By Teh Hooi Ling
Wednesday, Dec 07, 2011
The Business Times
|To pump in more or not|
|Returns of Reits with rights subscription and without|
|Reits||Year of IPO||Internal Rate of Return (%)|
|Ascott Residence Trust||2006||13.4||17.2|
|Frasers Centrepoint Trust||2006||-||12.7|
|Mapletree Logistics Trust||2005||11.9||11.1|
|CapitaRetail China Trust||2006||-||6.7|
|Fortune Reit (HK$)||2003||6.8||3.9|
|Cambridge Industrial Trust||2006||1.4||1.1|
|Starhill Global Reit||2005||3.7||-3.3|
|LippoMalls Indo Retail Trust||2007||-9.1||-13.4|
|Frasers Commercial Trust||2006||-10.4||-24.8|
|AIMS AMP Cap Ind Reit||2007||-19.4||-30.4|
(Attibution: Table reconstructed by Investor Lightyear, data source from BT.)
Key article highlights:
- The cashflows of Reits with four years of listing history were tabled and compared against StarHub, SingTel and SPH's cashflows since 2002.
- The Internal Rate of Return (IRR) was computed for the 18 Reits and three counters based on two assumptions - investors either subscribed or sold their rights entitlement.
- 13 out of the 18 Reits had positive IRRs and seven rewarded investors with >10% IRRs. Ascott Residence and Ascendas Reit came up tops. First Reit, CapitaMall Trust, ParkwayLife Reit, Fraser Centrepoint and Mapletree Logistics made up the remaining five respectively.
- Investors who took up their rights entitlement were better off with improved IRRs. Interesting, in the case of Ascott Residence, Ascendas Reit and K-Reit, unitholders achieved an even higher positive IRR by selling their rights entitlement.
- StarHub beat all the Reits with an IRR of 29.7% and had no cash calls since its IPO in 2005. SingTel did farely well with 12.7% whereas SPH only managed 4.9%.
My two cents worth - it appears subscribing to rights issues of Reits does not totally disadvantaged investors. Rights issues offer existing unitholders an opportunity to purchase additional new units typically at a discounted price. This may be appealing to certain investors, especially those investing for passive income.