REIT’s are popular in Asia -but not explained in Thailand.
Large investor appetitite for REIT’s -even while few brokers here are explaining these to rational savers.
The mega-huge REIT that flopped in Hong Kong late last year, called "Link Real Estate Investment Trust", a US$ 3 Billion Dollar REIT, was moe then fully subscribed (in fact some 75 Bill US$ over subscribed!) but then it flopped at the last minute, completely... when a 67 year little old Lady sued them.
She claimed rents could go up and so violating the city’s ordinance. (Link included some 150 shopping centers and 79,000 parking spaces). A real drama Hong Kong would like us best, to forget.
They are now trying to re-launch this mega fund but first will have to re-apraise all the properties. A huge job!
What it showed unquestionably is the large investor demand/appetite, unsatisfied, for this more prudent investment vehicle/alternative called REIT. (Real Estate Investment Trust).
Why is your Thai broker not telling you about the TFUND! The Link’s failure was a great embarasement to the Hong Kong Goverment and globally renowned investment bankers, at the time. It eventually helped oust that city’s chief executive, Tung Chee Hwa. Some 500,000 investors had to be given all their deposit money back..the investment bankers lost millions when it all got canceled.
In the meantime the Asian Wall Street Journal reports today that "REIT’s in other Asian markets from Tokyo to Singapore have soared this year". The total market value or REIT"S is Asia, excluding Australia, has more then quadrupled to 27.5 Billion US$, in the past 2 years allone, this acording to J.P. Morgan.
But in Thailand investors have for the most part not got caught on yet, most only due to the local press lack of explaining these atractive savings alternatives. Besides the broker community is to often just interested in trading, not investing accounts.
Ticon’s "TFund" yields about 7.5% in annual dividends and is set to become a 100 Million Dollar fund by early to mid next year. By far Thailand’s most attractive of all REIT’s in my view. Unlike a bond, factory rents do increase from time to time so as years go by one can expect the dividend yield to increase some.
The current leased factories held by this fund will be increased from presently 39 to perhaps as much 100. All leased factories in and around Bangkok in 12 different industrial zones. So very well diversified.
I am updating shortly, for members only, my latest visit in person this week with senior management of Ticon (8.7). Ticon is and remains a key Thai stock selection of mine. Ticon owns 33% of this TFUND (10) a SET listed REIT which started trading last April 2005 at 10 Baht per share. However, I expect the dividend rate/return on Ticon common shares to be higher then on the TFUND.
At the time of this writting Central Pattana also just announced a rather large new REIT. This proposed 8 Bill. Baht fund is expected to have a yield of around 7%. Central Pattana (CPN TB) will hold 33% in the fund while the rest 66% will go to public. The same as the TFUND, but the indicated yield is a touch lower.
Paul A. Renaud.
