冠君產業信託再次破頂

冠君產業信託(02778)今早跑贏，最新升6.6%，報5.97元，創上市新高，成交額1950萬元。
基金本月初公布，有意放售旺角朗豪坊辦公大樓(不涉及朗豪坊商場部分)。
負責探討出售可能性的第一太平戴維斯昨天宣布，推出物業進行全球招標，意向價250億元，挑戰全港甲級寫字樓以至商用物業造價新高，呎價料約3.56萬元。第一太平戴維斯透露，現時已有2至3家中資財團洽談。(信報)

筆者認為冠君重新估值及趁市場最高價套現物業，跟著派發特別股息是對股東的最佳回報。長久以來冠君賬面值PB都是徘徊0.5上下，令人失望。相較其它reits大幅折讓更甚。這次標售朗豪坊辦公大樓，很可能是資產變現分派第一步，應該陸續有來。羅家爭產糾紛是主因，分錢最實際。這交易單是現金回收已超市值很多，小股東再次耐心等待。

香港樓市瘋狂，我應該把手上的reits放掉嗎？(覆網友來信)

以下是網友G君的來函，筆者想和大家分享怎樣看待已經高升的房託。

天路客大哥，

REITS（Link, Yuexiu, MT, Champion) 從我去年年底建倉至今，一路表現喜人，但同時也更加提醒自己要考慮可能面對的風險。

有感于目前香港樓市實在過於瘋狂，個人感覺樓市出現較大調整的可能性越來越大。Reits和樓市表現有很強的短期關聯性，儘管我長期看好REITS這項資產，但最近一直也在考慮要不要做一些部署，未雨綢繆去準備可能出現的樓市調整。但是應該如何部署，卻沒有太清晰的方向。

最簡單做法當然是減持，但這樣又好像和長線投資的思維和方針所抵觸。一時之間有些左右為難。很想聽聽前輩的看法。

感謝不吝賜教。

G上

筆者覆函：

G,

組合中的房地產信托基金升值了很多是值得高興的事，擔心價格高了風險增加是人之常情。筆者是這樣調整心態的：我投資房地產信托基金的目的是收取穩定的現金流，價格升了提供了buffer應付將來價格的可能調正。只要是正數我就更能安心的持股下去，高出低入是很難拿捏掌握最佳時機的。相對高位放了，以為可低價補回，可能以後也沒有機會補回，過去自己也試過幾次後悔不已。所以要問自己你投資房託的目的是什麼？如果追逐股價上上落落，其實房地產信托基金不比很多其他股票好！例如科網股升幅更加凌厲可人。你持有這幾隻信托基金主要是在酒店商場和寫字樓，與私人住宅市場關係不大。如冠軍產業信托主要是甲級寫字樓及酒店，甲級寫字樓仍在上升軌跡，也有真正的需求托住，個人認為即使住宅市場下跌，也不會影響這個板塊。領展房托所持有的是百多個商場街市，平民所需，與住宅地產市道不太相關。換一角度來看，如果著眼在累積能產生持續穩定現金流的優質資產上，感覺會很不一樣。跌市時反而會高興，因為可以更便宜購入更多，我正是這樣心態，總是覺得現價很高，希望可以跌多一些，方便儲貨，可惜市場未肯回調。不過每人的心理質素不同，倘若這環境令自己內在焦慮升高過於承擔能力，則可減持至自己安心地步，這也是好的。心安最重要，患得患失反而壞事。每次投資決定後都檢討，總有能學習的地方，身量擴大了，下次可能承受焦慮的能力又增加了，這就是生命成長！祝福你身量日日擴大，快樂投資,享受投資！

天路客

息率趨升 惟房託續受追捧(轉載信報)

