Saizen REIT

[Sylvan Beau]

Hi all ... according to Moody’s calculations, Frasers Centrepoint Trust and Saizen REIT are the most insulated from rising interest rates. FCT has 94% of its total debt on fixed-rate terms, and 10% due for refinancing over the next 18 months. Saizen REIT has 85% of its debt on fixed-rate terms, and its earliest refinancing is in February 2018.

However share prices of Saizen had been dropping. Anyone had any insight on holding on to Saizen or to cut loss?

(Vested)

[Tiggerbee]

Hi all ... according to Moody’s calculations, Frasers Centrepoint Trust and Saizen REIT are the most insulated from rising interest rates. FCT has 94% of its total debt on fixed-rate terms, and 10% due for refinancing over the next 18 months. Saizen REIT has 85% of its debt on fixed-rate terms, and its earliest refinancing is in February 2018.

However share prices of Saizen had been dropping. Anyone had any insight on holding on to Saizen or to cut loss?

(Vested)

Based on history, Saizen had been doing share buy backs at about 17 cts, which translates to about 85 cts after the reverse stock split. My guess is that once the yield hits about 7.5%, Saizen will do share buy backs as that will give them a pretty decent margin over their cost of borrowing. Saizen's cost of borrowing is one of the lowest among the REITs listed in Singapore due to the low interest rate environment in Japan.

[Sylvan Beau]

hi Tiggerbee,
Thanks for sharing ...
By the way, I am wondering, for Saizen, how could the buying small apartments in Japan for leasing can be so profitable. Yes, Japanese salarymen lease on temporary assignments but once anchored, they buy. The capital gain on property in Japan is not tax transparent. Beside the fees for managing and maintaining a stretched small apartment portfolios could be lucrative biz for the Japanese estate agents.

So do you think I should continue to hold on to Saizen or should I sell off now?

[Tiggerbee]

hi Tiggerbee,
Thanks for sharing ...
By the way, I am wondering, for Saizen, how could the buying small apartments in Japan for leasing can be so profitable. Yes, Japanese salarymen lease on temporary assignments but once anchored, they buy. The capital gain on property in Japan is not tax transparent. Beside the fees for managing and maintaining a stretched small apartment portfolios could be lucrative biz for the Japanese estate agents.

So do you think I should continue to hold on to Saizen or should I sell off now?

This depends on your investment horizon. Saizen is more of a yield play unless property prices in Japan rises significantly, allowing Saizen gearing to drop, and thereby increase its borrowing capacity without compromising on its credit rating and also to sell its assets at a decent profit to unlock value. If you believe that Abenomics will work and boost the asset prices and salaries of the average Japanese, Saizen will be a good bet on the recovering Japanese residential property sector.

[Sylvan Beau]

Thanks for the tips

[piggo]

Was expecting more from Deloitte & Touche.... Guess REITs aren't an exciting business to study.

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This Strategic Review has provided the Board with the opportunity to deliberate the future
strategic direction of Saizen REIT, as well as to review existing practices and programmes
with the aim of enhancing Unitholder value. Taking into consideration its own deliberations
on a broad range of options, including the practicalities of execution of each of those options
and the recommendations of the DTCF Report, the Board has decided that, as a matter of
priority, focus will be placed on Saizen REIT’s capital structure, in particular, its cash
management and levels of leverage. As funds are made available as the capital structure is
optimised, the Board will continue to seek opportunities to expand its property portfolio in line
with the principal investment strategies of Saizen REIT. The Board may also consider a
buy-back of Units of Saizen REIT at times of Unit price weakness, as a useful signaling
mechanism and provided that is deemed as an effective use of capital at that time.
Following capital structure optimisation, more ambitious growth strategies can be explored,
subject to availability, compatibility, returns and execution considerations.

The Board has examined a broad range of issues under the Strategic Review and believes
that the strategy outlined above will best achieve the objective of enhancing Unitholder value
through long-term growth in distributions and net asset value per Unit. The Board will also
be mindful to implement this strategy in a prudent manner. For example, any increase in
leverage from the current level of 38% will be underpinned by stable financing on reasonable
terms

[sgd]

some of the reason I found from reading personal homepages and blogs previously on internet about why japanese people prefer to rent and not buy homes is the fear of loss from earthquakes.

[Tiggerbee]

Saizen should had engaged investment bankers instead of Deloitte.

[piggo]

http://infopub.sgx.com/FileOpen/20140724...eID=306670

Divestment of Sun Port 6 @ JPY 168,000,000 or 12.6% above valuation.

If I remember correctly, above valuation % for divestments is getting higher and higher...

vested

[tanjm]

You know what I'd have advised if I were Deloitte?

I'd have said something like "You have 160+ properties, but no one believes the NAV. So start selling properties at a steady pace and return half of each sale as capital return to shareholders, until the share price climbs close to the NAV. The manager gets to pocket acquisition fees and the share prices rises so that you can raise capital again if necessary. And naturally, you can't announce this policy as that will telegraph to potential buyers of the properties."

8-)