Analysing REITS

(07-10-2014, 03:38 PM)rainmaker Wrote:

(07-10-2014, 02:52 PM)specuvestor Wrote: ^^ My 2cents on the above

(23-09-2014, 12:18 PM)specuvestor Wrote: Firstly I have stated before that conceptually REITs are long term viable products that disintermediate between retail yield alternatives and property companies' return requirements, and not just another financial engineering product.

Since the days of first REIT CMT, the idea like Mohican pointed out is to provide a consistent cashflow with predictable yield. Since then of course market expectations forced more asset enhancements and structured REIT to come out, most infamous being Suntec, which Ho Ching spoke against and hence City Dev dropped the REIT back then.

But bankers and corporates started to understand the ATM nature of this disintermediation. Then as cashflow becomes more unpredictable it is packaged as business trust and then stapled security. It has become increasingly complex. Tycoons in recent years were the most ardent fans of using these ATMs

Now you have REIT co-investing in a development with uncertain cashflows, instead of the usual buying existing assets from the sponsors with predictable cashflow albeit high RNAV. The risk profile is changing. Sponsors are no longer using them just for pure ATM but also as "insurance" ie risk sharing.

Tycoons are playing with the rules with more and more patterns coming out. They are starting with 30% now... if market is receptive and regulators are nonchalent this % I suspect will be creeping up. All's well until a development flops and we see who is naked, much like the skeptical gloom overhanging the Business Trusts nowadays.

http://www.valuebuddies.com/thread-2256-...l#pid94995

Is it really true that Reits are into co-investing properties development. So far, this is the first time I heard about it. My understanding is they can buy a completed property and then rent it out or asset enhancement but definitely not into property development. Could you let us know which Reits are into co-investing properties development? Seem shocking news.

Real shocking ! But which reit did that or is doing that ?

err... click the link?

As mentioned before REIT is also an interesting study of Doddsville whereby earnings should be paid out as dividend and capital raised as and when needed. As opmi mentioned, when the leases expire there will be a capital call. But like HDB lease and our discussion on the discounting of the HDB "prepaid expense", nobody cares as long as the lease is still far off...

So there is certain logic in using cashflows to/from investors to value REITS.

(07-10-2014, 04:19 PM)cfa Wrote:

(07-10-2014, 03:38 PM)rainmaker Wrote:

(07-10-2014, 02:52 PM)specuvestor Wrote: ^^ My 2cents on the above

(23-09-2014, 12:18 PM)specuvestor Wrote: Firstly I have stated before that conceptually REITs are long term viable products that disintermediate between retail yield alternatives and property companies' return requirements, and not just another financial engineering product.

Since the days of first REIT CMT, the idea like Mohican pointed out is to provide a consistent cashflow with predictable yield. Since then of course market expectations forced more asset enhancements and structured REIT to come out, most infamous being Suntec, which Ho Ching spoke against and hence City Dev dropped the REIT back then.

But bankers and corporates started to understand the ATM nature of this disintermediation. Then as cashflow becomes more unpredictable it is packaged as business trust and then stapled security. It has become increasingly complex. Tycoons in recent years were the most ardent fans of using these ATMs

Now you have REIT co-investing in a development with uncertain cashflows, instead of the usual buying existing assets from the sponsors with predictable cashflow albeit high RNAV. The risk profile is changing. Sponsors are no longer using them just for pure ATM but also as "insurance" ie risk sharing.

Tycoons are playing with the rules with more and more patterns coming out. They are starting with 30% now... if market is receptive and regulators are nonchalent this % I suspect will be creeping up. All's well until a development flops and we see who is naked, much like the skeptical gloom overhanging the Business Trusts nowadays.

http://www.valuebuddies.com/thread-2256-...l#pid94995

Is it really true that Reits are into co-investing properties development. So far, this is the first time I heard about it. My understanding is they can buy a completed property and then rent it out or asset enhancement but definitely not into property development. Could you let us know which Reits are into co-investing properties development? Seem shocking news.

Real shocking ! But which reit did that or is doing that ?

As long as greenfield development is below 10% of AUM, they can develop property's Acendas Industrial Reit develop industrial property before, can't remember the buildings name now, they took 3 years.

(07-10-2014, 05:14 PM)Greenrookie Wrote: As long as greenfield development is below 10% of AUM, they can develop property's Acendas Industrial Reit develop industrial property before, can't remember the buildings name now, they took 3 years.

CCT's 40% stake in the development of CapitaGreen (fka Market Street car park) is also an example.

(07-10-2014, 04:19 PM)cfa Wrote:

(07-10-2014, 03:38 PM)rainmaker Wrote:

(07-10-2014, 02:52 PM)specuvestor Wrote: ^^ My 2cents on the above

(23-09-2014, 12:18 PM)specuvestor Wrote: Firstly I have stated before that conceptually REITs are long term viable products that disintermediate between retail yield alternatives and property companies' return requirements, and not just another financial engineering product.

