Jul 3, 20236 min read

REITS STILL BLEED RED IN 1H 2023 WHILE CENTRAL BANKERS ARE COMATOSE

07/2023

The last week of June 2023 saw four of the world’s most powerful central bankers hold a rare public discussion in Sintra, Portugal. While the underlying messages were quite frightening, what is even more frightening is - Federal Reserve Chairman Powell and his peers may have admitted that they don’t know what is happening now in the fight against inflation as the FTSE ST Reit index ended 1H2023 at 712.23, down 12.84 points or 1.77% even as the drums of peaking interest rates grow lounder.

It has been 15 months since the Federal Reserve started the fastest and largest interest rates in history on 17 Mar 2022. This beats even the latest movie of Fast & Furious as the FTSE ST REIT index has crashed 160.86 points or down 18.42% from the previous peak at 5 Apr 2022. This is the LARGEST S-REIT correction at negative 18.42% (minus the 2007 Global Financial Crisis and 2020 Pandemic Crisis) outside of crisis situations. This is also the LONGEST S-REIT correction at 15 months!

Table 1 – The Worst 5 S-REIT contractions in history through Crisis & Corrections

It is amazing that Federal Reserve Chairman Powell and his Central Banking peers have continued to couch their messages with confusion – “It’s great that economies have proven resilient since interest rates tighten since 2022, and it’s a nice surprise that unemployment remains so low”.

Translation: That’s not what Central Bankers have expected and we’re not totally sure why the economy hasn’t tanked or even go into a technical recession even after the fastest and largest interest rates in history!

The next confusing message after 15 months of heightened interest rates – “we are data-dependent on our next course of action”.

Translation: We are not too sure about our own forecasts or dot-plot anymore. We still need more clues from what’s happening on the ground, even after 15 months!

For me, the most frightening confusing message is – “It won’t happen before 2025” when Chairman Powell responded to the question of when inflation will return to the Federal Reserve long-term target of 2%. Does this mean that interest rates will continue to stay elevated in 2H2023 and into 2024? We will delve into this in detail in our next GCP Global REITS Quarterly Class on 9 Sep 2023

Table 2 – Top 10 Best Performing REITS in 1H2023

Table 2 above shows the Top 10 Best Performing REITS in 1H2023

Table 3 – Keppel DC where we recommended to GCP Global investors to drip and buy below $1.80

The top performing REIT was Keppel DC Reit which we have highlighted in our Quarterly REITs class as a STRONG BUY since last year as the share price dropped from $3 to below $1.80. We had established that other than stretched valuations, there was nothing wrong with Keppel DC various expansions into Guangdong 1, 2 or 3 data centres in China. Moreover, its various AEI initiatives added to NPI and DPU from 2022 onwards. Our entry price below $1.80 in Keppel DC REIT have once again proven to be prescient and accurate to the core. Keppel DC REIT is the BEST Performing REIT in 1Q2023. Want to know when to take profits on Keppel DC REIT as well as other REITS?

Join us for our next Quarterly REITS class at https://gcpglobalsg.wixsite.com/gcpglobal/events-1/reits-in-the-spectre-of-peak-interest-rates

Table 4 – Parkway Life Reit where we recommended to GCP Global investors to sell at $5 and above and buy back below $3.70

Parkway Life REIT was another top performing REIT that we have highlighted in our Quarterly REITs class as a STRONG BUY. We had previously called for a SELL above $5 last year when Parkway Life REIT went above $5. Thereafter, the share price collapsed from $5 to below $3.70. It was then that we recommended to buy in our 25 February 2023 Quarterly REITS Class. This was another case of extreme price action that we specialise in and discussed in detail in our Quarterly REITS class for our investors who are mainly Family Offices, HNIs and UHNI investors.

Table 5 – Worst 10 Performing REITS in 1H2023

Equally proud, Table 5 shows the Worst 10 Performing REITs in 1Q2023. We had forewarned on All US Office REITs, Elite Commercial Reit, Lippomalls, EC World Reit, Digital Core Reit and IREIT in our Quarterly REIT classes and in our weekly YouTube videos.

