Sunday, August 18, 2013

All that I have learned about reits

I learned quite a lot about reits from valuebuddies, many points which I might have missed earlier, and will use this post to recap:

1) Importance of sponsor during crisis does matter, but only if sponsor is also a large stakeholder.

2) Prudence capital management, means spreading out the loans and stretch them as many as possible, when interest rate are still low, those that also depend on short term loans, or worse use short term loans to increase gearing, are not prudent.

3) If the loan repayment is lower than 1 year of distributable income, it speaks volume of their prudence in capital management.

4) Different sources of capital, MTN, no concentration with a single bank.

5) Properties valuation and NPI yield offer little protection when crisis hit, although they offer insights to operation effectiveness and strength.

At such, Sabana is really an unknown, the CMF, who offer CMF? What is the counterparty risk of CMF? They did spread out their loans when opportunity comes, and got a better yield, but its only over 3-4 years, and the annual income could not cover any single year.

Cambridge is worse, will not touch cambridge, in my opinion, they are gearing up for more AEIs etc, they are proactive, but not prudent, many of their loans are short terms, which exposed them to risks, and their performance rewards structure reward them to do such aggressive expansion

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