Update as of 3Q 2019 (2)
作者：老查理 時間：2019-10-04 16:57:06
Singapore REIT portfolio:SG REITs in generally have performed very well this year. My REIT portfolio has benefited from the tailwind. As such, there is nothing to brag about. The portfolio has been driven by the appreciation of Ascendas REIT, Frasers L&I REIT and Keppel DC REIT whose unit price has risen by 20% YTD (distributions included). Yield seeking investors continue to favour income generating assets. Given the price, the running yields for these three REITs are below 5%. It is arguably low for REIT investors. Depending on the quality of the assets and experience of the management team, investors generally have to debate whether the current price/ yield is justifiable. I am on a conservative side and will not add more units (except for Keppel DC REIT, which launched equity fundraising and existing unitholders can subscribe at a preferential price). This year, I purchased more units in EC World REIT, a specialized logistics REIT with presence in China. The REIT secured master leases for certain assets, extending its WALE ("Weighted Average Lease Expiry") to more than 4 years. The prior concern to the REIT was its short WALE and most of its leases would expire in 2020. As one of the key concerns was lifted, I doubled down on the REIT. It is my third largest position in my SG REIT portfolio. However, the new concerns have arisen: (i) how will the Sino-US trade tension affect China and affect e-commerce? (ii) how does the currency depreciation impact on the distributions that are to be made in SGD? The latter is an open-ended question which has no anwser. REITs generally hedge its currency on a rolling 6-month basis, not enough to offset the declining RMB that will in turn lead to a reduction of SGD-denominated distributions. I am willing to take a cut in distribution yields in this regards. The current yield is more than 8%, partially compensated for the currency issue. It is the former that is more concerning to me. If the Chinese economy has come down significantly, will the Chinese people reduce its on-line purchase or increase? My view is that the Chinese consumer will continue to do so regardless of economy and will spend more cautiously online. The question to myself: where can you compare price more effectively when purchasing low value items? The anwser is online purchase. Thus, demand for logistic warehousing should be resilient. Similarly, I added a few units in Capitaland Retail China REIT ("CRCI"). Malls nowladays have food courts and restaurants to attract traffic. Domestic consumption play might be at stakes if the Chinese economy continues to slow down but if that really happens, the world probably would head for recession. I am investing for yields for the long-run and it is worthwhile to stay invested while collecting distributions. Over the quarter, I added three counters: one in industrial and logistics, one in commercial space and one specialized REIT. Given limited number of units, I will continue to monitor them for the time being. As REITs are quasi-bond investments that are expected to give investors most of its earnings, REITs are thus generally sensitive to the movement of interest rates. When the rate goes up, the finacing cost for REITs is to go up, leading to reduced profits (distributions); when the rate goes down, the finacing cost is to go down, leading to increasing profits (distributions). However, it is not always the case. REITs generally fix most of their interest rate, so the sensitivity to interest rate movements is gradual. So, when the interest rate goes up, it will take 1 or 2 years to have an impact on the REITs. When the rate goes down, REIT managers can refiance and lock-in the lower interest rate. If the world is heading to a recession, the central banks will act to reduce the interest rate, likely to benefit the REIT managers if they are able to manage the lease renewals and operations well. Quality assets and expereinced management are two key factors for long-term success in investing in REITs.