Notably, one of the Worst 10 Performing REITs was IREIT. IREIT had to go back to shareholders AGAIN to raise funds for its acquisition of 17 Retail properties in France. Significantly, IREIT highlighted that the Initial NPI Yield based on Purchase Consideration was a high 7.9%. Yet, when I worked out its Effective NPI Yield based on Total Cost, it was a whopping 1.5% lower! Not surprisingly, it was another costly acquisition, funded by a severe near-10% discount to the VWAP and having minimal positive minority shareholders enhancement! No wonder then the share price took a hammering from 50.5 cents.

Clearly,

1. Investing in REITs is about picking the right REITs for your investment portfolio. Being able to pick the Top 10 REITs in 1Q2023 for a $1 million investment would have yield a return of $62,300 in capital gain whereas that same $1 million investment, wrongly invested in the Worst 10 Performing REITs in 1Q2023 would have wiped off $272,300 from your capital of $1,000,000. Want to prepare your REITs portfolio for a profitable and defensive outing in 2Q2023 and the rest of the year? Join us for REITS IN THE SPECTRE OF PEAK INTEREST RATES

S-REITs probably has hit the low of 662.9 points on Fri 21 Oct 2022, just 1 day after we had called a LOW in our Business Times Interview on Thu 20 Oct 2022. The retest of the low of 699.17 reached on Monday 26 Jun 2023, if holds, will be another indicative sign that the bottom of S-REITS may have been seen. Wanna know what other indicators confirming a BOTTOM IN S-REITS has been reached? Sign up for our Early Bird Special for our next Quarterly REITS class at https://gcpglobalsg.wixsite.com/gcpglobal/events-1/reits-in-the-spectre-of-peak-interest-rates

Table 6– Our Business Times Interview on Thu 20 Oct 2022. 1 day later, the S-REIT market hit its LOW

Smart and profitable investing in REITs is as much a creative and intuitive process as it is an analytical process. Thus, we have always trained our REIT investor students to think in both creative as well as analytical way, by making assumptions that have high accuracy of happening and develop a great sense of timing. We have always emphasized that a savvy sagacious investor will depend on your ability to synthesize information and to see things that no one is able to see or refuse to see/imagine at the right timing.

And right timing is a concept that a lot of market “experts” and analysts have proffered as very difficult or impossible.

Afterall, by definition, if you want to earn outsized returns that no one is earning, you have to do things that others will not do/lazy to do, at the right time. JOIN US TO LEARN THIS DIFFICULT SKILL

OUR LATEST MEDIA INTERVIEW ON REITS, TECHNOLOGY & DISRUPTOR INNOVATORS –

1. Prospects for S-REITs in 2023 – Money Mind Interview Sat 28 Jan 2023

https://youtu.be/rmTnQkns_4g

2. S-REITS UNDER SEVERE STRESS – Our Lianhe Zaobao Interview Wed 16 Nov 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_interview-reits-inverse-activity-6998608672159412224-N3q-?utm_source=share&utm_medium=member_desktop

3. UPCOMING Q3 RESULTS WILL BE PIVOTAL FOR S-REITS FOLLOWING ONE OF THE WORST ROUTS – Our Business Time Interview Thu 20 Oct 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_interview-business-reits-activity-6988662368247414785-ecfD?utm_source=share&utm_medium=member_desktop

4. IS THAT WHY ASCENDAS REIT SURGED TODAY? Our Lianhe Zaobao Interview Fri 9 SEP 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_is-that-why-ascendas-reit-surged-today-our-activity-6973979178803093504-HyJB?utm_source=share&utm_medium=member_desktop

5. REITS AS GREAT INVESTMENTS – National Day Interview 9 Aug 2022, BIZ TECH

https://www.linkedin.com/posts/gabriel-yap-8745b822_tech-interview-reits-ugcPost-6962685236212064256-oVyj?utm_source=share&utm_medium=member_desktop

6. S-REITS MARKET MUST STEP UP – Our Business Time Interview 9 Jul 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_s-reits-market-must-step-up-our-business-activity-6954980627293097984-tWe6?utm_source=share&utm_medium=member_deskt

BETTER INVESTOR EDUCATION AND PROTECTION FOR A THRIVING REIT MARKET – 26 May 2022, BUSINESS TIMES