Analysing REITS

I find it a little ironic that issues of corporate governance and independence of REITs manager are being highlighted now; when most REIT balance sheet are looking better and on an acquisition trial.

During the financial crisis of 2008, I dun see many concerns about having a strong sponsor or the independence of REIT manager being vigorously highlighted.

So when the REITs need a cash call to shore up their balance sheet, its good to have a strong sponsor and analyst and journalist just gross over the fact. But whether there any hint of 'asset dumping' by the said sponsor, we can all hear the hallow of protests?

The fact is that most of the independent REIT manager (except Cambridge) has problems during the FC and needed to be rescued or were taken over. So I would suggest that however good 'independence' is, its not worth a lot if you cannot keep the REIT afloat.

I think more people should just followed Temperment's example, if you are not comfortable and really think the manager are screwing them over, just sell. I remain vested in K-REIT.

Sold off my REITs last week. Including dividends have a decent 6+% yield per year over last 2 years. I sold off because

1) REITs are vulnerable to interest rate hikes. Which may come in early 2013 which means 2nd half 2012 got to watch out already.
2) REITs are also vulnerable to property market fall. Of course commerical, retail and healthcare got different levels of exposure. But Spore market generally toppish for real estate.
3) There are better places to park my money which have decent yields (read above 4%, bluechip) and which probably have better capital appreciation upside. So i traded by REITS for stocks like DBS, Keppel, Noble

Yes, some people never believe in REITS. They say REITS are like cows in the field to be milked(hopefully not slaughtered one day) Of course you should know who are the "Farmers". And there are different types of "Farmers". Can anyone help to explain the different types of "Farmers". And different types of cows too?

NB: Still have a lot of cows in the field.

Is it necessary for a well managed trust and a sponsored trust to be mutually exclusive ? I think the GFC 2008/09 highlighted some very impressive sponsored REITs with astute Managers. FCT acquires its malls from F&N but they have 6 years of increasing DPU. Others like Plife REIT, First REIT, Suntec, AREIT, CDLHT etc were impressive as they managed their capital and their dividends were not in jeopardy. But I guess sponsored REITs with poor managers were also apparent - any who raised yield negative rights issue in that period showed pretty poor management. Each REIT is different and the REIT ultimately should serve their owner so voting by poll shouldn't have been rejected. Same goes for the business trust - Pacific Shipping Trust certainly out-performed the independent FSL Trust since IPO. Cityspring, with blue chip sponsors, failed to live up to expectations. So I don't think there are mutually exclusive and we should look at each REIT separately and decide the quality of the Manager based on their actions. If you think the Managers are poor, don't go anywhere near it ! Our best NO vote is simply to sell or avoid buying !

Thanks, NICK.
Unfortunately, i bought only 4 lots of FCT in OCT 2008@0.762cent/unit and leave them alone. Of course i benefited from "DPU".

(15-11-2011, 03:01 PM)lonewolf Wrote: I find it a little ironic that issues of corporate governance and independence of REITs manager are being highlighted now; when most REIT balance sheet are looking better and on an acquisition trial.

During the financial crisis of 2008, I dun see many concerns about having a strong sponsor or the independence of REIT manager being vigorously highlighted.

So when the REITs need a cash call to shore up their balance sheet, its good to have a strong sponsor and analyst and journalist just gross over the fact. But whether there any hint of 'asset dumping' by the said sponsor, we can all hear the hallow of protests?

The fact is that most of the independent REIT manager (except Cambridge) has problems during the FC and needed to be rescued or were taken over. So I would suggest that however good 'independence' is, its not worth a lot if you cannot keep the REIT afloat.

I think more people should just followed Temperment's example, if you are not comfortable and really think the manager are screwing them over, just sell. I remain vested in K-REIT.

Hi lonewolf,

We meet again!!

I have my 1c take on this issue on my blog. So if U have the time, U may wanna take a look. see

To have the independence of the KReit Board questioned is not necessarily a negative thing.
If U take a "longer term" and a "Bigger Picture" perspective, any attempt to improve the Reit's Corporate Governance will help the entire Reit class as an investment choice.

I read some of the posts in this thread in this forum and hear the complaints against the frequent "untimely" cash calls made just for the sake of growth of the Reits; thus making Reits to be less defensive than they were made out to be.

Yet, this is a golden opportunity to make the ecosystem (Sponsors, regulators, shareholders, alike) understand the damage such untimely cash calls can make to the evolving Reit class and some are unhappy that such Qs as the independence of the Board is raised.

