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2016 full year passive income from S-REITs.

Thursday, December 22, 2016


In this final blog on S-REITs in 2016, I want to record a heart felt good bye to Saizen REIT as we knew it. The REIT was one of my largest investments in the S-REITs universe for many years. It was an asset play and an income stock that amply rewarded my strategy of being paid while I waited.

Now, this brings us nicely to the importance of investing in income producing assets. For many of us, not having passive income means working till the day we die. It would also probably mean having a weaker ability to cope with very real financial challenges in life such as inflation.


Warren Buffett once said that we should not depend on a single income and that we should make investment to create a second source. To me,  quite simply, this means investing for income, which is what I have been doing mostly.


If you are a regular reader, I hope my experience will keep you pumped up for the new year. 

If you are a new reader, I hope my experience inspires you to consider investing for income (if you are not doing it already) for a financially more secure future.

2016 full year income from S-REITs.

In 2H 2016, I added to my investment in Soilbuild REIT due to a rights issue. This was at 63c per rights unit. I took up my entitlement and also applied for excess rights. From that exercise, I increased my investment in the REIT by more than 10%.

Some details:

1. Issue of 94,353,672 new units in Soilbuild REIT on the basis of 1 New Unit for every 10 existing units in Soilbuild REIT. 

2. Funds to partially finance the purchase of a building, 2 Bukit Batok St 23, which has an initial annual rental of $8 million. 






Another bit of news of interest to me was the reverse takeover (RTO) of Saizen REIT by Sime Darby. As I am still holding on to my original investment in Saizen REIT, I received another distribution before the RTO was effected. It means that I received a tidy 5 figure sum which, of course, made me happy.

I said this earlier in August:

"We will be paid 9.87c a unit and still get to keep our investment in the REIT."


I haven't been doing much with regards to my investments in S-REITs. 

Mostly, I am just collecting dividends regularly and letting professional managers take care of the day to day operations.


Total income from S-REITs in 2016: 

S$ 452,243.52

This figure includes the bumper distribution from Saizen REIT which will not be repeated in future.

If we were to exclude all income distributions from Saizen REIT this year, total income from S-REITs in 2016 would only be:

S$ 66,933.70

Q
uite shocking how much smaller the number is, isn't it? This shows how big an investment I had in Saizen REIT. 

The lower income, without any contribution from Saizen REIT, translates to S$ 5,577.80 a month.

This is still quite comfortable for one person to live off but unless I can make up for it somewhere, this lower income from my investments in S-REITs is something I would have to live with in future. 

Of course, if you have been following my blog, you would know what I have been doing to make up for the shortfall.

A few years back, I had 5 relatively large investments in S-REITs. Today, only 2 are left.

If you are wondering which 2, with the value of my investment in Saizen REIT drastically reduced in the past year, 


AIMS AMP Capital Industrial REIT 
and 
First REIT 

are now the only S-REITs which have significantly more weight in my portfolio.

Some might remember that, a few years ago, I drastically reduced my exposure to LMIR and Sabana REIT for different reasons, locking in some decent gains in the process. So, my S-REIT portfolio has been shrinking in size for some time.

With interest rates probably going higher, there is a reasonable need to be cautious when investing in S-REITs but there is no need to be pessimistic.

In response to a reader who was rather pessimistic:


The worry is probably common amongst investors.

This was a conversation with a reader who raised two questions:


What do I find more important?
1. Relatively reasonable gearing.
2. Relatively strong cash flow.
3. Relatively good manager.

(If you want to listen to AK talking to himself a bit more, go to related post #3 at the end of the blog.)

That ends this blog post and I will share some thoughts on my non-REITs portfolio, hopefully, before the year ends.
Related posts:

29 comments:

SGDividends said...

Wanted to ask if u would be participating in Sabana rights but now I know u have divested ..

Happydoggy said...

OMG. my total dividend for FY 2016 from S-reits is only a pathetic SGD 462. It really pales in comparison to yours. I am still trying very hard to build my base. :(

Gark said...

AAReit has executed interest rate swaps on their remaining floating interest rate loans and thus have boosted total fixed interest rate from 67.5% to effective 86.8% on all loans 18 October 2016.

I think the management is quite proactive in this.

AK71 said...

Hi SGD,

I divested more than 90% of my investment in Sabana REIT some time ago. You might want to read my past blog posts on the REIT on why I did what I did.

Whatever remains of my investment in the REIT is free of cost.

I don't mind taking part in the rights issue.

AK71 said...

Hi HD,

I shared a more realistic 5 figure number in the blog. ;)

Rome wasn't built in a day. Gambatte! :)

AK71 said...

Hi Gark,

Thanks for the update. :)

MPC said...

