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Some Info I Looked into on Elite Commercial REIT (Guest Post)

Some Info I Looked into on Elite Commercial REIT (Guest Post)

Elite Commercial REIT has all the right metrics you would look for in a worthy Reit to invest in. Great looking yield, long wale, low debt to asset, freehold property and a tenant that looks like someone who you expect to be the last to default on their rent.

This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.

elite-commercial

Sometimes it is either I overthink things or that I am absolutely right to be a little more skeptical.

Private equity firm Elite Partners is looking to IPO Elite Commercial Reit. A lot of the context for how to look at this REIT is shaped by the people associated with supporting this REIT.

My mode is wary for two reasons:

  1. The guys working on these deals try to sense the market and priced it accordingly. At this point (23 Jan), we don’t even have a sensing what is the range of yield we will get. It feels to me they are trying to gauge interest from the larger investors to see how to price this. If this REIT has high-quality assets yet the IPO prices the REIT at a high yield, either the banks advising and the people themselves have a lack of confidence or that there is something we don’t know about this portfolio
  2. The people behind it

That said, it doesn’t mean I am always right in the short term.

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Why Reits Are Likely To Stay At The Top For Longer Than Most People Would Expect (Guest Post)

Why Reits Are Likely To Stay At The Top For Longer Than Most People Would Expect (Guest Post)

The real estate industry cycle has been around for many years.

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Traditionally, it has several built-in advantages that make it natural for property owners to receive rental income while awaiting for their property to appreciate in value over time. This is due to the higher affluent population group and the higher GDP for the nation as well as decent inflation rise that will all but contribute to an eventual higher property price.

This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with username known as 3Fs and 1800+ followers.

While traditional real estate usually requires high amount of funds to start with and is out of reach by many retail investors, Reits on the other hand are not. They are investment vehicles that is structured to exhibit the same attributes as traditional real estate but more importantly it allows retail investors like you and me with minimal funds to invest in them.

When investors like us buy Reits, the properties owned are generally incorporating a steady income and cashflow predictability into our income-oriented portfolio. Because of this, most of the returns we are getting should be in the form of the dividends that are being paid out. Capital appreciation is a secondary bonus factor, if any due to the nature that they have to pay out more than 90% of their cashflow income as dividends, leaving only a small amount of retained cashflow for any growth opportunities.

How Managers Are Optimizing Their Cost of Capital

Since a REIT is always raising money to grow, its cost of that capital is one of the most important things to help determine a REIT’s long-term investment potential.

There are three sources of capital: undistributed cash flow, equity, and debt.

The cost of capital is the weighted average of all three sources of capital. Undistributed or retained cash flow is by design (and tax law) the smallest but cheapest (free) source of capital.

The next cheapest is debt,measured by the total interest expense it pays out of the total debt, especially in today’s low interest rate environment.

The most expensive source of capital is equity. This makes sense intuitively because each additional share sold is a future claim on a REIT’s cash flow and increases the dividend cost.

Reits Are No Longer Just An Income Play

Gone are the days that Reits are just an income play.

Kep DC Reit – Effective Debt Structure & Accretive Acquisitions


MLT – Exponential Rise To The Top

Thanks to the sluggish global economy that encourages lower funds rate and cheap borrowings, managers are looking to tap into the credit liquidity to leverage their portfolio in this era of lower borrowings.

They would tap for as much leverage the company could take before considering for more access to funds via the equity route.

That is because the cost of equity is usually more expensive than the cost of debt and it would make more sense for them to consider debt first then equity as their main cost of capital to structure the most effective leverage for growth opportunities.

To the managers, they would look for pipeline opportunities and maintain a cost of capital that is lower than the cash yield on new acquisitions in order for AFFO and dividend to grow sustainably over time.

REIT’s leverage ratio, measured by key metrics Debt/Asset or Debt/EBITDA, is important because this is one of the major factor that credit rating agencies use to determine how risky a REIT’s profile is. A lower credit rating increases a Reit’s cost of debt capital, which could spiral into lower return on investment for any growth opportunities.

So REITS can grow over time and quickly for as long as they find good opportunities aided by cheap cost of borrowings and a rising share price, which compresses the cost of equity lower when they are issuing shares for funding.