上周美國聯邦儲備局議息，決定今年第二次加息。現時巿場預測，在今年底之前，約有一半機會聯儲局會再加息一次。而且聯儲局今年第一次討論縮表，但是巿場的反應仍然平和，例如美國10年期債到今年底的預期息率仍然只會有20點子的漲幅，甚至較今年初的利息更低。這反映巿場情緒仍然平穩，有利房地產和房託的表現。
特朗普選舉時候承諾的大型基建只聞樓梯響，科技發展又壓低了能源價格，所以巿場預期美國通脹率仍然溫和。在這情況之下，聯儲局實在缺乏理由大幅加息。
亞太區房託在去年第四季一度下跌了超過15%，但今年房地產無論租金還是樓價，表現仍然向好。例如澳洲的辦公室巿場今年普遍造好，位處悉尼的澳洲交易所大樓剛剛獲香港註冊的投資者垂青，以4.5厘左右的租金回報率成交，創出歷史新低。至於巿郊及其他級數較低的資產，租金回報率亦由年初的7厘左右，下跌至6厘左右，樓價升幅約為14%。
香港零售商舖的租金這兩年表現較弱。在主要購物區，地舖租金相對2012年錄得兩三成的跌幅。但是另一方面，辦公室表現仍然穩健，中環租金升至歷史高位之餘，港島東和九龍東的租金這幾年仍然錄得升幅。因此，美利道停車場和啟德機場的大型混合發展地皮拍賣價格皆錄得歷史新高，證明發展商仍然看好香港後巿。
商業樓巿繼續造好，加上息口走勢漸趨明朗，房託的表現亦普遍向好。這幾個月的升幅已經補回去年底的跌幅；以12個月計，回報已經重回正數。當然，房託所派的股息與租金收入掛鈎。房託股價的短期升跌甚少會影響股息回報。中長期而言，房託的表現視乎加息的速度。現時加息速度穩中有序，證明經濟發展穩健，是有利房地產的環境。
另外一個考慮則是房託和長息之間的息差。2007年的時候，美國10年期債券的利率在4.5厘及5.0厘之間徘徊，與亞太區房託的股息率差不多。房地產的風險當然比穩健國家的10年期國債為高，兩者之間出現零息差，證明投資者過度看好後巿，願意以同樣的現金收入，換取樓巿或會繼續升值的回報。
在上次金融危機之後，雖然歐美日的利率都降到歷史低位，但是房託股息率與國債的息差並未如上一周期般收窄。現時亞太區房託的息率約為4.5厘，相對美國10年期債，息差約為200點子。這個水平的息差相對17年的歷史平均息差，其實算高。在亞太區房託之中，尤其以新加坡巿場最為保守。當地房託自2013年起，平均價格都對淨資產值有所折讓。
換句話說，巿場一直明白現時的低息環境總會終結， 資產價格升得再快，都仍然有一定水位。在過去兩年之中，實際上利率已經加了幾次，但是房地產的價格仍然上升。一方面是因為部分資產類別的租金持續上升，另一方面則是因為息差仍然健康。(楊書健)

《大行報告》麥格理升冠君(02778.HK)目標價至5.51元

麥格理發表報告表示，預期冠君產業(02778.HK)旗下甲級寫字樓綜合大廈花園道三號((前稱花旗銀行大廈)，於未來三年租金收入將可大幅增長40%，由目前每呎租金78元升至110元。強勁的租金增長應能蓋過朗豪坊疲弱的租金增長。

該行稱，上調對冠君每股資產淨值75%至8.08元，對冠君的目標價上調26%至5.51元，並看好第三季銷售能見底回升，預期內地企業的租賃需求能推動花園道三號租金及價值提升。

麥格理指出，受惠內地企業來港設辦公室的需求帶動，同區中銀大廈呎租己上升至130元，交易廣場呎租升至140元，國金中心二期呎租達到170元。花園道三號今年有23.4%的面積租約完結，13.7%在明年完結，加上今年將有約5%面積空出及目前有4%空置，預期會是黃金機會去重估該商廈價值。

15 things learned from Starhill Global REIT’s FY2016 AGM

By Adam Wong on November 1, 2016

Starhill Global REIT (SGX:P40U) owns retail and office properties in Singapore, Malaysia, Australia, China, and Japan. Among its properties, Singaporeans would be very familiar with two of Starhill’s retail malls –  Ngee Ann City and Wisma Atria along Orchard Road.

Starhill is one of my REIT investments when I purchased it in January this year when Singapore REIT prices took a pounding. It has since returned over 17.7% (including dividends). But, regardless of how positive returns are at the moment, you can be sure that I and the rest of us here at The Fifth Person are keeping a watchful eye on our investments and the prevailing economic climate.

