Dr Tee, Ein55 Mentor & Graduates have together organised 4 charity investment courses (REITs/Business Trusts in Nov 2015 and May 2017, High Dividend stocks in Mar 2016, and Discounted NAV stocks in Sep 2016) over the past 2 years, and donated a net income of around $70,000 to Tzu Chi 慈济 (Singapore). We hope to inspire more Ein55 Graduates to reach out to society and help others who are in need. More importantly, they have also learned the secrets of making money through investment. When more Ein55 Graduates are successful financially, they can also contribute back to society to help more people in future.
Here are the key learning points from the recent Charity Course on REITs and Business Trusts:
1) Investing for dividend income is one of the important criteria that investors must not ignore because historical data have shown so
– S&P 500 (1932 to 2014) – dividend contributes to 45% of portfolio return
– STI 30 (2003 to 2013) – dividend contributes to 49% of portfolio return
2) What are REITs (Real Estate Investment Trusts)?
REITs are collective investment schemes that invest in a portfolio of income-generating real estate assets such as shopping malls, offices, hotels or serviced apartments and hospitals. It is also a type of security that can trade on major exchanges like other listed securities.
– Assets of REITs are professionally managed
– Revenues are derived mostly from rental payments, >90%.
– Net income generated from assets must be distributed at least 90%, quarterly to unit holder.
3) What is Business Trust?
Business Trust (BT) is an investment vehicle structured so that a single company, known as the “trustee-manager”, holds and operates business enterprises for the benefit of its investors, but the unitholders do not have any operational control or shareholders’ rights. Business trusts allow retail investors to have a direct exposure to cash flow-generating assets, such as utilities, shipping, seaport, and it is suited to any businesses involving high initial capital expenditures with stable operating cash flows.
4) 7 Risk factors for REITs & BTs Analysis
– Market Risk and Income Risk which intervenes with each other
– Foreign Country risk especially currency exchange rate change
– Concentration risk – depending on single property or few tenants
– Leverage risk – downward revaluation of asset resulting in hit gearing limit
– Refinancing risk – unable to secure new loan or securing new loan at higher cost
– Liquidity risk – difficult to buy/sell portfolio asset
5) 4 Common Growth Strategies Adopted by REIT Managers:
– Acquisition – from sponsor or third party
– Asset Enhancement Initiative (AEI) – shopping mall to increase net liquid assets (NLA)
– Organic growth – positive rental revision and increased occupancy
– Development & re-development – cap limit increased to 25% from Jan 2017
6) Best Timing to Invest in REITs and Business Trusts
– Long-term Optimism and Mid-term Optimism < 25%
– Average dividend yield over 8%
We should drive the money (helping others when you are successful), not be driven by the money (making money for one’s own gain). Investors should learn the unique Optimism Strategies with FA (Fundamental Analysis) + TA (Technical Analysis) + PA (Personal Analysis) developed by Dr Tee to choose strong global stocks, buy them at a low price, then hold for consistent dividend payout or sell for capital gains. Free high-quality investment courses are provided by Dr Tee to the public.
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