Eagle Hospitality Trust

And responsibility of fulfilling said recurring income obligations falls on the sponsor UC.

The properties are definitely worth something. How much? It is for the enterprising investor to find out.

A lot of useful lessons from such a short-lived REIT/security.

17 freehold hotel and 1 leasehold hotel in the reit cost 144.7 mil at an average price of 8.01 mil each when eagle reit is at $0.165. I felt that it is a good bargain with good margin of safety if there is no fraud involved. If not, where can you find hotels selling at 8mil each?? Even if the tenant cannot pay up, there is still value in the hotel... Now we should not be looking at valuation based on cashflow. Instead, we should be focus on the value of the net asset...

While the price of Eagle had pretty much collapsed before the trading halt, it is only the worst among a sorry tale for many REITs:

https://www.drwealth.com/18-reits-lost-5...ding-days/

The article was dated 19th March, and most of the hammered down REITS bounced to some extent on Friday.

What the author was not aware of was that there had been some earlier insider selling that was only notified on 20th March (Friday), for example ESR REIT:

https://links.sgx.com/FileOpen/_eFORM1V2...eID=601739 (one of several filings)

IREIT

https://links.sgx.com/FileOpen/_Ireit_Fo...eID=601751 (one of several filings).

The hospitality REITs are a particular concern in the current environment, and Eagle has had a number of particular issues. So, the question is why so many of the other REITs have also collapsed in price.

Part of the answer is quality. In these uncertain times, the better quality local REITs have generally done better (or at least dropped less) than the poorer quality REITs, and REITs with mostly or all foreign property holdings.

There is huge uncertainty about future earnings, if any, as countries lock down to combat COVID-19. However, on the basis that things will be up and running again in 1 to 2 years, is it reasonable for some of the industrial and (foreign) office REITs to be selling at 30% to 60% of NAV?

One of the concerns may be whether some of the REITs will implement large rights issues at a steep discount to the current hammered down price, in order to reduce borrowings and make room for bargain acquisitions. This was quite common in early 2009, after a similar hammering during the GFC. I remember making applications for rights (and excess rights) for Fortune, First and Saizen REITs at about that time, which turned out to be hugely profitable. So part of the rush for cash may be that having cash will allow holders to subscribe to heavily discounted shares if there is a rights issue in the future. Whether that is going to be as profitable as the same choice was in 2009 is another issue, due to uncertainty about future income.

If an investor is counting on the NAV to make a purchase, it is important to understand how the properties are valued. HK Land was selling at about 1/3 of NAV before the sharp sell off. Genting HK was selling at about 1/5 of NAV. Now both are selling at yet greater discounts to NAV.

An investor would have made money just by buying during 2008-2009; of course, more with better quality stocks, and less with poorer quality ones.

So long as an investor does not pick duds which blow up -- perhaps due to liquidity or solvency issues -- it is highly likely that money will be made.

Hence, there is flight to better quality companies/REITs which appear to be better able to weather the difficult period. This makes the poorer quality companies/REITs attractive based on traditional valuation tools (yield, p/b, p/e), but perhaps they are not so attractive when their higher risks are taken into account. High risk, high return. Not my cup of tea.

The better quality REITs now look more fairly priced, but don't look like a very attractive buy to me. Yields of 6% based on 90% payout and 35% leverage is only okay. If it is yielding 10%, then yes, that looks cheap. Otherwise, there are a lot of other quality companies providing yields 6% or higher -- at far lower payout ratio and leverage, and some with a healthy amount of net cash -- that can also be considered.

So even as the market is presently volatile, it is still pretty efficient. Quality is still more expensive.

I think Convid 19 will highlight and maybe test SG REIT models. Especially hospitality and retail and especially one with a master lease.

SG REITs operates with minimum cash balance and payout all available cash. Everything is ok when cash is flowing, what will happen if cash stop flowing? You are only as strong as your tenants are, strong sponsor or not. Who is paying the rent? Who say master lease won't walk away when they are in the same situation?

One golden rule of investing or in life is having cash reserves for bad times!

I don't know why the drop in REIT but I do know, REIT is a very crowded place before convid 19 so I am not surprise.

https://sginvestors.io/market/sgx-share-...its-sector

REIT is leveraged product which gives out most of their cash. Stock market normally go down first before property price. REIT is likely be faced with cash call if the property price come down. Furthermore, most REIT has already locked in to higher interest loan. Thus the low interest rate will not help them much... The tide for REIT have turned.

The greater the climb, the greater the fall...

Reits are leverage  , but their gearing ratio is cap at 45% . Most reits listed here are having less than 40% ratio . Compare to some property developers , some their  gearing are more than 2X , Yanlord , Oxley  ....
Reits don't face unsold stocks , unlike property developers who have to face unsold inventories.
So the risk for reits is still lower than others .

REITS can face empty units, that's their risk.

With empty units comes lower property valuations. And in a race between asset vs equity, equity races faster to zero than assets

(22-03-2020, 02:14 PM)CY09 Wrote: REITS can face empty units, that's their risk.

With empty units comes lower property valuations. And in a race between asset vs equity, equity races faster to zero than assets

Lower the rentals should solve this problem , unless the country is in deep depression . If in deep depression , only cash is safe . Banks may go under also .

But the asset in the REIT is definitely worth something. So in this market condition, we can pick up REIT based on the value of the properties coupled with margin of safety. In this case, i definitely feel that the eagle reit is worth more than the current market price if you liquidate all eagle reit asset...