So with the recent news that Singapore’s mall vacancies are at their highest level in a decade, I attended Starhill Global REIT’s recent FY2016 AGM to find out more about how its management planned to navigate the increasingly tough retail conditions.

Here are 15 things I learned from Starhill Global’s FY2016 AGM:

• At first glance, Starhill’s FY2016 results look like they took a tumble. Revenue, net property income (NPI), and distribution per unit (DPU) are all down 25-30%. However, the reason for the drop is because Starhill moved the end of its fiscal year to June. Which means FY2015 figures are calculated over 18 months while FY2016 figures are over 12 months. So if you compare FY2016 with the previous 12-month period, Starhill actually performed better: Gross revenue increased 11.4% to $219.7 million, NPI increased 6.9% to $170.3 million, and DPU increased to 1.4% to 5.18 cents. Starhill’s current yield (TTM) is 6.4%.
• Growth in revenue and NPI was mainly driven by Myer Centre Adelaide which Starhill acquired for A$288 million in 2015. Starhill’s Australia portfolio revenue and NPI grew 120% and 89% respectively. In comparison, Starhill’s Singapore portfolio remained flat with revenue and NPI inching up 1% and 0.6% respectively. Overall, Singapore still contributes the bulk of revenue at 62.6%. Australia and Malaysia contribute 19.5% and 14.6% respectively.
• Starhill Global REIT was one of the first few to venture into Australia in 2010. CEO Ho Sing explained that Australia’s retail scene is “quite strange”. Major retail brands like Uniqlo, Zara, and H&M only entered Australia in 2013-2014 with many major brands yet to enter the country. He believes that this along with changing consumer behavior presents an upside for the retail market in Australia.
• Starhill Global REIT divested its property in Japan, Roppongi Terzo, for ¥2.5 billion.The management also plans to divest the rest of its Japanese properties eventually. The CEO said that Tokyo Olympics in 2020 might drive valuations up and the management will look for divestment opportunities leading up to the Olympics.
• Portfolio valuation grew 0.7% to $3.14 billion. This was mainly due to revaluation gains in the REIT’s Singaporean and Australian properties which were offset by the Roppongi Terzo divestment in Japan and portfolio devaluations in China and Malaysia (due to forex loss).
• Overall occupancy rate is 95.1%. CEO Ho Sing also highlighted the fact that Starhill’s occupancy rates have remained largely resilient even during recessions. During the financial crisis of 2008, Starhill’s Singapore portfolio retail occupancy rate was 98.3%, while its office occupancy rate was 92.4%. Moving forward, there is no new retail or office supply in Singapore’s Orchard Road area from 2016 to 2018.
• Starhill Global REIT’s gearing is at 35% and average cost of debt is 3.09%. Weighted debt to maturity is 3.1 year with a large portion of debt (35% of total debt; $400 million) due to mature in FY2017/2018. 100% of Starhill’s debt is fixed/hedged via a combination of fixed rate debt, interest rate swaps, and interest rate caps.
• A unitholder asked why the REIT’s Malaysia revenue was falling. Chairman Tan Sri Dato (Dr) Francis Yeoh explained that it was due to the weakening ringgit. Lot 10 in Kuala Lumpur is on a master lease with built-in rental reversions for the next three years and that the mall is, in fact, doing well. Lot 10 is located at the prime Bintang Walk area which the Malaysia government has earmarked as a key shopping destination for locals and tourists. The government is also building an MRT station in Bintang Walk which will open right in front of Lot 10 and bring 100 million people in ridership annually. While currency deprecation is a problem, the chairman said “we can’t play God’s role” and control which way foreign exchange rates will go. However, the quality of the asset will endure and revenues will increase.
• Another unitholder asked about the management’s strategy for Starhill Gallery in Kuala Lumpur. The chairman replied that Starhill Gallery is a large luxury mall with over 300,000 square feet of retail space. However, there are not enough good luxury brands to fill the mall entirely, thus the management is looking to bring in restaurants and other brands like Apple to attract more blended shopper traffic. On the plus side, the management has convinced Louis Vuitton to build a global store in Starhill Gallery; the only other cities to have a Louis Vuitton global store are Paris, Shanghai, and Tokyo. Major property developments are also being built opposite Starhill Gallery including the headquarters of YTL Corporations (Starhill Global REIT’s sponsor). The chairman admitted that the property is “not (doing) as good as we want it to be” but it will get better.
• A unitholder questioned the management about Starhill’s falling revenues in China. The chairman explained that the Chinese market is extremely competitive. In Chengdu (where Starhill’s Renhe Spring Zongbei property is located), 100 million square feet of new malls were built after Starhill acquired its property. The chairman joked, “When the Chinese build, they build massively and (properties) spring up like mushrooms, and our prime property becomes ‘not-so-prime’ anymore.” He also said that another trend that is hurting sales is the clampdown on corruption and gift-buying. Businessmen in China used to buy gifts as a way of doing business in the past but it is looked upon as corruption now. The good news is that the management has managed to secure one of the largest furniture retailers in China, Markor International Home Furnishings, as an anchor tenant for Renhe Spring Zongbei which will generate more stable revenues. The chairman revealed that he doesn’t think the retail situation in Chengdu will improve and the REIT will look to divest its Chinese property at the right time.