Hi AK71,

I remember you have some APTT share, the price has kept dropping,have you disposed them? Also, are you applying for the excess right for Sabana Reit?

AK71 said...

Hi MPC,

APTT is under my non-REITs portfolio. Most of my position is a legacy from MIIF days. Largely free of cost. As long as it generates income, I am OK to continue holding.

No harm trying for excess rights.

Investminds said...

very impressive income from S-Reit. I have been reading your blogs for the past 3 years. Your blog has inspire me to invest for passive income. Thanks for the inspiring blog AK.

AK71 said...

Hi IM,

I am glad. Gambatte. :)

AK71 said...

Media Release

AA REIT achieves TOP for 30 & 32 Tuas West Road redevelopment

Singapore, 28 December 2016 – AIMS AMP Capital Industrial REIT Management Limited (the Manager) as manager of AIMS AMP Capital Industrial REIT (AA REIT) today announced it has received the Temporary Occupation Permit (TOP) for its redevelopment at 30 & 32 Tuas West Road on 27 December 2016.

The redevelopment has transformed former two three-storey detached industrial buildings with an under-utilised plot ratio into a five-storey ramp-up warehouse facility with exclusive loading and unloading bays at each level.

The redeveloped 30 & 32 Tuas West Road is valued at S$60.7 million1, up more than four times from its former value S$14.1 million2. The S$41.7 million redevelopment nearly doubles the gross floor area from 159,717 sqft to 288,663 sqft3, with the increase in built plot ratio from 1.15 to 2.07.

The entire property at 30 & 32 Tuas West Road is pre-leased to SGX-listed CWT Limited, a leading Singapore logistics company. The completed development will deliver S$4.15 million in rental income annually in year one with fixed annual rent escalations over the term of the lease – up from S$0.82 million4 in annual rental income prior to the redevelopment. AA REIT expects a full quarter’s contribution in 1Q FY2018.

sy sy said...

hi AK

happy new year and wish u earn more more $ ;)

i know ur blog since early 2016 & sort of a silent reader also.
bcos of i no use facebook, so dont know how to follow ur update.
the only thing i do is to check ur blog almost everyday see got any news updates or not...
i really learn a lot a lot of investing knowledge & also cpf oa, sa account benefits from ur blog.

i really appreciate ur effort to have conversation with ur ownself.
i hope & wish u can continue to talk to urself for the coming days & day & years & years....

many many thanks and pardon for my bad english :)

btw, how come u now seldom post ur foodie news?
just kaypoh only...hehehe

sy sy said...

hi AK

i remember last time ur blog left hand side got a list of ur old blog stories.
which i can select the years & months & the title.
but now seems like gone liao...
is it u moved it to other special hidden button which i can't find, maybe u can teach me how to find that.

many thanks



AK71 said...

Hi sy sy,

As my blog grows older and the blog posts became many more, that way of displaying past blog posts became very cluttered. I cleaned it up by using a simpler way.

You will see "Archives of ASSI" in the left sidebar now. It doesn't provide as much information though. Click on it and it shows the months and how many blog posts in each month.

AK71 said...

Hi sy sy,

Just saw your comment before this one.

I share my foodie photos in FB quite often but rarely here in my blog. FB makes it very easy to share photos. I have grown lazy. ;p

I am glad you have enjoyed my blog and found it useful. :)

HAPPY NEW YEAR!

AK71 said...

Hi sy sy,

OK, I have brought back the old style of displaying past blog posts in the left side bar. :)

This style, I guess, is better for all new readers. Thanks for letting me know. :)

AK71 said...

Hi sy sy,

I must apologise. I brought back the old style and realised clicking on past years would load 50 blog posts each time.

I now remember another reason why I changed the style because a reader told me before about this problem. Computer hang. -.-"

Using the old style, current year is OK but past years not good.

The new style makes hanging less likely. Loads past blog posts according to the week chosen. :)

AK71 said...

For those who are interested in the Archives of ASSI, past blog posts now load week by week.

The old style of archiving created a problem for some as their computer hanged because the system would try to load 50 past blog posts each time!

Hope this is an improvement for anyone who was affected.

Archives of ASSI is found in the left side bar of the blog.

sy sy said...

hi AK

thanks for fast reply.
i thought u said now u getting lazy liao.... hehehehe

i found the archive liao, but when i use hp to check ur blog, i cant see the archive.
only can see that archive button when i use pc to check ur blog.

anyway thanks for all ur effort make for us, reader.

take care

AK71 said...

Hi sy sy,

Oops. OK, you should be able to see it on your mobile phone now. :)

keng said...

Hi AK,

I just attended a seminar hosted by SGX and SIAS (Uncovering Value in Small and Mid Cap Stocks (REITs)).

