After a few requests by readers for me to blog about my 2012 full year passive income from S-REITs, I was pleasantly surprised to receive advice from a reader that I should not blog about it. Since I was of two minds whether to go ahead, I started a poll on 11 December to see what readers want. The poll ran for two weeks, ending on Christmas Day.
Readers have spoken and here is the blog post by popular demand.
This year, I sold some of my investments in S-REITs as their unit prices moved higher and their distribution yields compressed. Of course, the plan is to possibly increase my long exposure again should their unit prices experience any significant correction. If their unit prices were to continue moving higher, my portfolio would continue to benefit from capital gains.
However, higher unit prices would create a problem as my remaining long positions in S-REITs are part of my core investments for income which means that if I were to further divest even partially, I might not be able to achieve my target annual passive income level. Some might say that this is a happy problem to have but it remains a problem.
I also made an opportunistic purchase of units in Saizen REIT when its unit price plunged 15% as its warrants expired middle of the year. So, I was able to increase my long exposure to the REIT again at a relatively attractive average price, locking in a rather high distribution yield of 9+% on cost, almost quadrupling my position in the REIT within a few days. This highlights the importance of having a war chest ready to seize opportunities when they present themselves. Saizen REIT is once again an important part of my portfolio of investments for income.
|An apartment building in Japan owned by Saizen REIT.|
My five largest investments in S-REITs are now:
1. AIMS AMP Capital Industrial REIT
2. Sabana REIT
3. Saizen REIT
4. First REIT
5. Lippo Malls Indonesia Retail Trust
I also have five smaller long positions in:
6. Cache Logistics Trust (CLT)
7. Cambridge Industrial Trust (CIT)
8. Frasers Commercial Trust (FCOT)
9. Suntec REIT
10. Keppel REIT (formerly K-REIT)
An advance distribution from First REIT was paid out on 26 December because of a private placement and this bumps up (and distorts) total income received in 2012 from S-REITs a bit.
Overall, despite some divestments to lock in capital gains, my larger investments in Saizen REIT (due to aggressive buying as its unit price plunged middle of the year) and LMIR (due to aggressive buying of nil-paid rights a year ago) resulted in higher total income from S-REITs this year.
Total income received from S-REITs for the year 2012:
In the year 2013, with regards to S-REITs, I will fill my war chest while waiting for potential rights issues as well as opportunities to buy more at lower prices.
With First REIT having made an advance distribution, I could receive less income from the REIT in 2013. There is also possible dilution of DPU from First REIT's private placement. The DPU dilutive actions of LMIR this year and the weakening JPY which should impact income from Saizen REIT in S$ negatively would all put some downward pressure on my total passive income from S-REITs in 2013.
Definitely, it is almost impossible now to get a 10% or even a 9% distribution yield from S-REITs. We could in fact continue to see yield compression as central banks around the world are bent on increasing monetary supply.
Any correction in the unit prices of S-REITs would probably see opportunistic buying as they remain a compelling proposition in the current low interest rate environment. Sentiments having turned decidedly positive on S-REITs. Mean reversions could become less probable.
To all readers on the same journey to passive income generation, this has been a very good year for our portfolio of S-REITs.
1. 2011 full year passive income from S-REITs.
2. $120K annual passive income from S-REITs next?
3. Saizen REIT: Why did I buy and would I buy more?
4. Staying positive on S-REITs.
5. Made and still making money from S-REITs.
6. REITs: When to buy?
7. Never lose money in real estate and REITs?