• A unitholder asked where Starhill Global REIT was planning to acquire its next properties. The chairman replied that the REIT will focus on Singapore, Malaysia, and Australia as these are the three markets they know very well. Starhill was ahead in Australia and the management predicted correctly that retail closing hours would extend later (from 5 p.m. to 7 p.m.) due to the growing Asian population and their shopping habits. For Singapore and Kuala Lumpur, the high-speed rail will be good for Starhill’s properties in both cities.
• A unitholder asked what the management planned to do to attract shoppers to its malls. CEO Ho Sing replied that the management is working with relevant agencies like the Orchard Road Business Association to promote events in Orchard Road. He gave examples like the Japan Matsuri Summer Festival where Orchard Road was closed to traffic, the annual Christmas light-up, and the F1 race. The CEO also mentioned the Great Singapore Sale though he said the concept has gotten tired over the years. The chairman then reassured unitholders that the management is aware of the changing spending patterns of customers and online shopping, and doing all it can to attract shoppers. The retail experience has to be crafted better now and be compelling enough to attract people to physically visit a mall, and it is in the interests of the REIT to enhance the sales of its retailers so they can pay higher rents.
• In his presentation, the CEO highlighted that Starhill Global REIT doesn’t own the space occupied by Isetan in Wisma Atria; it belongs to Isetan. The space was closed for renovations for a year which affected shopper traffic in the mall. It has since progressively opened and Isetan also launched Japan Food Town which has improved shopper traffic. During the Q&A, the chairman revealed that he was trying to persuade the Isetan president to launch an All-Japan concept in Wisma Atria that received positive response from shoppers when it was launched in Lot 10, Kuala Lumpur. He mentioned things like Honda robots and ikebana classes that attracted shoppers in Malaysia and he brought this back to his point about creating unique and compelling retail experiences for shoppers. If this concept was executed in Singapore, it would complement the mall and be very good for Wisma Atria without the REIT having to spend any money.
• A unitholder asked if the management was considering an investment in Jurong due to the Singapore-Kuala Lumpur high-speed rail (HSR). The chairman joked that the HSR was his idea but he doesn’t know if the government will pay him a royalty for it! He then digressed and said that Kuala Lumpur, long-term, is a good market where property prices are still attractive. If Malaysia can get its politics rights, Kuala Lumpur would be a compelling city to invest in. He said condominium prices in Kuala Lumpur are, prime-to-prime, 600% cheaper compared to Singapore. But the level of architects is the same and the building materials come from Malaysia anyway! With the HSR, the chairman views that KL prices will converge toward Singapore’s in time like how prices in London and Paris converged with the London-Paris line. The unitholder keenly asked the chairman if he would invest in Kuala Lumpur then. The chairman said yes but currency depreciation is a concern and the management has to take a long-term view of whether a property will be yield-accretive over 5-10 years after taking that into account.
• Finally, a unitholder then asked the chairman what his views were on the Singapore property market moving forward. The chairman replied that he has been through many property cycles as a property developer himself but that this particular cycle was ‘broken’. The Singapore government had to control property speculation and inflation here like in China. The worry for the government at the time was that average Singaporeans were complaining that they couldn’t afford a home. Due to the printing of money by foreign governments, foreign buyers with an influx of cash speculated on private properties driving their prices up — which, in turn, pulled HDB prices up. The government had to introduce cooling measures to cut the speculation because, even though they welcome foreign investment, they didn’t want Singaporeans to suffer from sky-high property prices. However, the chairman thinks that the government has overdone the cooling measures and the market is almost dead for foreign buyers. He shared that a lot of property developers are in trouble and face heavy penalties of $30-40 million if they can’t sell their developments on time. But they have no market to sell to. He views that the government should readjust its policies to encourage more economic activity and he is optimistic that the government is watchful and that they won’t fall asleep on this. The chairman revealed that the high-end property market is the worse he has ever seen in the last few years and feels that it can’t get any worse. If it does, there will be collateral problems with banks and loans which he believes the government will take into account and not allow to happen. Lastly, he advised everyone to be patient and that the change won’t be immediate, but it is his personal view that it will become better than what it is today.

