General S-REITs Discussion Thread

[crow123]

aiyo i also cant remember much, but basically bobby jayaraman was suggesting the following to MAS,
1) reits should not have "Distribution Reinvestment Plan" which pay out dividend using units (shares dilution i guess, might affect dpu in longer term)
2) reits should have their own internal managed team instead of paying external managers to do the job
3) make it mandatory for reits to buy back shares ( i guess this is to improve dpu )
for now i can only remember this 3 maybe if i can find my 15oct paper i share more.
We should also do our part by sending in some suggestion to MAS lol

 

[marandaz]

aiyo i also cant remember much, but basically bobby jayaraman was suggesting the following to MAS,
1) reits should not have "Distribution Reinvestment Plan" which pay out dividend using units (shares dilution i guess, might affect dpu in longer term)
2) reits should have their own internal managed team instead of paying external managers to do the job
3) make it mandatory for reits to buy back shares ( i guess this is to improve dpu )
for now i can only remember this 3 maybe if i can find my 15oct paper i share more.
We should also do our part by sending in some suggestion to MAS lol

disagree on some of the points...

2) I assuming the words "internal managed team" refers to building management teams. I am disagreeing as some of the reits have a few buildings thus does not make economic sense to have own team. Also, contracting out to specialized firm may result in cost saving.

3) Buy back shares need money. So my question is where should the money come from? Note that 90% of the income is being distributed...

For 1 I have no opinion.

 

[streamofmight]

hi all

just opened my CDP account, wish to put money into REITs as my first purchase. Tried sifting through a few threads but tbh its a lot of content to go through. Wish to ask for the key things to look out for when choosing SREITs. Am currently interested in Mapletree Greater China and First Real Estate.

 

[SpeedingBullet]

hi all

just opened my CDP account, wish to put money into REITs as my first purchase. Tried sifting through a few threads but tbh its a lot of content to go through. Wish to ask for the key things to look out for when choosing SREITs. Am currently interested in Mapletree Greater China and First Real Estate.

1. Occupancy Rate
2. Weighted Average Lease Expiry
3. Debt maturity profile
4. all ur other general financial metrics.

 

[athulican]

hi all

just opened my CDP account, wish to put money into REITs as my first purchase. Tried sifting through a few threads but tbh its a lot of content to go through. Wish to ask for the key things to look out for when choosing SREITs. Am currently interested in Mapletree Greater China and First Real Estate.

Suggest you spread out to a few different types of REITs, read this latest report on Singapore REITs. Sorry, this is basic home work you have to read.

This blog site updates the latest information on most Singapore REITs and Trusts: SGX REIT Data

Good luck.

 

[indexsg]

Can share the key pointers? Didn't buy the 15 Oct BT.

The article can be read from here

 

[Bustamagic]

The article can be read from here

Thanks for the link. I certainly agree to stop the scrip dividend. If you don't opt for it, you face constant dilution as new units get issued, and lower DPU with all else being equal. Not nice at all.

 

[Lasogette]

hi all

just opened my CDP account, wish to put money into REITs as my first purchase. Tried sifting through a few threads but tbh its a lot of content to go through. Wish to ask for the key things to look out for when choosing SREITs. Am currently interested in Mapletree Greater China and First Real Estate.

You might want to grab a copy of Bobby rajaratnam book building wealth through reits.
For me I look at yield, gearing, nav, nav to price ratio, weighted average debt maturity and weighted average lease expiry. Currently only investing in retail and health care.

 

[chewjekhui]

You might want to grab a copy of Bobby rajaratnam book building wealth through reits.
For me I look at yield, gearing, nav, nav to price ratio, weighted average debt maturity and weighted average lease expiry. Currently only investing in retail and health care.

Anyone got any 2nd hand to hand down to me??

 

[lzydata]

Thanks for the link. I certainly agree to stop the scrip dividend. If you don't opt for it, you face constant dilution as new units get issued, and lower DPU with all else being equal. Not nice at all.

I disagree.

You got to look at both sides. New units are issued in lieu of distributing money, so the REIT retains more cash (e.g. a few million dollars per quarter for First REIT*) for working capital, to pay down debt, or if they accumulate enough, to make more acquisitions. If management is doing nothing worthwhile with the retained money, that's a problem with management, not DRP.