Opportunity does not come often.
A stitch in time saves nine.
The level of corporate governance can only go as high as the level of the investing public.
Here is a forum full of erudite value investors.
Perhaps, this could be the forum to foster such a change; IMHO, the change that can make the Reits class safer!!

OK, call me cold, cynical and selfish. I just thought sharesholders' activism works best if one is a substantial shareholder that can "push" through changes at the boardrooms - only then can you influence management - that's the domain of hedge funds and private equity players?

With so many stocks listed on the SGX, if I don't like what I see, I just switch. It's not that I have limited choices... (Mountain don't turn, I turn)

I am an equities man whore

http://singaporemanofleisure.blogspot.co...whore.html

Vested in a REIT. Oh dear!

(17-11-2011, 03:25 PM)Jared Seah Wrote: OK, call me cold, cynical and selfish. I just thought sharesholders' activism works best if one is a substantial shareholder that can "push" through changes at the boardrooms - only then can you influence management - that's the domain of hedge funds and private equity players?

With so many stocks listed on the SGX, if I don't like what I see, I just switch. It's not that I have limited choices... (Mountain don't turn, I turn)

I am an equities man whore

http://singaporemanofleisure.blogspot.co...whore.html

Vested in a REIT. Oh dear!

5 points to note....
1) "It's not that I have limited choices... "----- With with 23 listed Reits on the SGX, U have just cut down on Ur choices by 23!!

2) Mountains do not exist in Sg.
Reits do.

3) The person who called for a poll in the KReit EGM was from an institutional shareholder.

4) Not only are fundmanagers from the US and Europe looking to park their monies in Asia Pacific Reits, many local Reits such as CMT are going abroad to market their Reits.

http://info.sgx.com/webcoranncatth.nsf/V...9001FB0B0/$file/CMT_Slides_NDR_US_Roadshow.pdf?openelement

5) So how the Board and Management handles Corporate Governance issues during EGM/AGM are important criteria which will affect their credibility in the eyes of these fundmanagers.

Quote:Published November 17, 2011

Sentiment in Asia-Pac Reit market rising
Market cap up since end-2010; sector in strong recovery from 2008 rut


By MICHELLE TAN


SENTIMENT within the Asia-Pacific real estate investment trust (Reit) universe has improved, according to the Asia Pacific Real Estate Association (APREA).


'At the beginning of this month, the market capitalisation of the Asia-Pacific Reit market was US$168.9 billion, with a total of 191 Reits,' said Peter Mitchell, CEO of APREA. 'This is up from US$156.8 billion at the end of 2010. Excluding Australasia, the market capitalisation of Asian Reits at the beginning of November was US$93 billion with 132 Reits. This compares to US$86.6 billion at the end of 2010.'

In fact, since the global financial rut in 2008, many Reit markets have staged a commendable comeback.

Notably, the Hong Kong Reit market has shown the strongest recovery over the period, up more than 100 per cent, outperforming its benchmark by a 'comfortable margin'.

The sector has also performed fairly strongly on a year-to-date basis, with many Reits managing to claw back part of their earlier losses despite the inconducive macroeconomic backdrop.

In particular, Asia-Pacific Reits have weathered 'external shocks' from Europe and the United States relatively well.

Attributing their overall resilience to a general lack of exposure to European banks and conservative gearing practices, Mr Mitchell also pointed out that several listed real estate funds around the region have even managed to raise capital this year despite the trying times.

The three largest Reit markets in the region - Australia, Japan and Singapore - collectively make up 84.4 per cent of the market capitalisation of all Asian Reits.

Performance-wise, Reits in the three biggest markets have also been outperforming equities, with the earnings yields of their respective Reit indexes coming in above that of broad equity market indexes.

More significantly, Singapore tops the chart in terms of earnings yield, where government bonds are relatively low. This, perhaps, explains the popularity of Reits among investors locally as well as their price resilience towards recent market sell-downs.


BT

My own Thots are that Reits will evolve to be an important class for investment on SGX.
Better corporate Governance can only help.

A warm and sunny hello to Qiao Feng!

I am curious. Are you vested in a REIT now?

And yes, I believe in leveraging on OPT (other people's time). Let the institutional investors do the work for me

Thanks for the heads-up! I am indeed wrong... There are no mountains in Singapore! Apology for mixing Chinese into my England writing.

Cheers!

Interesting report by CIMB (with special focus on their leverage and risks),

http://www.remisiers.org/cms_images/rese....11_OW.pdf

I dowloaded a copy and upload below as the reports at remisiers.org are removed after a couple of weeks,


  S_Reits_by_CIMB_17.11.11_OW.pdf (Size: 593.84 KB / Downloads: 25)