我在IB的新加坡房託組合

筆者經過兩個月時間，初步建立了自己的新加坡房託收息組合。收到第一次的派息，大都集中在八月份，沒有任何扣減稅項。新加坡房託多是每季派息，三個月收息一次，眨眼間又是下次收成期，很有滿足感覺。頻繁派息，令人不太介意每日股價上落，只要不是跌太多就可以了。這段期間，組合不計派息輕微增長了3%，算是意外收獲！期間利息支出只佔股息收入2成不到！IB的報表詳盡，很清楚列出要付的利息及應收的股息，方便核對。我的S reits的借貸比率是60%，並未用盡，有15%buffer！借的是坡紙，買的是新加坡資產，對沖了大部份匯率風險。IB的操作很暢順，用message centre提出問題也覆得快，解決很多初期的不明白。上手了都幾好玩！期間有少許不如意事就是Mapletree Commercial Trust供股，海外股東無得供，卻又不能買賣供股權，見財化水，透過IB和基金經理交涉，海外機構投資者可以供，散戶則不能，平白損失了機會。供股價是S$1.41，正股價是S$1.52😞！猶幸供股後股價沒有回落，還升了不少(S$1.63)，也算是有安慰😊！這段時間花了很多時間學習操作IB，筆者太太有輕微怨語，少了時間和她談心😊希望以後熟習後可以少花時間在操作上，多享受家庭之樂。

三招揀REITs財息兼收(信報)

美國聯儲局主席耶倫本周五將於Jackson Hole全球央行年會發表演說，美股上周五已偷步炒耶倫屆時可能談論加息時間，加上副主席費希爾表明美國經濟增長已逼近央行目標，預期未來數季仍有上升動力，儼然為加息造勢；慎防本周美滙指數反彈，拖累收息防守板塊如公用及電訊等回調。
港股昨天好淡爭持，恒生指數未能企穩23000點水平，一度挫144點，低見22792點，惟尾段拗腰倒升，收報22997點，升60點（0.26%）。權重股騰訊（00700）繼續發威，再次逼近上市新高，收報204.8元，彈升1.5%。
今年央行年會主題是「為未來設計彈性的貨幣政策框架」，由於前任聯儲局主席貝南奇曾在Jackson Hole年會透露量寬（QE）及扭曲操作（Operation Twist）意向，這次耶倫如何演繹主題，備受外界關注。不過，如果本周美滙漲幅過大，如重越97水平之上，則未必是好事，事關美滙轉強或迫使耶倫這位「國家隊領隊」再次放出親鴿言辭，以此引導美滙維持在區間上落。
從美股ETF資金流變化可見，投資者依然熱切尋找利息回報產品。除了新興市場及美國科技股受追捧，房地產信託基金（REITs）亦持續見資金流入，例如Vanguard房地產信託ETF（VNQ）上周及過去30個交易日分別錄得淨流入1.05億美元及10.13億美元。
值得留意的是，聯儲局幾可肯定想在年內再加息25個基點，若然敲定加息時間，勢將引發高息投資產品震盪。惟美國今年加息始終「一次起，兩次止」，環球低息環境難變，故此投資者對具較高利息或回報的投資產品依然趨之若鶩。
以下從3個角度分析5隻以本地業務為主的REITs，包括冠君產業信託（02778）、泓富產業信託（00808）、領展（00823）、置富產業信託（00778）及陽光房地產基金（00435）的最新形勢【表】。