Since the days of first REIT CMT, the idea like Mohican pointed out is to provide a consistent cashflow with predictable yield. Since then of course market expectations forced more asset enhancements and structured REIT to come out, most infamous being Suntec, which Ho Ching spoke against and hence City Dev dropped the REIT back then.

But bankers and corporates started to understand the ATM nature of this disintermediation. Then as cashflow becomes more unpredictable it is packaged as business trust and then stapled security. It has become increasingly complex. Tycoons in recent years were the most ardent fans of using these ATMs

Now you have REIT co-investing in a development with uncertain cashflows, instead of the usual buying existing assets from the sponsors with predictable cashflow albeit high RNAV. The risk profile is changing. Sponsors are no longer using them just for pure ATM but also as "insurance" ie risk sharing.

Tycoons are playing with the rules with more and more patterns coming out. They are starting with 30% now... if market is receptive and regulators are nonchalent this % I suspect will be creeping up. All's well until a development flops and we see who is naked, much like the skeptical gloom overhanging the Business Trusts nowadays.

http://www.valuebuddies.com/thread-2256-...l#pid94995

Is it really true that Reits are into co-investing properties development. So far, this is the first time I heard about it. My understanding is they can buy a completed property and then rent it out or asset enhancement but definitely not into property development. Could you let us know which Reits are into co-investing properties development? Seem shocking news.

Real shocking ! But which reit did that or is doing that ?

Co-investing in property development is not shocking. CMT, capitaland and capitamall Asia co-develop West Gate mall.

In fact, some REITs are strong enough to build a new property from scratch.

MINT is building one for Hewlett Packard. It is currently building a data centre for Equinix.

CACHE is co-developing with CWT on a huge one for DHL.

These properties are usually already pre-leased with annual rental escalation built in.

Suntec REIT also building an office in Australia.

And the list goes on.....

Sorry, my english no good. Do you mean City Dev dumped Suntec REIT ?

If my memory didn't failed me, it was Suntec REIT who dumped City Dev !
They were negotiating a huge package deal back then. Suntec REIT were suppose to acquired many City Dev's buildings ( like IBM Building, Queenstown shopping centre etc. )
Suntec pulled out at the very last minutes, stating that City Dev could not fulfill some of the important clauses in the contract, hence they drop the whole thing altogether.

(07-10-2014, 02:52 PM)specuvestor Wrote: ^^ My 2cents on the above

(23-09-2014, 12:18 PM)specuvestor Wrote: Firstly I have stated before that conceptually REITs are long term viable products that disintermediate between retail yield alternatives and property companies' return requirements, and not just another financial engineering product.

Since the days of first REIT CMT, the idea like Mohican pointed out is to provide a consistent cashflow with predictable yield. Since then of course market expectations forced more asset enhancements and structured REIT to come out, most infamous being Suntec, which Ho Ching spoke against and hence City Dev dropped the REIT back then.

But bankers and corporates started to understand the ATM nature of this disintermediation. Then as cashflow becomes more unpredictable it is packaged as business trust and then stapled security. It has become increasingly complex. Tycoons in recent years were the most ardent fans of using these ATMs

Now you have REIT co-investing in a development with uncertain cashflows, instead of the usual buying existing assets from the sponsors with predictable cashflow albeit high RNAV. The risk profile is changing. Sponsors are no longer using them just for pure ATM but also as "insurance" ie risk sharing.

Tycoons are playing with the rules with more and more patterns coming out. They are starting with 30% now... if market is receptive and regulators are nonchalent this % I suspect will be creeping up. All's well until a development flops and we see who is naked, much like the skeptical gloom overhanging the Business Trusts nowadays.

http://www.valuebuddies.com/thread-2256-...l#pid94995

BTW, I know FCT is also currently re-building the East Point mall for our NTUC bosses.

Development property cannot constitute more than 10% of its shareholder fund.
Keppel reit is developing an office in Perth, Aus also.

(07-10-2014, 07:27 PM)Layman A Wrote: BTW, I know FCT is also currently re-building the East Point mall for our NTUC bosses.

Interesting to watch East point belongs to Ntuc Income..let see how an insurance co. go into reit..can meh? Think they engage or JV with Fraser the AEI project to enhance the yield..up rental 20%...?

(07-10-2014, 07:27 PM)Layman A Wrote: BTW, I know FCT is also currently re-building the East Point mall for our NTUC bosses.

Eastpoint is owned by NTUC Income. The property is managed (not owned) by FCL. FCT has no link to Eastpoint whatsoever.