Saizen REIT

[soros]

Paying S$2.1 mil for block of 35 flats works out to S$60,000 per flat which seems to be too cheap. ??

[tanjm]

For a singles accomodation in Tokyo, rent can be 50k yen per month. At 5% yield this translates to 120k sgd. In fact 50k is not that low. It will be cheaper outside Tokyo.

I once had a colleague who stayed one hour train ride away and lived in what was basically a block of converted containers.

You may think of Japan as a rich society, but accomodations can be very basic esp for singles.

[rokcradle]

Does anyone has any insights into the value unlocking initiatives by mgmt?

This feels like one of those low-risk reasonable-reward counters
- Decent yield of 6+%
- About 20% below NAV; in fact, latest property divestment fetched premium of 16%

Catalysts are like there, yet not there
- Mgmt had a strategic review earlier this year, arriving at a conclusion that they will work out a more optimal capital management plan
- Single largest shareholder, Argyle street management has been pushing for corporate action to unlock value
- Abenomics

But somehow, mgmt seems to be going about business as usual, doesnt seem to be doing much to unlock values. Classic example of agency problem?

[corydorus]

Think the primary concern is the continuous depreciation of yen and the hedging period ending, where we have to face lowered returns with stagnant rental.

[gzbkel]

I think another concern would be the gradual decrease in the Japanese population.
Also, unlike Singapore they do not have many foreign workers to support rental income. It is not easy to get a work visa in Japan.

[sgd]

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.

[gzbkel]

I think it is still customary for Japanese to buy their own home when they get married. It is part of their image of middle class life.
New employees in bigger company usually stay in the company-provided housing with very cheap rent of around 15k JPY/month for a few years while saving up money to buy their property.
Of course there are also people who prefer to rent long term, especially if they stay single (getting common). One reason is because their company can assign them to another city if necessary, and they want to stay mobile if that happens.

Perhaps earthquake is a consideration, but I don't hear them talk about this factor much. Newer buildings are earthquake resistant. During the big earthquake in 2010, few buildings collapse even in the north east region which experienced 6-high on the Japanese scale. (7 is max). Most buildings that were destroyed was because of the tsunami.
However, even if it does not collapse, property value will drop if it sinks or tilt due to soil liquefaction.
When buying properties, best to research the geography of the area and avoid softer ground like reclaimed land.
Also avoid low-lying land in coastal area, on top/below cliff, etc.

[thor666]

Hi gzbkel,
I worked in Japan for 6months. Let me share a bit of my observations:
Japan has a silent policy of foreign workers. Try speaking to food stall workers in Chinese, you may get a response. Many of those doing prostitution are also Chinese ladies as I understood from coworkers.

Japanese would like to buy homes but most can't afford it. A coworker of mine in a relatively good company only was able to afford housing at the age of 40. (In some ways, Singaporeans are not too much different)

You are right about company rentals, they are relatively cheap. But of course people do worry about when they retire, they still need a roof over their heads.

[gzbkel]

Hey thor666,
I was also there for a time. I noticed significant number of east-Asian foreigners working in hourly pay jobs like restaurants and convenience stores. I think many of these people are working part-time while on student visa.
There are also long-timer Chinese or Korean running their own restaurants, some of these people might have already naturalized.
I don't seem many foreigner PMET types. In my company, perhaps less than 5%.

I think for housing, the Japanese have some choices. If they want near CBD, will be expensive or small.
If they don't mind long commuting, can get a place 1 - 1.5 hours from the CBD. Can get a small detached house with peaceful rural-like surrounding.

Sorry, I am getting off topic

[sgd]

when was there I also saw a lot of service staff that spoke mandarin mostly worked as cashiers waiters at restaurants or in-store sales assistants pretty low level paying jobs. I don't want to sound bias but if you are an illegal getting such jobs are easier to come by and maybe less regulated.

We spoke to some of them on how they knew mandarin we could tell they were vague in response they claimed they learnt it in schools, why? oh because there a lot of chinese tourists I learnt it for work, are you japanese? Of course I am born and bred here. I suspect when china threw it's doors open a lot of people from mainland fled to japan and stayed over indefinitely, the lanaguage can be easily pick up if you have a strong mandarin base just different pronounciation.

If you go to a store you can almost spot the difference, japanese sales staff sales technique is they will greet you then let you browse at your leisurely pace - no pressure but chinese sales assistant after greeting will follow you around like a hawk (same as in singapore), open your mouth to ask them something in mandarin most likely you will get a reply.