一、收益率
REITs的吸引力在於高息。相較本港地產股平均收益率3.75厘，彭博估算泓富產業信託的收益率達5.33厘；其次為陽光房地產基金的4.95厘。回報率遠高於本港甲級商廈及商舖分別約3厘及2.6厘，以及美國10年期國債孳息的1.6厘。是「好息」一族最愛的產品。
二、浮息債務比例
一旦本港追隨美國加息，以HIBOR為參考標準的債務利息支出勢必增加；故此浮息債務比例愈低，企業財政愈穩健。以上5隻基金當中，陽光房地產基金的浮息債務比例僅29%，較有優勢。
三、槓桿比率
低槓桿比率的REITs，對息口變化的敏感度較小。例如領展的債務相對資產的比例僅16.5%，屬較低水平。故此，美國加息對其衝擊相對較輕。
在長期超低息大環境下，防守型股票價格近年來普遍跑贏周期性股份（見是日「信圖分析」），投資者對有穩定回報的投資產品更如飢似渴。當然，除了以上3項比較之外，追求長線穩定回報的投資者宜深入分析REITs旗下的物業類型、質素、租金回報和空置率等，如此則可增加勝算。

文章‘’12 things Learned from Ascendas Hospitality Trust’s FY2016 AGM‘’的讀後感

文章的作者親身參與Ascendas hospitality Trust(AHT)的股東週年大會，並將所見所聞記下來，對了解這隻reits很有幫助。新加坡的房託基金投資地域不僅限於星加坡，更遍布全世界。AHT 80%的投資在澳洲、日本、中國等地方的酒店。這對分散地域風險很有幫助！這幾年日本的酒店業務增長不俗，增長達23%。值得大家注意！(筆者考慮直接投資日本酒店房託)，會後的股東答問也提供了有用訊息，原來新加坡房託不能直接經營業務(operational business),只能有被動收入(passive income)，所以AHT另外就另外成立了business trust經營業務和酒店發展。現時只有2間酒店under reit，其餘的9間under business trust.待發展成熟後就轉移到reit那邊。這叫做stapled security.即把2隻不同運作原理的信託‘’釘‘’在一起，以達致最好投資效益！這令筆者不期然拿香港的房託作比較，香港的房託雖然也有十幾年歷史，但發展相對落後很多，無論在經營策略，範圍，投資選擇等都很局限，盼望政府能主動研究引導房託的發展，從新加坡政府學習，在政策及法規上扶助房託業務的發展，使香港整體房託跟上世界潮流，才不辜負世界金融中心這美譽！

以下是該文章：

By Adam Wong on July 11, 2016 article link

 Hospitality Trust (SGX: Q1P) (A-HTrust) is a stapled group comprising Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust. The group invests in and manages a portfolio of hospitality properties across Asia Pacific.

The author attended the trust’s most recent AGM to find out more about its prospects in the face of a weakening global economy and flat tourism sector in some countries.

Here are 12 things I learned from Ascendas Hospitality Trust’s FY2016 AGM:

