(25-08-2013, 11:35 PM)cfa Wrote: I always ask one question, if the management is so confident of what they claimed , why is the sponsor only maintain a 10% stake in this reit , which is one of the highest yield reit ?
After IPO , they keep buying properties and earn more acquisition fees and management fees and forget their promise of the below 40% gearing to unitholders.
Acquisition fees is 1%, performance fees will only be given when DPU improve be 10% compared to preceding year. So acquisition fees will be 670k. Performance fees, they are not getting it this year even with this acquisition.
Loans wise, its all fixed, so the impact will come only when they need to refinance them. It will be be at fixed rate too, with their MTN on standby
I do have to admit that the risk of placement or rights has increased with the acquisition, if they do a right, I am ready.
I have rather good confidence with the management, if the management is after performance fees,he should lump the Serangoon purchase and Chai Chee purchase together, such that the base in 2012 will be lower and the 10% DPU improvement attained. Do note that soilbuild reit allow a higher quatum of performance fees with improvement of DPU (regardless of extent). This is one of the strongest reason why I choose Sabana over other high yielding reits. Also, if you look at the yield of acquisitions since IPO, there range from 6-7%, and the chai chee purchase should at least yield 5%, I consider this prudent compared to recent Cambridge AEI that produce yields in the range of 4+%
Sponsor factor really only comes into play in a crisis, and I think it has been priced in, Sabana is the highest yield reit. Anyway the Kua family that owned freight links has been increasing Sabana stake from 6% of IPO days to current 10%. Of course, crisis can strike anytime, so I think this is a calculated risk one has to take according to one risk preference.
Kopikat has already share an announcement from MAS, that if loan limit is breached due to revaluation of properties, it should not be an issue, thus, the risk of lower rent leading to lower valuation is reduced.
Industry rent might get lower, but they have risen by about 20% for the past 2 years (IIRC), and only about 50% of sabana properties (those since IPO period)have rental reversion clause of 1.5-2% increase. And the biggest contributor, Lor Chuan Tech Park has no such clause, even if they negotiate a lower rent come November to keep the Master Lease, net net it should still be higher that what is negotiated 3 years ago.
Hence, I find the risk-reward profile rewarding enough.
Vested, my tainted view