First REIT

technically its fixed to SGD but the rent is actually broken up to 3 portions. the performance fee on the revenue over hurdle is actually in INR

I think it could be the case of selling low and renting low if not there is no incentive to take the fx risk. Alpha quant, your thinking makes sense.

http://infopub.sgx.com/FileOpen/PR_S$165million_TLF_Refinancing.ashx?App=Announcement&FileID=294172

Quote:

First REIT secures a S$165 million transferable term loan facility from OCBC

• Funds will be used to refinance outstanding loans with maturity spread over three to five years
• No short-term refinancing needs until 2017
• With this facility, all debt will be on fixed-rate basis

(Not vested)

Hi to all seniors here, I'm new to investing and REITS and hope to learn some things from you guys along the way.

I was trying to read the latest Annual Report for First REIT and have some questions when reading them (about the loans etc).

1. On pg 76 it states that 'Other than Sarang Hospital, Siloam Hospitals Bali and Siloam Hospitals TB Simatupang, all the properties are mortgaged as security for the bank facilities (Note 20)' - If I'm not wrong, this would be for the Secured Bank Loans, right?

I understand that REITS usually roll over their debts due to the 90% minimum payout requirement, so I'm assuming that most of the time the REIT would have been paying off the interests incurred and roll over the debt (and that they will only be able to clear these debts when they raise more equities in terms of Rights Issue/ sell properties) with the properties mortgaged. May I know is mortgaging properties to get bank loans a common practice?

2. On pg 88 which talks about Fixed Rate Notes - They do sound like bonds to me like those that CapitalMall Trust issued earlier this year. But they sound like bonds issued by the banks to REIT. It says that 'The total facility drawn down as at 31 Dec 2013 under the Programme was S$100,000,000 ... ' but i can't seem to find a corresponding figure to tally against that. On pg 86 there is an item on Fixed rate notes (unsecured) but is noted as S$98,902,000. So what happen to the balance $1,098,000?

Sorry if my questions sounds noob. Cheers!

(03-05-2014, 12:48 AM)Cheerios Wrote: 1. May I know is mortgaging properties to get bank loans a common practice?

2. On pg 88 which talks about Fixed Rate Notes 'The total facility drawn down as at 31 Dec 2013 under the Programme was S$100,000,000 ... ' but i can't seem to find a corresponding figure to tally against that. On pg 86 there is an item on Fixed rate notes (unsecured) but is noted as S$98,902,000. So what happen to the balance $1,098,000?

1. Loans can be secured (i.e. with something held as collateral) or unsecured. Normally secured loans come with lower interest rates than unsecured loans, all else being equal.

Getting unsecured loans has the advantage of leaving your assets unencumbered, so that if dirt hits the fan tomorrow, you will still have some assets to mortage to get credit. But of course this normally comes at a higher interest rate expense due to credit risks.

I think secured loans for companies (not just REITs) is rather normal but as an investor you prob want to think abt the overall health of the balance sheet.

2. On Pg 88, i see that "It will mature on 22 May 2018 and bears a fixed interest rate of 4.125% per annum payable semi-annually in arrears. The effective interest rate per annum is 4.40%."

This implies that the notes were sold at a discount to par, and simple discounting yields a price of 98.9mio. Since the bond is carried at "amortised cost using the effective interest method", this will be amortised over time to converge at 100mio by maturity.

(03-05-2014, 10:01 AM)AlphaQuant Wrote:

(03-05-2014, 12:48 AM)Cheerios Wrote: 1. May I know is mortgaging properties to get bank loans a common practice?

2. On pg 88 which talks about Fixed Rate Notes 'The total facility drawn down as at 31 Dec 2013 under the Programme was S$100,000,000 ... ' but i can't seem to find a corresponding figure to tally against that. On pg 86 there is an item on Fixed rate notes (unsecured) but is noted as S$98,902,000. So what happen to the balance $1,098,000?

1. Loans can be secured (i.e. with something held as collateral) or unsecured. Normally secured loans come with lower interest rates than unsecured loans, all else being equal.

Getting unsecured loans has the advantage of leaving your assets unencumbered, so that if dirt hits the fan tomorrow, you will still have some assets to mortage to get credit. But of course this normally comes at a higher interest rate expense due to credit risks.

I think secured loans for companies (not just REITs) is rather normal but as an investor you prob want to think abt the overall health of the balance sheet.

2. On Pg 88, i see that "It will mature on 22 May 2018 and bears a fixed interest rate of 4.125% per annum payable semi-annually in arrears. The effective interest rate per annum is 4.40%."

This implies that the notes were sold at a discount to par, and simple discounting yields a price of 98.9mio. Since the bond is carried at "amortised cost using the effective interest method", this will be amortised over time to converge at 100mio by maturity.

Thanks for the clarification! Will read more and clarify along the way ~

How are the properties lease structured? Anyone know why healthcare REIT tend to be structured with the lease and lease back structure?

Hi Buddies

Appreciate if someone can clarify for me as this is the 1st time I have come across taxable income component in dividends. CDP will inform income tax correct, I presume I do not have to do additional declaration in income tax? Also I'm wondering why is div taxable, I think it not common in Sg stocks, is there a special reason?

First Real Estate Investment Trust Announces Distribution for the Period from July 1, 2014 to September 30, 2014, Payable on November 28, 2014
From 17/Oct/2014

First Real Estate Investment Trust has announced a distribution of 2.02 cents per unit for the period from July 1, 2014 to September 30, 2014, comprising a taxable income component of 0.11 cent per unit, a tax-exempt income component of 1.24 cents per unit and a capital component of 0.67 cent per unit. Unit holders of the company whose securities accounts with The Central Depository (Pte) Limited are credited with units as at the Books Closure Date will be entitled to the Distribution to be paid on November 28, 2014.

just a question, I don’t understand why gearing can increase when you buy properties… if gearing is calculated as total debt over the value of investment properties, shouldn't the ratio go unchanged if you raise debts equal to the value of properties? you buy 10 mln properties with 10 mln debts, inv properties up by 10 mln, debts also up by 10 mln.... so net net no change in gearing...

then the rental yield is usually >10% while their financing cost is about 4-5% that gives them 5% excess return so acquisition with debt will most likely be yield accretive... is my thinking correct?

It's debt/net asset. So debt goes up, net assets which is the same (because as you've explained net net no change i.e liabilities up, assets up and cancels out) gearing goes up.

Tax exemptions are only for REITS within Singapore... those outside are taxable but unless it's significant (like thousands upon thousands bowls of mee pok worth of tax dollars) it's probably not worth bothering.