The assistant fund manager for AA reit was one of the presenters. I must say I am impressed with how AA reit grows its DPU.

I have read your many topics on AA as well as browse through its reports, but nothing beats hearing from the horse's mouth. The presenter even showed actual floor plans of their asset redevelopment in the presentation!

Hope to make time to attend their AGM this year. Never attend any AGM before.

相见恨晚。。。

Going to look for an opportunity to add to my measley 3000 AA shares! 8.4% yield at current price looks good enough for me.
Huat ah!

AK71 said...

Hi keng,

AIMS AMP Capital Industrial REIT is my largest investment in the S-REIT universe. I don't see this changing anytime soon as I have said before that there is a chance AA REIT is a mini A-REIT in the making. Mr. Market likes paying a premium for pedigree and AA REIT is still trading at a discount. ;p

You might be interested in this:
AIMS AMP Capital Industrial REIT: A private tour.

keng said...

Yup, I have read that post. My thinking at that time was 'wow, AK must be a substantial shareholder (slightly shy of 5%) of AA' ;p

There is still some concern that rising interest rates will make REITs less attractive due to gearing, but if I am to stay invested for > 20 years, I will probably witness another decline of interest rates.
Long term holdings to me won't seem to be much of an issue, all else remaining the same. Hopefully the AA management team for the next 20 years holds the same management philosophy.

AK71 said...

Hi keng,

Me? Own 5% of AA REIT? I thought I was mental, you are not much better. LOL. ;p

It makes sense that investing in property for income is necessarily a long term commitment. :)

Cindy said...

HI AK

How to find out the dividend distribution yield for AA Reit at the current price of $1.34?

AK71 said...

Hi Cindy,

I give you some homework to do. ;)

Read this blog post and you will know the method:
AA REIT: 3Q FY2013.

AK71 said...

Soilbuild REIT (UPDATE):

Acquisition of Bukit Batok Connection will offset the negative effect of Loyang Way but weighed down by the higher unit base.

The manager has taken possession of the Loyang Way property and 4.4 months of rental deposit remains as at end of December 2016. We understand from the manager that divestment of the property is a possible outcome. However, it is limited to disposal to a third party as JTC is not prepared to buy it back. As the property is slated for waterfront users, the manager is seeking approval from JTC to allow non-waterfront users from sectors such as construction or fabrication, to lease the property.

Revaluation loss of S$50.9mn to investment properties was substantially due to Loyang Way (S$32mn). Other properties were West Park BizCentral (S$13mn) and Tuas Connection (S$4mn). Resulting gearing was pushed to 37.6% from 37.0%.

Source: Phillip Securitites


AK says:
If Loyang Way remains unproductive, my expectation is for DPU per quarter to reduce some 10% to 1.4c. How would this affect the unit price? I don't know but I have a hunch that Mr. Market has already priced this in with a unit price of 64c which means we are looking at a prospective distribution yield of 8.75%.


AK71 said...

SINGAPORE (March 10): The manager of Saizen REIT says the proposed reverse takeover transaction for industrial properties in Australia under Sime Darby Property Singapore has been terminated.

Japan Residential Assets Manager says further discussions between the two parties will no longer proceed because is had become impossible to complete the proposed RTO deal by March 31, the long-stop date of the implementation agreement.

No other reasons were given in its filing after the market closed on Friday.

To recap, Japan Residential Assets Manager announced on Oct 11 that Saizen REIT will acquire industrial properties in Australia from Sime Darby Property Singapore as part of its reverse takeover by the latter.

The acquisition deal came under the Aug 15 framework agreement entered into by both parties which lapsed on Oct 1 but seemed to have been revived.

The properties to be injected into Saizen REIT are industrial assets in Australia currently held by Hastings Deering (Australia) Limited (HDAL) and are master leased to HDAL.

They comprise 20 industrial properties located in Australia, with 18 properties in Queensland and two properties in the Northern Territory, with total land area of one million square metres.

SDPSL and HDAL are indirect wholly-owned subsidiaries of Bursa Malaysia-listed Sime Darby Berhad.

Units of Saizen REIT closed flat at 5 cents on Friday.

Source: The EDGE

AK71 said...

Saizen Reit's manager said that it is not possible to complete the proposed transaction by the long-stop date of the implementation agreement, or March 31, 2017.

"The manager will commence liquidation proceedings for Saizen Reit upon the mutual termination of the implementation agreement, and will make relevant announcements to keep unit-holders updated as appropriate on the next steps," it said.

Source:
http://www.businesstimes.com.sg/companies-markets/hot-stock-saizen-reit-down-42-as-rto-deal-falls-through

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