Author: LieuCF

Education REIT with international schools as its real estate properties portfolio?

You bet.

And since education is one of the modern day necessity and there’s no end to parents who are able and equally willing to send their kids to international school (even though fees at international schools hike by double digit every year), this new class of REITs holding education-related assets will emerge as more resilient, if not as defensive as healthcare REITs.

Let’s face it, medical and education fees are probably the top two sectors where businesses can raise fees every year without so-called ‘losing’ customers. Complain till the cows come home, but if you can’t afford the high fees imposed by businesses in these 2 sectors, you find a cheaper alternative. The people who can afford them will still flock to these businesses.

Furthermore, it is on triple net lease for this very unlisted (unfortunately) education REIT!

I’d say, this article does give me some positive insights on how it is going to grow its DPU beyond 10.5, which has been static for some year.

The answer lies in turnover rent.

Read more for details – straight from the horses (CEO) mouth.

Although Malaysia REIT sector only has less than 20 counters, it is not ‘stagnant’ despite what some people think. Just last month (Aug ’17) when we talked about growth, this month (Sept), another REIT has announced a high quality asset acquisition. Also, analysts expect MQREIT to have any round of asset acquisition in 2018.

Important updates this month include:

• Pavilion REIT and KLCCP Stapled REIT seeing some earnings decline due to tenant relocation
• Oversupply of offices and retail spaces is still persistent
• IGBREIT will be your best bet for exposure to retail REITs (see why below)
• MQREIT next acquisition > Menara Celcom (see details below)
• ARREIT acquire Vista Tower from Intermark S/B, the last piece of property within Intermark integrated development to be sold by Blackrock

Here are a few salient points on the new acquisition – Pavilion Elite

• To complete by Q4 2017
• Funded by debt ; gearing up marginally circa 2-3%
• Net Property Yield est 5.95% via GRR for first 4 years
• Lease = 10 + 10 years

Here are a few salient points on the new acquisition – which is 2 plots of land leased back to tenants for 15 years

• Rental hike 10% every 3 years
• Fully funded by debt
• Gearing to go up 5%
• Net Property Yield est 7%

Here are a few salient points on the new acquisition – Pavilion Elite

• To complete by Q4 2017
• Funded by debt & private placement
• Net Property Yield est 6.1%

I’ve seriously never knew about unlisted REITs in Malaysia, until recently…but it is indeed not late…because it is the first in M’sia too.

The thing is, Paramount who previously was mulling about listing a REIT comprising of their educational assets…decided not to go thru the public listing path. (See here – https://reitmethod.com/paramount-reit/)

Instead, they went for unlisted REITs.

Details below:

This is rare but I spotted this in a shopping mall in Penang (under a renowned Singapore-based REIT manager)

For your eyes only, as I was doing ‘REIT property inspection’ back in Jun 2017.

Distress Writ:

The seizure of Personal Property for the satisfaction of a demand.

The process of distress, began at Common Law wherein a land-lord had the right to confiscate the chattels of a tenant who had defaulted on a rent payment.
A warrant of distress is a writ that authorizes an officer to seize a person’s goods. It is usually used in situations where a landlord has the right to obtain a lien on a tenant’s goods for nonpayment of rent.

Despite challenging office spaces rental market, Sunway REIT managed to grow its office segment Net Property Income (NPI) by 16%

Also, in spite of the competition from online retailing, it’s retail segment – comprising mostly of Sunway Pyramid and Sunway Carnival, NPI grew 8.2% y.o.y

Details below:

NPI (Net Property Income) up by 40% in Q1 2017 vs Q1 2016? How come?

It is no surprise, after the recognition of rental income from Menara Shell since 1 year ago.

This effect of this will be higher DPU, but investor will only reap this after another quarter, because MQREIT only distribute dividends half yearly.

That is not to say there are no challenges going forward (see below). It only means it is doing better than its peers like UOAREIT/TOWER REIT/AMFIRST REIT.

I still believe in the resiliency of retail REITs.

Just not CMMT for now, looking at how things had been and will be in the short-mid term.

Read for yourself.

If you need further reason why NOT to invest in office MREIT now or anytime soon, here is it.

click to enlarge

For a REIT which has not achieved anything ‘spectacular’ since it was being listed, I’ll take such statement by the CEO with a grain of salt.

Are there better quality and better managed M-REITS? Of course, then I’d suggest you look elsewhere until ARREIT has got something solid to show.

Let’s see what ‘trophy’ property that will be in the portfolio by this year end (2017)

click the below to enlarge

…if they are injected into the REITs by 2019 (I don’t see why it won’t since Sunway Medical Center is already in the portfolio)

As an advanced REIT investor, this is how we want to make educated guesses based on recent news, before most people realize it – we get in early and reap the rewards.

If you are already invested in MREITs, it is important to read this – whether your investments are impacted.

My summary

1. First hybrid community-centric REIT
2. 6 properties – 5 are hybrid of traditional wet market & conventional shopping mall
3. Tenants (small traders) occupancy rate and turnover is less resilient than retail malls
4. Could be defensive too due to the nature of its assets providing venues for selling necessity goods
5. Gearing – low: 14.8%
6. Forecasted yield – 6.5% (very good)

Note: you can easily get exposure to Asia Pacific/global REITs via a few REIT funds available in iFast. You can even invest in some using EPF Account #1. More details here – http://www.howtofinancemoney.com/2016/12/epf-unit-trust-investment.html