's OK.

 

Paying out 90% every year sort of forces you to raise funds:

A) By issuing new units and dilute your existing unit holders

B) Take up loans and incur additional interest expense and face refinancing roller coasters (like in 2008, granted their gearing has been brought down but who's to say they won't binge again when the animal spirits return?)

 

But you can argue this about any stock that "regularly" continues to pay high dividends. A certain type of investor goes in for this kind of stock - the relatively risk-averse type that wants to see regular "income" from the investments rather than feeling good about paper capital gains in the short term. In other words, my type. If a company (like those you mentioned) has had a habit of regularly (like clockwork) declaring good dividends to its shareholders, then it wouldn't want to risk that track record, the absence of the 90% rule notwithstanding. I guess extenuating circumstances would force them to do so, but that would also mean they're in precarious shape, and would still be an unreasonably risky investment.

 

If whatever they dump into the REIT was so wonderful, they would never list it and "share" it unless they can get a better price by listing it than what they can generate internally had they kept it to themselves.

 

Isn't this true about almost *any* publicly listed share? Why would any company want to dilute its ownership amongst a bunch of riff raff if their product was really that great and profitable? Short answer: they need the money (euphemistically called "capital investment") - hopefully, so that they can make more money so everyone benefits. But we take the second part on faith, that's euphemistically called "investor confidence". But this applies to both REITs and other stocks.

 

Likewise for the OUE Trust. Has anyone pointed out the remaining lease left for Mandarin Hotel?

 

Anyhow both REIT and Trust IPOs were 2x subscribed? Not exactly a vote of confidence.

 

And the last 2 rounds of pummeling the REITs received (I know everything got hit but REITs really bled) that were preceded by the 2 slight hints of tapering is a preview of what awaits bond-like instruments when rates normalize, unless the assumption is that rental rates now are at an all time low.

 

Fair enough. But when the economy goes into the crapper, everyone suffers. But rental incomes will still remain, albeit be lower. REIT-holders will at least get their dividends as long as there is a functioning economy, even if the share value is in the toilet (and hopefully, that's a temporary thing).

 

Interesting conversation you've started, btw. I can predict that others like Viceroymenthol, will also chip in before long, and it will be enlightening to hear what he has to say. Pity that Zangetsu doesn't post here often anymore (if at all).

Edited July 19, 2013 by Turboflat4

[Porker]

REIT is just securitization to recover the $$$ while charging people a fee for doing so

[Lala81]

i'm not an amateur investor but amateur gambler

[Lala81]

 

 

keira knightly. nice

[Duckduck]

And the last 2 rounds of pummeling the REITs received (I know everything got hit but REITs really bled) that were preceded by the 2 slight hints of tapering is a preview of what awaits bond-like instruments when rates normalize, unless the assumption is that rental rates now are at an all time low.

http://app.hedgeye.com/media/592-podcast-b...a-trade-is-over

 

One of many fund mgrs i follow. Yields, gold, japan, US mkts.

Edited July 19, 2013 by Duckduck