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Wednesday, October 2, 2019

Added Cromwell REIT

The BUY

72000 shares @ 0.500 EUR a share

Expected yield: 8.2% based on last half yearly payout


Accordingly, this investment may yield around SGD 4,300 a year in dividends, or around SGD 360 a month.  Yet another step towards breaking 100k a year passive in 2020.

Why?

Diversification

Wanted some geographical diversification.  I currently have exposure to Singapore, UK, and Australia (AA REIT +  FCOT + Starhill), China  (CRCT), US (Eagle HTrust), ID (First REIT).

Ultimately, it was a toss up between IREIT and Cromwell.  Overall, I preferred Cromwell REIT because I feel there is less tenant concentration risk compared to IREIT.


ECB money printing quantitative easing bond purchases

This is a double edged sword.

On the one hand, low interest rates is always a boon for REITs. It provides cheap financing for the REIT to acquire new assets, and further boosts the NAV of the underlying assets.  Cromwell REIT is already trading at a discount to NAV.  Any further boosts to the NAV would make the share price more attractive.

On the other hand, for Singapore-based investors who receive their dividends in SGD, any signficant devaluation of the EUR would adversely impact the dividend income.

With ECB tiered rate cuts expected in October, it is any one's guess what the future holds. I can't imagine the Fed or Trump not responding to this.

Strong Sponsor

The Sponsor, Cromwell Property Group, has 3.7B Euros of assets under management in Europe alone. Sponsors with a ready pool of assets are always good since it represents a pipeline for future injection.

Reasonable Yield 

As long as the DPU is sustained, I am not expecting the share price to perform phenomenally. DBS has a TP of 0.59 on this share.  I am happy for it to trade side ways while collecting a 8% payout.

IMHO, it makes far more sense to put money in this than a recently IPO-ed, (basically 1 Orchard mall) REIT with a forecasted 5.8% yield (and this is at 100% payout mind you), and where one of its top 10 tenants by Gross Rental Income  (Forever 21) just declared bankruptcy.

Struggled to understand why it was 14 times, sorry, 14.5 times oversubscribed. I mean, have you ever been to Somerset 313 and went: wow, this place is dope. Not me.

Furthermore, the WALE of Someret 313 is a pitiful 1.8 years, and 35% of its leases by GRI is expiring in 2020. Awesome. It almost feels like Sky Italia was injected so that the overall WALE looks more palatable to investors. 

Perhaps I am missing something. Who knows. After all, so many people, can't all be wrong right.

DYODD.

Onward to FI friends!




3 comments:

  1. Hi UN

    Wah like this you can already retire la :)

    ReplyDelete
  2. Hi B, I would love to retire! haha.

    But honestly, to be prudent, and for a peace of mind, it is probably necessary for me to work a couple more years to build a sufficiently wide passive income buffer, i.e., FI but not retired

    ReplyDelete
  3. Hi Edwin,

    If not mistaken, it would be better to calculate the DPU based on the total received annually (rather than quarterly x 4 or half yearly x 2) since its reported on income statement as annually paid DPU. For Cromwell at the price of EUR 0.5, the annual DPU is approx 5%.

    ReplyDelete