• A-HTrust’s portfolio comprises 11 hotels across seven cities in four countries – Singapore, Australia, China, and Japan. The trust’s entire portfolio is worth $1.5 billion – an increase of 11% year-on-year. Australia accounts for the largest proportion at 41% but the trust’s exposure down under is spread out evenly among six properties. The trust’s largest property, Park Hotel Clarke Quay in Singapore, accounts for 21% of the portfolio.
• A-HTrust’s current yield is 7.55%. The figure is near the trust’s historical low yield in 2015. Its historical high yield is 9.22% in 2013.
• Gross revenue and net property income (NPI) increased in same currency terms but decreased 5.3% and 2.7% respectively in Singapore dollar terms. This was mainly due to a weaker Yen and Australian dollar. Australia accounted for the largest proportion of NPI at 54.5% while Japan saw the largest increase in NPI year-on-year at 13.2%.
• Master leases accounted for 37.5% of NPI. The management revealed it aims to have master leases account for at least 50% of NPI for longer-term stability.
• Distribution per stapled security rose 6.9% year-on-year despite 5% retention of income by the trust. The increase was mainly due to a $2 million contribution from the divestment proceeds of a property – Pullman Cairns International.
• Average occupancy rates, average daily rates and revenue per available room (RevPAR) were all largely flat year-on-year in Australia and China. Only Oakwood Apartments Ariake Tokyo in Japan saw a large increase in RevPAR year-on-year at 23.3%. The rest of the trust’s properties are anchored by master lease agreements.
• A-HTrust’s gearing ratio decreased to 32.7% from 37.2% a year ago. As far as possible, the trust aims to borrow in the local currency where its properties are located to achieve a natural hedge. So for example, Australia accounts for 41% of the portfolio and, accordingly, 42.5% of the trust’s debt is in Australian dollars. To minimize exposure to interest rate volatility, 91.2% of borrowings are at fixed interest rates.
• Australia and Japan are seeing steady growth in international tourist arrivals. Australia saw 6.9 million tourists visit the country in 2015 – an 8% growth from the previous year. Japan saw even better numbers with 19.7 million tourists – a 47% growth from the previous year! International arrivals in Japan are forecasted to reach 40 million in 2020 with the Olympics being held in Tokyo that year. On a side note, one shareholder remarked that he thoroughly enjoyed his stay in one of A-HTrust’s recently refurbished hotels, Hotel Sunroute Osaka Namba, and recommended everyone to give it a try if in Osaka.
• Singapore and Beijing’s international arrivals remain flat. Singapore only saw 1% growth in tourist arrivals in 2015. While the flat tourist numbers will drag the trust’s performance in Singapore, Park Hotel Clarke Quay is anchored by a master lease with a high proportion fixed income paid to the AH-Trust. Beijing’s international arrivals have been falling from 5.2 million in 2011 to 4.2 million in 2015 – one of the reasons being the city’s bad air pollution. However, China’s domestic travel remains robust; 269 million domestic travelers visited their country’s capital in 2015 which has been growing at 7% per annum since 2011.
• A-HTrust has partnered with NASDAQ-listed Chinese hotel operator Huazhu Hotels Group to operate the trust’s Beijing hotels and tap on their local experience and knowledge in the Chinese market. Huazhu manages/operates over 2,700 hotels in 352 cities in China and has over 49 million members in its loyalty programme. CEO Tan Juay Hiang mentioned that Ibis Beijing Sanyuan has gotten good traction from Huazhu’s loyalty programme and is expecting good results from the partnership moving forward.
• In November 2015, A-HTrust announced that it received an expression of interest from an undisclosed party to acquire the entire trust. The management hired appointed a slew of advisors – JP Morgan, Wong Partnership, KPMG Corporate Finance, and Ernst & Young – to provide financial, legal and tax advice on the viability of the proposal. In the end, the board decided not to proceed with the transaction because they believed it was not in the best interests of shareholders. One well-known local activist investor was not impressed and questioned why so many high-powered advisors were needed to consider a non-binding expression of interest and which party bore the cost of the advisors. The CEO replied that the cost was borne by the trust. Another shareholder pressed to know the total costs involved and the CEO revealed that it was the region of $600,000. A number of shareholders then voiced their displeasure with the board that so much money was wasted for an exercise that eventually amounted to nothing.
• Our activist investor asked why the trust decided to structure itself as a stapled security: a REIT and a business trust. He pointed out that there are tax benefits for REITs – when a REIT pays out at least 90% of distributable income to unitholders – and questioned why A-HTrust would place only two hotels under its REIT and the other nine hotels under its business trust. He carried on to say that most stapled securities use a business trust to undertake property developments (where REITs have a limitation), after which they move the property to the REIT to be more tax efficient. The CEO replied A-HTrust has a stapled structure because a REIT in Singapore is only allowed to earn passive income (rent) and is not allowed to have an operational business. For A-HTrust, some of its hotels are not under a master lease and run on management contracts instead – and therefore can’t be placed under the REIT. In other words, the trust operationally runs the hotel business for some of its hotels. The CEO continued and said that while running a hotel operation means taking on more business risk compared to a master lease, there is also an upside when demand and room rates increase.