Saizen REIT

There's no way anybody could have anticipated such things to happen.

In the near term insurers could be facing billions in claims so they will likely be unwinding positions in the market so regardless whether one has japanese investment will also be clobbered by market sell off in the region.

In the long term, here's where I put my prediction I will say this could turn out to be a blessing in disguise for the Japanese. To me they have tried everything "humanly" possible to turn their economy around for the last 20 years but it just won't take off high enough but this act of god disaster could be what is needed that will force the Japanese government to come out to spend heavily to rebuilding public infrastructure where in the past they didn't have the rationale for it to do so, this could be the turning point.

Of course in the near future there will market correction but as you recall I commented in the market prediction thread earlier that there will be a "correction of sorts" - so there

Quote "Regarding your first question, as disclosed in our IPO prospectus, Saizen does not generally maintain earthquake insurance on its properties"

I don't believe in whatever those guys at Saizen Reit fund management are saying now, they were probably cutting the corner to maximize the yield in the first place. These guys are ex-bankers , the Commercial mortgage-backed securities (CMBS) experts but those days are gone and i doubt if they have any valuable expertise in properties management business or none at all. They started it off with financing all these properties using CMBS, then listed the REIT in Nov/2007 and exited nicely when the CMBS market was already boiling for some time. The first dividend was around 10%, too good but it does not last, soon they raise capital and later selling off properties (most of them at lower valuation than the book value) to pay debt. At some points i was looking at what perceived to be "very attractive valuation" but after figuring out the whole thing i thought its better to just ignore it.

BTW, there are some material about Saizen REIT on the next insight for your reference.

Basically, the article gives you an impression that there is a good management who are working hard and smart to pull out shareholders stuck in mud after the Tsunami, but hey who are the ones who brought them in there in the first place.

http://www.nextinsight.net/index.php/sto...a-with-ceo

(15-03-2011, 09:26 PM)sgd Wrote: There's no way anybody could have anticipated such things to happen.

In the near term insurers could be facing billions in claims so they will likely be unwinding positions in the market so regardless whether one has japanese investment will also be clobbered by market sell off in the region.

In the long term, here's where I put my prediction I will say this could turn out to be a blessing in disguise for the Japanese. To me they have tried everything "humanly" possible to turn their economy around for the last 20 years but it just won't take off high enough but this act of god disaster could be what is needed that will force the Japanese government to come out to spend heavily to rebuilding public infrastructure where in the past they didn't have the rationale for it to do so, this could be the turning point.

Of course in the near future there will market correction but as you recall I commented in the market prediction thread earlier that there will be a "correction of sorts" - so there

with public debt mouting to 200% of GDP, can Japn afford to issue more debt to fund their re-building plan?

(15-03-2011, 09:41 AM)d.o.g. Wrote: A sensible investor should impair all the buildings in the affected coastal cities to zero and revalue the REIT accordingly.

Just to share some figures that I posted in another blog.

The properties are roughly at 15% of total NAV. Rough projections on a straight line basis:

Potential loss of revenue: $500,000,000 Yen

Nett Income to Income Expense ratio will drop from roughly 2.4X to 1.7X.

If DPU were to be maintained at current rate, payout would exceed 100%. Payout was currently below 2/3 of nett earnings.

If they were to maintain the same payout ratio as before, DPU could conceivably drop to 0.55 S cents or a yield of roughly 3-4% based on a share price of 16 S cents.

Silver linings are that a large portion of the affected properties are already excluded from Saizen's DPU.

Their loan liabilities have been decreasing gradually over the years.

The latest divestment of property have been made at a slight premium to valuation. This divestment is not from the defaulted portfolio. They might have realised that they are not in a favorable bargaining position when selling properties from YK Shintoku.

The ratios reminded me of an incident with regards to a certain counter some time ago.

FSL Trust.

The impaired vessels accounted for roughly 20% of FSL's revenue. Share price dropped from around 60+ cents to 40+ cents or a drop of 33%.

Disclosure: Vested recently. I view 11-12 cents as an extremely comfortable entry point.

Addendum: Open market purchase of 1,600,000 Units by ASMARMF and ASMHRF at an average of $0.138.

Check out latest announcement:

http://info.sgx.com/webcoranncatth.nsf/V...4004F3F66/$file/20110315_Update_on_impact_of_earthquake_in_Japan.pdf?openelement

Situation is not as bad as we think...

Major shareholders are increasing their stake in Saizen...

Watch out for it...

Trading halt is morning

Saizen is becoming a compelling value buy with this turn of events..

http://info.sgx.com/webcoranncatth.nsf/V...A001BD14E/$file/20110406_Repayment_plan_for_YK_Shintoku_loan.pdf?openelement

Finally a feasible REPAYMENT PLAN !!!!

Congrats Zelphon...This has be a dream come true to all Saizen shareholders. Any idea where they will get the cash from ?

(06-04-2011, 08:33 PM)Nick Wrote: Congrats Zelphon...This has be a dream come true to all Saizen shareholders. Any idea where they will get the cash from ?

The existing cash hoard and the cash from the upcoming divestments..

The fact that they made the announcement with a stipulated timeline shows that the plan is already in the final phase...

They should be discussing the divestment price of the properties with interested buyers now...

If the bank accepts the plan...

Saizen will rocket cos almost all the properties are FREEHOLD..
and still standing !!!!

Recent divestment was at 6% discount to book value... I'm quite curious about the price that they're going to get for future divestments. With my very limited knowledge of japanese real estate, I suspect it'd be a good gauge of the value of their remaining assets.

Freehold doesn't mean perpetual income without costs. There are costs like maintenance and renovation to keep the condition at an acceptable level, buildings are also designed with a specific lifespan in mind; so eventually it has to go. Rental also trends downwards as the building gets older...