01/2019
SREITS has had one of the worst performing year in 2018 with the FTSTI Reit Index off 9.164% to close at 777.45 while only 2 (namely Mapletree Commercial Trust and Capitaland Mall Trust) out of the 37 SREITS under our coverage, posting positive returns in 2018.
However, if there is any consolation, it is that SREITS have continued to prove that they are more resilient than the FTSTI again, outperforming it by 3.756% if you add back the average dividend yield of 6.3% as compared to the average dividend yield of FTSTI stocks of 3.4%.
As in our quarterly REITS class, we have always highlighted that the ability of SREITS to deliver outperformance should not be based on growth in revenue or NPI or Distributable Income, but on the DPU. https://gcpglobalsg.wixsite.com/gcpglobal/blogs/the-ability-to-deliver-dpu-growth-is-the-key-in-sreits-outperformance-in-3q2017. 2018 set of results clearly underscored what we have been teaching for the past decade.
2018 will definitely go down as one of the most interesting learning year for the smart REIT investor. Some of the most important lessons learned were - When REITS undertake huge acquisition deals or via financing by dilutive fund raising exercises, these have led to Value Destruction for shareholders.
REIT investors can lost as much as 55% as the Worst Performer Lippomalls has shown. In fact, an analysis into the 10 Worst Performers for 2018 revealed that most of these REITS delivered either negative YoY OR QoQ DPU growth.
The Worst Performing REIT goes to Lippomalls which saw its DPU plunged from 0.9 cents in 1Q2018 to just 0.59 cents in its latest 3Q2018 results. We have forewarned our students in our Quarterly REITS classes and Master classes since 2017 to avoid Lippomalls as it has steadily doubled its number of assets to 30 in the course of its listing, but the DPU delivered continued to be the reverse mirror-image of that.
Lippomalls have gone on aggressive asset acquisitions since 2008 increasing its portfolio size from 15 and value from Rp 6.4 billion to a portfolio size of 30 and value of Rp 19.5 billion in 2017. But alas, such aggressive asset acquisitions partly financed by expensive PERPS at 7% do not lead to accretive results.
The 2nd Worst Performer was OUE Commercial Reit which undertook one of the most dilutive rights issue in Singapore’s REIT history with a 83 for 100 rights at 45.6 cents to raise $567.5 million to help purchase OUE Downtown for $908 million. To add fuel to fire, the acquisition of OUE Downtown was one of the rare SREIT acquisitions in SREIT history as it was terribly DPU negative-accretive as DPU was projected to fall from 4.67 cents to 3.54 cents, according to its rights circular. It is indeed a wonder why such an acquisition even took place at this price and timing!
The 3rd Worst Performer was newbie Keppel KBS Reit, another REIT that we have informed our investee students to AVOID/SHORT since its IPO as its assets came from KBS Strategic Opportunity Fund, a fund managed by KBS. This sale of assets which gave birth to Keppel KBS Reit listing had resulted in a huge profit for the KBS Strategic Opportunity Fund shareholders which received a near 40% return based on the US$3.61 special dividend payout and an increase (even after the special dividend) in the fund’s NAV post the sale at end-2017.
We had raised the question if Keppel KBS Reit had indeed overpaid for its IPO assets in our classes.
KBS’s success was like the Korean KBS TV station with a wonder hit drama. It was so fantastic that a second KBS fund is planning to divest its assets into another KBS-sponsored REIT, to be known as Prime Reit for listing in 2019, based on the latest market talk.
The Top Performing REIT for 2018 goes to Mapletree Commercial Trust which posted DPU of 2.23, 2.23 and 2.27 for the past 3 quarters. The 2nd Best Performing REIT was Capitaland Mall Trust which registered DPU of 2.78, 2.81 and 2.92 for the past 3 quarters. Not surprisingly, these are the only 2 SREITS which registered positive return in 2018 and both posted increasing trend of DPU growth, underlying that it is the ability of REITS to deliver positive DPU growth that holds the key for outperformance again in 2018 as it has been in the past 5 years. This is an area of our expertise that we dice and slice, toss and answer in our Quarterly REITS and Master REITS classes.
The huge divergence in performances of the Worst 10 vs the Top 10 REITS clearly illustrate that those REITS that do not appreciate the needs of REIT investors looking for steady and consistent returns via DPU, have and will not do well. REIT managers can have excuses and attribute lower DPUs to higher interest expenses or what-not, but if they do not deliver positive DPU growth, the REIT price will suffer along with the investors.
Over the past decade, we have educated more than 6,000 HNI and UHNI investors, boutique funds and Family Offices across Asia in our various Quarterly REITS and Master REITS classes. The 3 SREITS that we presented and hosted at our Symposium & Investors Meet events attended by close to 200+ investors have done well in 2018.
Some of GCP Global Highlights in 2018 -
ESR-Reit surges to historic highs in volumes as share price pierced 51 cents just 9 days after GCP Global Symposium & Investors Meet
Frasers Centrepoint Trust ends 2018 as the 4th Best Performing Reit – GCP Global is privileged to have presented FCT to our investor students in our Symposium & Investor Meet, another of our Winning Reit.
https://www.facebook.com/gabrielyap17/videos/370597213697450/
EC World Reit ends 2018 as one of the most Resilent REIT https://www.facebook.com/gabrielyap17/videos/653624365034454/
Investors Trip to Hangzhou for GCP Global investor students
https://www.facebook.com/gabrielyap17/videos/1149532861866643/
In 2019, we expect to present more winners – do stay tune for our upcoming events.
From REITS to Riches, our tagline – it is indeed both hard and consistent work, year-in, year-out, something that we have done for the past 3 decades.
Happy New Year!
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