Conclusion

Investors are generally afraid that they will be diluted when REITS increase their share counts over time so this leads to active participation from investors who will but contribute to this gracious cycle that will allow more funds for management to grow and seek accretive acquisition that will allow the cash yield from acquisition to be higher than the cost of capital on the equity.

Growing cash flow and a well diversified portfolio would then lead to a rising share price and capital appreciation for the investors.

In fact, the likely they remain at the top, the easier it is for management to look for external opportunities because the growth play is likely to remain a big part for a rising capital opportunities.

The only likely swan that could break this cycle is a liquidity crunch as well as a black swan event which eventually leads to a credit crunch which typically leads to increase in the cost of capital. But by then, REITS are not alone. All of the companies in all sectors around the world are likely to be impacted as well.

Thanks for reading.

Once again, this article is a guest post and was originally posted on Brians profile on InvestingNote. 

Also, we recently did an interview with Brian, to understand how he invested and traded during the SG Active Trading Tournament here.

Become a part of our community and also see what other investors are saying about the current market right now: (click on the view now button)

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5 Reasons Why you should include REIT in your retirement portfolio (Guest Post)

5 Reasons Why you should include REIT in your retirement portfolio (Guest Post)

One of the common questions I always receive in my seminars is what type of asset classes are suitable in our retirement portfolio. Is it endowment, annuity, universal life, bonds, equities, physical properties, land banking, hedge funds, etc. Physical properties is one of the most favorite asset classes when come to investing in Singapore. However, there are some disadvantages on physical properties investing when we are entering into our retirement age.
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This post was originally posted here. The writer, Kenny Loh is a veteran community member and blogger on InvestingNote, with username known as marubozu and 700+ followers.

One of the common questions I always receive in my seminars is what type of asset classes are suitable in our retirement portfolio. Is it endowment, annuity, universal life, bonds, equities, physical properties, land banking, hedge funds, etc. Physical properties is one of the most favorite asset classes when come to investing in Singapore. However, there are some disadvantages on physical properties investing when we are entering into our retirement age.

REIT stands for Real Estate Investment Trust and can be served as alternative to physical property investing. I will share here 5 reasons to include REIT as alternative investment to physical real estate in your retirement portfolio.

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Singapore REIT Fundamental Analysis Comparison Table – 12 August 2019 (Guest Post)

Singapore REIT Fundamental Analysis Comparison Table – 12 August 2019 (Guest Post)

Technical Analysis of FTSE ST REIT Index (FSTAS8670)

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This post was originally posted here. The writer, Kenny Loh is a veteran community member and blogger on InvestingNote, with username known as marubozu and 700+ followers.

FTSE ST Real Estate Investment Trusts (FTSE ST REITIndex)broke outfrom the 10 years resistance at 875 with significant increase in trading volume. The REIT index is currently retracing from the high 941.77 to 895.14 (-4.95%). Next immediate support zone is between 870 to 875 for a healthy correction. Previous chart on FTSE ST REIT index can be found in the last postSingapore REIT Fundamental Comparison Tableon July 1, 2019.

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Cromwell European REIT’s First Placement. Acquires Polish and French Offices (Guest Post)

Cromwell European REIT’s First Placement. Acquires Polish and French Offices (Guest Post)

There has been a few placements, non-renounceable rights issues and acquisitions by REITs that I cannot get through all (well by my own standards). But I thought I will just do the Cromwell European REIT one.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 700+ followers.

After the burnout work in the office in the past 2 weeks, I really do not feel like doing anything.

So this one will probably be a short one.

I have not do much homework on Cromwell, so decide to treat this as a relaxing homework of mine.

Cromwell European REIT will be purchasing:

  • 3 Freehold French Office Buildings in Greater Paris
  • 2 Freehold Office buildings in Krakow, Poland
  • 1 Freehold Office building in Poznan, Poland

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Lessons from a Discussion of the Net Lease Corporate Real Estate ETF (Guest Post)

Lessons from a Discussion of the Net Lease Corporate Real Estate ETF (Guest Post)

Ben Carlson and Michael Batnick’s Animal Spirits have become a great podcast to listen to. If you are the sort that wants a short 30 minute entertaining take on what are some of the best financial data points out there, and discussion on some of the latest articles that they have read (they read a lot), this is the one.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 700+ followers.

