Saizen REIT

[piggo]

Feb 2015 Presentation

Seek opportunities for yield-accretive property acquisitions

The Management Team has identified several potential targets and is hopeful of acquiring at least one property soon

Probably the most exciting development in 2015 for this relatively boring stock.

[ValueMushroom]

Does not really feel comfortable if I understand correctly the properties are not owned by Saizen REIT but by the TK Operators, who are the legal holders of the title deeds of the properties.

If the TK Operators decide to do funny things, Saizen can do nothing?

So this bring me to one question, what does Saizen REIT own?

[piggo]

Does not really feel comfortable if I understand correctly the properties are not owned by Saizen REIT but by the TK Operators, who are the legal holders of the title deeds of the properties.

If the TK Operators decide to do funny things, Saizen can do nothing?

So this bring me to one question, what does Saizen REIT own?

The TK Operators are obligated to transfer 97% of their income to Saizen, while Saizen is liable to 97% of its losses as well.

In event of insolvency, each TK Operator is independent from each other... i.e they force sell properties of other TKs to finance the debt. Also Saizen's losses is limited to its investment only.

[ValueMushroom]

yup I do see this on Saizen REIT website.

Like to know if there are any fallacies in this kind of arrangement.
What can go very wrong (detrimental) to the unit holders?

[piggo]

Just a few obvious ones that's been mitigated somewhat;
- Rapid devaluation of JPY/SGD (Hedging can only help that much)
- Increase in interest rates triggering default and resulting in severe drop in DPU (Loans are being amortized)
- Natural disaster resulting in structural damage
- Drop in occupancy rates / rental rates

Quite limited risks I feel.

Anyway from its record of property sales (all above valuations), it's apparent that the NAV is a good reflection of its value. However, they are only planning to increase leverage, buy properties and increase DPU which isn't very exciting. Essentially the story is for shareholders to wait (at 7% p.a) for an immediate 22% gain for on full disposal which may occur before the leases on the property's up (and being freehold, in other words now to forever)... Hah!

[piggo]

Having successfully obtained Saizen REIT’s first loan from a bank in the northern region of Japan in March 2015, the Management Team will continue to seek opportunities to increase Saizen REIT’s gearing level (from 37% currently to between 40% and 45%) and to expand its property portfolio with yield-accretive acquisitions.

The Management Team has commenced due diligence on an acquisition target in Fukuoka, and barring unforeseen circumstances, hopes to complete the transaction by July 2015. Meanwhile, the Management Team continues to observe an improvement in market conditions and sentiment, which should be reflected in a positive impact on property valuations to be conducted for the financial year ending June 2015.

Distribution reinvestment plan

The Board of Directors of the Manager plans to establish a distribution reinvestment plan (“DRP”) to provide unitholders of Saizen REIT with an option to receive distributions either in the form of units in Saizen REIT or cash or a combination of both.

It is intended that the DRP shall apply to the distribution for the 6-month financial period ending 30 June 2015

http://saizenreit.com.sg/wp-content/uplo...cement.pdf

JPY 260 million loan from The Shonai Bank Ltd was secured in March 2015, at a loan-to-value ratio of 48%. The prevailing interest rate on the loan is 2.475% (lender’s short term prime interest rate plus 0.5%) per annum.

[safetyfirst]

Just asking out of curiousity, not too good with geography

Is the entire japan prone to earthquakes, or is it just certain areas only?

To buy a block of 35 flats for 2mil looks cheap but what's the catch? So cheap why people there still want to rent?

when you consider frequency of earthquakes japanese people are quite wary about home ownership since everything could be gone in a flash along with a sizable portion of their net worth hence better to rent.

So how do you unlock these properties? who will buy them? the management? if they choose to take it private the risk belongs to them unless of course it's very cheap to take it private otherwise my view is they will prefer to let shareholders keep the risk.

Of course to mitigate that risk that's why you see Saizen has properties spread all over japan.

[piggo]

Just asking out of curiousity, not too good with geography

Is the entire japan prone to earthquakes, or is it just certain areas only?

From MetEd
[Image: 4LiA45E.png]
Note that there was already a run up in prices from 0.84.

[Shrivathsa]

Wow, 9% jump after receiving an offer.

I know that some VBs highlighted this as a deep value investment.

For more details, I have read the past VB highlights here.

http://singaporeanstocksinvestor.blogspo...ut-is.html

http://gotmoneygothoney.blogspot.sg/2015...-reit.html

http://sgyounginvestment.blogspot.sg/201...anese.html

http://nextinsight.net/index.php/story-a...reit-or-no

Will be interesting to see what the offer is.

[Shrivathsa]

From SGX Announcement : The Board of Directors of Japan Residential Assets Manager Limited, the manager (the
“Manager”) of Saizen Real Estate Investment Trust (“Saizen REIT”), refers to its
announcements on 13 August 2015 and 8 September 2015 in relation to the establishment
of an independent evaluation committee (“Evaluation Committee”) and the appointment of
joint financial advisers to advise the Evaluation Committee respectively.
Further thereto, the Manager wishes to announce that the Manager has received a firm offer
in relation to the assets of Saizen REIT which the Evaluation Committee and the joint
financial advisers are currently reviewing and evaluating. No definitive agreements have
been entered into and there is no assurance that the offer will be accepted and that definitive
agreements will be entered into.
In the meantime, Unitholders are advised to exercise caution when dealing with the Units.
The Manager will update Unitholders on any material development in this regard by making
appropriate announcements in compliance with the listing rules of Singapore Exchange
Securities Trading Limited, as and when required.
Unitholders are advised to read this announcement and any subsequent announcements by
the Manager carefully.