That's from the perspective of the REIT and unitholders as a whole. For individual unitholders I would still advise against participating because of the odd lots issue, the loss of control over purchase price, and the rounding effects that don't make it worthwhile especially for small unitholders. Let others participate

* Oops I was thinking of First REIT, $3.8m retained by DRP last quarter.

MIT actually retained not a few million but $21.1m from the Jan-Mar distribution.

 

[lzydata]

Anyone got any 2nd hand to hand down to me??

Lots of copies available in the library.

Btw guys it's Bobby Jayaraman.

 

[winguy]

hi have noob questions.
1. why do some reits not require rights issue, while some need to?
2. some reits issue bonds. are these reits less likely to issue rights because they have bonds as an alternative source of funding?
3. are reits that issue bonds typically those that are bigger/have higher credit rating such as CMT, A-Reit, CCT?
thanks.

 

[Lasogette]

Lots of copies available in the library.

Btw guys it's Bobby Jayaraman.

sorry my bad. Thanks for the corrections

 

[SpeedingBullet]

hi have noob questions.
1. why do some reits not require rights issue, while some need to?
2. some reits issue bonds. are these reits less likely to issue rights because they have bonds as an alternative source of funding?
3. are reits that issue bonds typically those that are bigger/have higher credit rating such as CMT, A-Reit, CCT?
thanks.

Ehhh... Companies can raise money two ways: debt or equity. It's up to them which way they choose to do it.

Sometimes they dont do rights, they do private placement of shares and that dilutes you too.

Just bcos they issue bonds doesnt mean they wont do a right s issue in the future, no one can tell. They can do both debt AND equity raising if they deem fit.

Yup the higher the credit rating = lower interest expense. All reits issue bonds, not just the three you mentioned.

Cost of debt is usually lower than equity (tax savings), in REITs' case, their cost is the distribution.

 

[lzydata]

hi have noob questions.
1. why do some reits not require rights issue, while some need to?
2. some reits issue bonds. are these reits less likely to issue rights because they have bonds as an alternative source of funding?
3. are reits that issue bonds typically those that are bigger/have higher credit rating such as CMT, A-Reit, CCT?
thanks.

Like with all companies, REITs can choose to raise money through debt or equity, and one of the ways to raise money by issuing equity is a rights issue, which is to let every current shareholder participate if he/she wants. But most REITs (and companies) would prefer not to do rights issues because the discount they would have to offer for people to take up the shares is higher than under the alternatives, which means they raise less money all else being equal.

The process also takes longer, costs more, and is subject to market fluctuations. On top of all that, they would have to deal with the negative perception people have of rights issues, that you only do it when the company is in trouble, like several were in the wake of the financial crisis.

There are indeed some REITs that have never had a rights issue, for example Suntec REIT. When Suntec REIT had its mammoth MBFC acquisition, I thought they would break that tradition, but in the end they turned to bank borrowings and a private placement instead.

The most common way of financing for REITs is just bank borrowing, which is usually secured using some of their properties. You are right that it is usually the bigger-name REITs that issue bonds, although there are also small ones that do that, like Sabana's Islamic bonds (sukuk). In terms of borrowing costs, bonds lie somewhere between bank debt (lower) and equity (higher).

CMT is far and away the most successful REIT at raising money through bonds, like it borrowed $350m earlier this year for 7 years at 3.08% pa, which is not much higher than what say a stat board with an implicit government guarantee would achieve. But they could probably do even better with bank debt. It's just a way to diversify your funding.

 

[wahkao3]

think of rights issues as the exact opposite of dividend. instead of the company give you money, you give the company money.

I invest in a company to generate returns for me, not the other way around!!

 

[sophie.wee.weng]

Master, which stock you buying now?

 

[dork32]

think of rights issues as the exact opposite of dividend. instead of the company give you money, you give the company money.

I invest in a company to generate returns for me, not the other way around!!

this is wrong. after you exercise your rights, you can still take back your money by selling it in the open market.

 

[lzydata]

think of rights issues as the exact opposite of dividend. instead of the company give you money, you give the company money.

I invest in a company to generate returns for me, not the other way around!!

Same old REIT myths nonsense.

 

[sandwicher]

Same old REIT myths nonsense.

Coming from wahkao leh. What can we expect?