They have introduced a Talk your book segment where they bring on some interesting financial products that they find, could have a role in your portfolio, and ask the people behind it to talk about it.

You will appreciate the way they context the discussion to a strategic level, thinking about whether you need this financial product in your portfolio.

In last week’s episode, they brought on the folks behind Fundamental Income to talk about their new Net Lease ETF and the index behind it.

The NETLease Corporate Real Estate ETF (ticker: NETL) seeks to track the performance, before fees and expenses, of the Fundamental Income Net Lease Real Estate Index (NNNLSCTR). The index’s goal is to track the performance of the U.S. listed Net Lease real estate sector in a diversified manner by screening for real estate companies that focus on investments in net lease real estate and assigning only those companies identified to the Index. The Index places constraints on constituents to protect against concentration in any one company or tenant.

This ETF that they are discussing is not listed in Singapore. It is listed in the USA and thus if you are attracted to the dividends, you have to take into consideration a 30% dividend withholding tax. So if the forecast dividend yield is 5% the after tax return is 3.5%.

Still, I think the value of this discussion is to hear from the management why they think this segment has a unique proposition that more investors should know about.

You could also benefit from contrasting this to the other type of REITs you invest in.

You could also benefit form the discussion of portfolio positioning, risk management for the REITs.

The Net Lease segment is interesting. In the past, I wrote an article about the Perfect REIT experienced investors are looking for and the Net Lease like REITs have many of these characteristics.

In Singapore, perhaps Keppel DC, Parkway Life REIT matches that description the most.

You can listen to the podcast here:

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An Investor’s On-Site Visit To A Property Of Mapletree North Asia Commercial Trust In Japan (guest post)

An Investor’s On-Site Visit To A Property Of Mapletree North Asia Commercial Trust In Japan (guest post)

This post was originally posted here. The writer is a veteran community member on InvestingNote, with username known as Spinning_Top.

mapletree nac trust

$Mapletree NAC Tr(RW0U.SI)

Buildings : SII Makuhari Building & Fujitsu Makuhari Building

Location: Chiba prefecture, Japan.

Date : November 2018.

Mapletree Greater China Commercial Trust was listed in 2013 and managed overseas commercial properties in China and Hong Kong.  Earlier this year, with the acquisition of Japanese properties into its portfolio, it changed its name to Mapletree North Asia Commercial Trust.

I started to took notice and then shortly thereafter took up a position.  With the trade war with U.S and China at the forefront, I reckon that a more diversified portfolio would be beneficial so properties in Japan would be a good balance.

It would be better if they can get some South Korean commercial properties but I think it is good to keep within 2- 3 countries as exchange rates maybe a double edged sword.

Gearing ratio had increased to 39% (Sep 2018) from 36% ( Mar 2018) but I am not too concerned.

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This Keppel KBS US REIT Rights Issue and Withholding Tax Debacle (Guest Post)

This Keppel KBS US REIT Rights Issue and Withholding Tax Debacle (Guest Post)

This post, This Keppel KBS US REIT Rights Issue and Withholding Tax Debacle was originally posted here. The writer is a veteran community member on InvestingNote, with username known as Kyith.

kbs

One of the most traumatizing experience for shareholders of Keppel KBS REIT was the announcement of the acquisition of Westpark Portfolio in Redmond.

Keppel KBS is a Singapore listed real estate investment trust (REIT) which owns 11 office assets in 7 key regional markets in the USA.

Westpark is a portfolio of 21 buildings located in the Redmond area, most famous for being where the original Microsoft resides. Keppel KBS proposed to acquire this portfolio for US$170 mil.

By all accounts for their first acquisition, things should not be so traumatizing. I am not sure if its due to the rather negative overall market sentiments or what but the share price of Keppel KBS have fell 23% since the announcement of the acquisition.

At one point it was 3 cents away from the price the rights was priced at (US$0.50).

I think analysts and bloggers have written enough about it. What I would like to do is to gather some personal notes on what transpired so as for me to revisit next time.

Attractive Dividend Yield Even Before the Acquisition

The chart above shows the timeline of all the events that happen till now (the rights issue have not been concluded yet)

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