Eagle Hospitality Trust

[cfa]

But the asset in the REIT is definitely worth something. So in this market condition, we can pick up REIT based on the value of the properties coupled with margin of safety. In this case, i definitely feel that the eagle reit is worth more than the current market price if you liquidate all eagle reit asset...

Agree , unless this covid disaster is going last for longer than expected , then not only this Eagle , many others related ind. will collapse also.
Casino , cruise , hotel , airline , F& B ....... these will drag the banks down also . Not many are safe .

[karlmarx]

While the price of Eagle had pretty much collapsed before the trading halt, it is only the worst among a sorry tale for many REITs:

https://www.drwealth.com/18-reits-lost-5...ding-days/

The article was dated 19th March, and most of the hammered down REITS bounced to some extent on Friday.

At least where local malls are concerned, shopper traffic is still present and is not likely to reduce severely. High quality mall REITs will survive. If interest rates remain low, it is highly likely that investors in high quality REITs will be made whole again, in time to come.

Less fortunate are the ones who followed the teachings of such course sellers and used margin to buy REITs. Not only have they paid to learn risky strategies, but they also employed those strategies to devastating effect.

The margin call from the sell-off would have meant realising 30%-40% losses to the portfolio. If more money has been put into the margin account to prevent force-selling, that fresh infusion of cash may soon be gone too, given the still deteriorating coivd situation. 

If this was experienced by someone who just started making a living, the losses will be negligible compared to his/her future earnings, and important lessons are probably learnt. If this was experienced by a middle-aged/retiree who employed a large proportion of their wealth in such a leveraged strategy...

In spite of the accolades, the multiple degrees, top honours, finance certifications, and million dollar portfolios did not prevent the highly capable/intelligent course sellers, and their students, from major blow ups. 

Now these people are conveniently pivoting and promoting their trading courses. Caveat emptor.

[donmihaihai]

I think Convid 19 will highlight and maybe test SG REIT models. Especially hospitality and retail and especially one with a master lease.

SG REITs operates with minimum cash balance and payout all available cash. Everything is ok when cash is flowing, what will happen if cash stop flowing? You are only as strong as your tenants are, strong sponsor or not. Who is paying the rent? Who say master lease won't walk away when they are in the same situation?

One golden rule of investing or in life is having cash reserves for bad times!

I don't know why the drop in REIT but I do know, REIT is a very crowded place before convid 19 so I am not surprise.

https://sginvestors.io/market/sgx-share-...its-sector

Almost exactly as I said it. Good luck.

https://links.sgx.com/FileOpen/EHT%20-%2...eID=602009

[CY09]

To help summarise the above article:

Their lessee defaulted

Like all other REITs, EHT had a syndicated loan led by Bank of America and seeing that EHT's lessee defaulted, Bank of America issued notice to redeem the loan in full. Being a trust with little money due to structure, the "margin call" is killing EHT; now they have to find money to pay

[weijian]

Based on the earlier announcement on 19th March, the security deposits were supposed to be topped up during IPO last May. The agreement was subsequently amended that they could delay the top-up..

Since you are supposed to top up money as per agreement during mid last year. It does seem like Covid-19 is used as nothing but a convenient excuse to escape your obligations!

[karlmarx]

I think Convid 19 will highlight and maybe test SG REIT models. Especially hospitality and retail and especially one with a master lease.

SG REITs operates with minimum cash balance and payout all available cash. Everything is ok when cash is flowing, what will happen if cash stop flowing? You are only as strong as your tenants are, strong sponsor or not. Who is paying the rent? Who say master lease won't walk away when they are in the same situation?

One golden rule of investing or in life is having cash reserves for bad times!

I don't know why the drop in REIT but I do know, REIT is a very crowded place before convid 19 so I am not surprise.

https://sginvestors.io/market/sgx-share-...its-sector

Almost exactly as I said it. Good luck.

https://links.sgx.com/FileOpen/EHT%20-%2...eID=602009

EHT didn't go bust overnight. There were numerous reasons/warning -- all of them highlighted in this thread -- signs for investors to be highly wary of EHT.

Those that bought the share in the 40/50 cents range would have been aware of those very widely publicized issues that caused the share price to fall so much since IPO.

Lesson: Be very careful when chasing for yield.

[dreamybear]

Less fortunate are the ones who followed the teachings of such course sellers and used margin to buy REITs .... Now these people are conveniently pivoting and promoting their trading courses. Caveat emptor.

Lesson: Be very careful when chasing for yield.

My first REIT experience was Saizen Reit* and I believe my entire investment was decimated. Admittedly, my foray was due to being a young investor and FOMO(hot topic on REIT being a good source of passive income - this is an especially attractive proposition for a person in the IT industry where jobs frequently get replaced). I have been haunted by that miserable experience.

*I can't really recall, but I think one of the main(or the main) selling points for Saizen was yield

However, I now understand the "motivation" of REITs after reading karlmarx's masterpiece.

I think those course trainers are smart enough to know the strong local demand for passive income or F.I.R.E.(nowadays), just like those real estate agents marketing rental investment properties. The REITs model provides regular streams of income, and attracts investors with the idea of becoming "tiny landlords" without the need to handle the tenants, in a stable law-based environment.  So strong market demand, coupled with the trainer's extensive investment book knowledge/passion, more flexible work arrangements than a regular job and good income ..... voila, it's a perfect match.    

