More Good & Bad Days?

Well, the title may sound contradicting but that is the dilemma that I am facing right now as a REIT investor. Let's start with the bad news first (I always believe the bad one must go before the good one).

REIT Data (found on INVS 2.0's sidebar) reported that office REITs may not perform that well after all, given that the present economic climate is ill. Personally, I subscribed to this theory. Office and retail REITs are not very resistant to economic fluctuations. For example, office rentals based on the financial industry would be badly affected by a global economic recession. Retail industry, especially in the local context, depends heavily on tourist arrivals to sustain or boost their rental incomes. In a bad time like now, I expect tourism to decline which could spell troubles for office and rental REITs. Fortunately, things may not be as bad as I thought. My holdings on Starhill Global REIT, which based on office and retail industries, has a stable fundamentals and survived the 2008 crisis. I believe Starhill Global REIT's board of directors can partake defensive measures to ride out the latest series of economic shocks.

That's all for the bad news, shall we continue to the good news?

AIMSAMP-REIT has proposed unit consolidation. Under this practice, a shareholder could enjoy the privilege of a new share for every 5 shares held. Meaning, if this practice is voted in by shareholders in its upcoming annual general meeting, I could received an additional of 5200 shares for my existing 26000 shares of AIMSAMP-REIT. This is to reduce the risk of this stock via lowering volatility and market capitalisation.

I quote the S-REIT article on this latest unit consolidation by saying:

AIMS AMP Capital Industrial Reit Management Limited yesterday proposed a five-into-one share consolidation, which will see shareholders receive one new share for every five existing shares held as at a book closure date to be announced.

The company currently has 2.207 billion issued units.

The company believes that the proposed share consolidation ‘may serve to reduce the magnitude of volatility of (the Reit’s) unit price and market capitalisation’ as well as ‘improve the profile of (the Reit) among institutional investors’ and ‘improve the coverage of (the Reit) among research houses’.

Said Tang Buck Kiau, head of finance at Aims AMP Capital: ‘Based on the current units, a volatility of 0.5 cents in unit price impacts market capitalisation at 2.38 per cent. After consolidation, volatility will go down to 0.5 per cent.’

The company said that it is seeking unit-holders’ approval for the implementation of the unit consolidation by way of an ordinary resolution at an extraordinary general meeting to be convened.

Following this, it will make an application to SGX for approval for the listing and quotation of the new shares arising from the consolidation and will despatch a circular to shareholders setting out the details of the move.

The counter closed down 0.1 cent at $0.199 yesterday.

I am further convinced that the board of directors are taking care of the shareholders' welfare and have no regrets invested heavily on this REIT. I am planning to load up more shares this week, should the price hits another historic low of $0.195. And I wish Starhill Global could do the same. Wishful thinking? Well, it did it in the past, why not now?