OUE H-Trust

[lonewolf]

#1 is not true. Its a stapled securities comprising of a REIT and a dominant business trust. The assets are held in the REIT structure so its guaranteed in the sense that like all REIT, its must distribute 90% of its net income to enjoy tax concession.

Dormant..

Thanks for the spell check! Dominant and dormant is a world of difference! That's what happened when you try to reply when you are half-asleep.

@ Lonewolf. Thanks for clarification, I just find OUE hybrid tougher to value weighing on which is the key drivers of the trust, The REIT may just be actually a small component of the entire structure hence public may perceive this as a heavy weighted REIT.

But stapled securities is not new to the market. So why should it be more difficult to value OUE HTrust compared to what already listed on SGX? And since the business trust component is dormant at the moment, we can just value it as a REIT for now.

Of cos things may change in the future but for now, investing in OUE Htrust is the same proposition as investing in other hospitality REIT.

Public perception is probably more shallow than you think. I doubt many who pressed at the ATM actually knows the structure of the trust. And the probable reason why the placement was so poorly received was the anal decision to list it a day later after SPH REIT. Just a day later and the subscription rate would probably be higher.

I'm wondering if the timing of the listing this is just an ego trip for the Riady family.

[KopiKat]

UOBKH analysts' report extract,

Valuation range. OUE H-Trust’s FY13F listing yield of 7.2% is 20bp higher than hospitality peers’ average (7%) and 50bp higher than the blended average of 6.7% (70% hospitality and 30% retail). In terms of P/B OUE will be listing at 3% discount to book value compared to 1x for hospitality peers. We believe the higher yield premium takes into consideration the shorter lease terms and concentration risks (reliance on a single asset). Assuming yield compression similar to industry peers indicates a trading range of S$0.90-0.94/share.

[Salty]

0.5% additional yields compensation....

Its like...
a 20yr old wife where you have to spend 1000 a month to feed.
or
a 56yr old wife where you have to spend 995 a month to feed.

Would you take the 56yr old one where theres a 0.5% monthly compensation?

whahahahahahahahaha

[KopiKat]

Balloting Results
News Release

STRONG PUBLIC SUPPORT FOR THE S$1.15B IPO OF OUE HOSPITALITY TRUST
 Public Offer of Stapled Securities approximately 19.1 times subscribed by retail investors
 Placement Tranche fully subscribed on the back of strong demand from institutional and other investors
 Stapled Securities expected to commence trading on the Main Board of Singapore Exchange Securities Trading Limited (the “SGX-ST”) on Thursday, 25 July 2013, at 2.00 p.m.

[NTL]

seems like the 2 hotels in the trust have less than 50 yrs lease left.

From the OUE thread,

price $0.88-0.90
99 yrs lease from 1957=> 43 years remaining.
NAV ard 90c so depreciation p.a. is ard 2.1c p.a.

@ a fwd yield of 7%, this implies DPU of ard 6.3c
taking away the depreciation, the actual returns is only 4.2c per unit so 4.7% p.a.

so out of this 7% yield, 33% of it is actually just capital redemption.

BTW, it's not 2 hotels. Mandarin Gallery is something like a mall...

Most industry buildings are on 30 or 60yrs lease. Does that mean that the yield is to be calculated the same manner for the industrial/logistics reits?

[KopiKat]

seems like the 2 hotels in the trust have less than 50 yrs lease left.

From the OUE thread,

price $0.88-0.90
99 yrs lease from 1957=> 43 years remaining.
NAV ard 90c so depreciation p.a. is ard 2.1c p.a.

@ a fwd yield of 7%, this implies DPU of ard 6.3c
taking away the depreciation, the actual returns is only 4.2c per unit so 4.7% p.a.

so out of this 7% yield, 33% of it is actually just capital redemption.

BTW, it's not 2 hotels. Mandarin Gallery is something like a mall...

Most industry buildings are on 30 or 60yrs lease. Does that mean that the yield is to be calculated the same manner for the industrial/logistics reits?

It gets a lot more complicated when you have a REIT with multiple assets with differing balance of lease. I'm lazy, I usually look at the yield, give myself some margin eg. only look at REITs >7% yield and decide on my target after also looking at their Gearing, NAV, Shareholders, Sponsor,...

[AlphaQuant]

Most industry buildings are on 30 or 60yrs lease. Does that mean that the yield is to be calculated the same manner for the industrial/logistics reits?

REITs are interesting vehicles financially engineered using debt, equity, performance units, master leases/minimum income support. Normally what i like to do is to try to cut through the clutter and see what i am really getting.

e.g. to improve the yield , one can always:
1) take on more debt=> less equity means higher yield. but what happens if financing costs rise?
2) assets of lower life => older means cheaper to buy but is it good for your portfolio longevity?
3) minimum income support for X years to engineer a good yield initially => but what happens after X?

i think it is tough to compare a retail mall with 50 assets, average asset life 99 years, gearing 30%, no income support, yield 4% with a hospitality trust with 5 assets, average life 35 years, gearing 45%, income support for 5 years, yield 9% if we do not normalise the numbers to comparable e.g. taking out the real depreciation of assets, normalising for cost of capital i/o just cost of equity.

so there's nothing wrong with buying any reits but i think one should understand the real returns and whether it is accretive to your portfolio.

[Temperament]

Yes short term assets should be invested as short term assets. To me investing in this type is when to get out is very important.

[NTL]

Thanks, thanks & thanks to all the replies. Guess I still on a learning phase.

I guess this could be one of the reason why industrial reits are "able" to offer a higher yield than commercial or office reits where the lease are mainly 99yrs or freehold.

Need to plough back into the annual reports to look at those that I am holding.

[specuvestor]

#1 is not true. Its a stapled securities comprising of a REIT and a dominant business trust. The assets are held in the REIT structure so its guaranteed in the sense that like all REIT, its must distribute 90% of its net income to enjoy tax concession.

Dormant..

Thanks for the spell check! Dominant and dormant is a world of difference! That's what happened when you try to reply when you are half-asleep.

@ Lonewolf. Thanks for clarification, I just find OUE hybrid tougher to value weighing on which is the key drivers of the trust, The REIT may just be actually a small component of the entire structure hence public may perceive this as a heavy weighted REIT.

But stapled securities is not new to the market. So why should it be more difficult to value OUE HTrust compared to what already listed on SGX? And since the business trust component is dormant at the moment, we can just value it as a REIT for now.

Of cos things may change in the future but for now, investing in OUE Htrust is the same proposition as investing in other hospitality REIT.

Public perception is probably more shallow than you think. I doubt many who pressed at the ATM actually knows the structure of the trust. And the probable reason why the placement was so poorly received was the anal decision to list it a day later after SPH REIT. Just a day later and the subscription rate would probably be higher.

I'm wondering if the timing of the listing this is just an ego trip for the Riady family.

I'm trying to figure out what is the incentive for structuring a stapled offering.

If OUE HT does a rights offering, does it mean half the money will go to the BT?

"OUE H-REIT cannot issue (including the issue of partly paid units), transfer, register the transfer, consolidate or divide, redeem or buy back or cancel any of its units, unless the same action occurs in respect of OUE H-BT, and vice versa" -pg 230 of prospectus