By reading what those trainers wrote, I somehow get the feeling their industry knowledge does not seem to be as superior as their investment theoretical knowledge. I am impressed by their multitude of investment know-hows(valuation ratios, etc), but find they provide very limited information or none at all in terms of for e.g., how a SG company benchmark agst its local / global competitors, what has been done throughout the years of listing for a company to become best-in-class in the industry.    

From my investing experience, I think accumulating wealth via investing(be it to make millions or just having a reasonable regular passive stream of income) is not a passive process at all. There is a lot of work involved, not only in researching and waiting for a good buy but constantly be in the know what is happening around the world and whether or how your investment will be affected as a result. It is at best another part time job, e.g. an office worker doing Grab or giving tuition after work. Effort is expected, it is not simply just buying the REIT/shares and looking at the yearly bank statement for the dividends credited.

[karlmarx]

Salesmen everywhere are the same. They prey on your hopes (you can have lots of passive income like me, which will allow you to fire your crappy boss and colleagues), and fears (you know your job is crap and it will only be a matter of time before you lose it).

REITs are a good vehicle for the so-called trainers to sell their courses; real estate is well-understood by most adults and so does not require much effort in the explanation of its attractiveness. The general appreciation of REITS over the past 10-years also makes it easy to convince students that investing in REITs are fool-proof. So why not throw in some leverage as well?

Picking companies is more difficult than just making a diversified REIT portfolio, as the former requires analysis of the company, business, industry, management, which is a separate skill and requires a much larger knowledge base. Unless they have these, trainers are unlikely to have a record of superior portfolio performance, which is the whole point of making picks. Reciting the texts of Ben Graham, Warren Buffet, etc are very different from being able to deliver their types of results.

===

The easiest way to accumulate wealth is to do so from employment. Upgrade your skills to market needs, and take crap from your bosses and colleagues. That's what everyone does, so there's no shame in that. And that can support a pretty okay lifestyle.

If you want to earn 'passive income' from owning higher-risk securities (stocks, REITs, bonds), then you must acknowledge that you are engaging in a somewhat entrepreneurial activity; there is risk of loss, so effort is required to prevent loss, or make gains.

If that sounds like too much to manage, there is the option of placing your money in passive instruments like endowments, or index ETFs. They won't make you a fortune, but you are more likely to come out ahead, in the long-term, of those who try to make picks with little ability.

Even after spending so much time and effort, I still think that picking securities -- with an aim of making a fortune -- is incredibly difficult.

[holymage]

The low interest rates environment has resulted in a race for yields by investors. Leveraging on REITs to juice up income returns, to me, is no different from leveraging on indexes to juice up capital returns. Everything will seem perfect like it does for the past 10 years, until a black swan appears and it is shown to be a mirage. Same goes for real estate investing, especially in Hong Kong, China, Canada, Australia, US, simply ridiculous valuations.

The problem is, the common folk desires higher returns, yet are unwilling to put up the necessary effort, resorted to paying for courses promising easy methods to build their wealth. And people actually believed in it.

Forming a diversified REIT portfolio could be as challenging as picking individual companies. Why? Because the counterparty tenants could come from various industries and that requires the investor to study whether there will be impact to the REIT. For example, Sabana was heavily impacted by the oil and gas downturn, if the investor didn't see this coming, his portfolio will be impacted as well. REITs requires analysis of the REIT business itself, its management and underlying industries etc, no different.

Lastly, investing in index funds or ETF may not necessary gain you good returns, if the investor overpays. Just look at the S&P500 returns from 2000 to 2007, the returns (dividends inclusive) for the investor at the peak is a merely 1%+ for 8 years!!

[karlmarx]

The low interest rate environment has been a convenient bogeyman to frighten people into buying higher-yielding investment products. While interest rates have been low for years, so have inflation rates. And when interest rates are high many years ago, so were inflation rates.

So allowing your savings to be 'eaten by inflation' is not something new that this generation has to deal with.

The average person has three options for dealing with this:

1) Put it in a fixed deposit, where there is a 100% chance of earning 15%, over 10 years.

2) Buy an endowment, where there is a 100% chance of earning 30%, over 10 years.

3) Pick stocks, where, as a bobo investor, there is say, a 75% chance of losing 50%, or 25% of earning 50%, over 10 years.

So if you want more, you sacrifice liquidity by buying structured products, take more risk by picking stocks, and/or mitigate the risk of making picks by performing due diligence.

Probably the worst case involves paying exorbitant course fees, and still lose money.

===

Investing in Index ETF has to be paired with some form of dollar cost averaging (monthly, quarterly, or bi-yearly). If the investor wants to make a lump sum bet, then he/she has to recognise the risk of doing so, which includes overpaying.

Even if an investor bought an STI ETF over the past 10 years, the investor may not make much in capital gain, but will have received about 3% of dividends a year, which pretty much tracts Singapore's GDP growth rate. If an investor is expecting more than that, he/she should look for another country which can produce higher growth, buy its stock index ETF, and bear the forex risk.

The world isn't fair. But in investment markets, it looks to me that over the long-term you are more likely to be fairly rewarded for the risk you take and the due diligence you conduct.

If everyone could spend a weekend to learn investing, and go on to make 10-15% p.a. on their capital ad infinitum, Josephine Teo and her fellow ministers will not have to worry about Singaporeans over 40 losing their jobs.