The Two Japanese Reits Which Got Acquired - What Can We Learn From This?

It has been a fruitful journey investing into Japanese Reits for the past few years. Saizen Reit was the first Japanese reit which was acquired earlier before. Recently, Croesus retail trust, a Japanese reit which owned Japanese shopping centres was also successful acquired just last week. What makes them so attractive that both reits from Japanese were bought over at a premium price?

I've written extensively on Croesus Retail Trust as early as back in 2013. The timeline of the posts are as follow:

• Looking to invest in Japan's real estate - November 10, 2013
• Croesus Retail Trust - First Quarter results released and initiated long position - November 13, 2013
• Short interview with Jeremy Yong, Co-founder of Croesus Retail trust - April 10, 2014
• The Japan story - Croesus retail trust and Saizen Reit - June 1, 2014
• Croesus Retail Trust - More than 10% dividend yield! - August 29, 2014
• Croesus Retail trust 2nd Quarter results beats forecast. DPU 3.1% higher than forecast - November 14, 2014
• Investing in Japan's Shopping Centres - Croesus Retail Trust Retail Investor Seminar - April 29, 2015
• Croesus Retail Trust - Rights Issue 22 For 100 - October 5, 2015
• Croesus Retail Trust - Another Japan Reit Potential Takeover - May 1, 2017

The purpose of the sharing of the previous posts is to look back at my thoughts and why I invested in Croesus in the first place. Time pass very fast. 3 years plus just went past like that. As you can see, in April 2015, I went for a Croesus retail trust retail investor day where I manage to hear from the top management of Croesus itself. I wrote in my blog that I was happy with what I heard and the management knows what they are doing. As soon as a rights issue came, I immediately subscribed to it to increase my holdings in this investment.

Last week, Croesus was acquired at a price of $1.17. My average price for the reit is about $0.80. This represents a gain of 45%+. Including dividends, the total ROI for this particular investment works out to be about 81%. It was a long journey nevertheless.

What caused the Reits to get acquired?

The most important lesson is to find out what cause the reits to get acquired and hopefully we can always buy into the right companies which generates value for shareholders. In the case of Croesus, when I first invested in it, it was purely base on the fact that the Japanese government was aggressively trying to expand their economy through quantitative easing. They had a target of 2% inflation back then when Japan was facing decades of deflationary economy. Noticing that this was an opportunity, I went to search for companies which deals with properties in Japan. Saizen Reit and Croesus came up as an investment choice.

Next, I looked at the stability of its income which is important for a reit or business trust. Saizen reit was in the residential rental business so it was really stable. It was rare for a reit to be in the residential business. Croesus on the other hand is involved in shopping centres which had some risk in itself. However, upon a closer look, Croesus management were quite committed in achieving good value for shareholders through the many positive rental yield acquisitions and AEIs. They were committed in keeping the company's balance sheet healthy also.

Finally, the Japanese reits was trading at an attractive price which was below their book value. Many of their properties were valued conservatively when you compare their properties valuation against the other nearby properties. Furthermore, Japanese real estate and rental prices were going up steadily over the years which was an added positive development. All these attracted other big investors to offer attractive prices to takeover the 2 companies. Sure enough, it happened and shareholders got rewarded.

There will always be more opportunities in the future for those who missed it. For fellow shareholders of Croesus retail trust, congrats to all!

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Croesus Retail Trust - Another Japan Reit Potential Takeover

Croesus Retail Trust is not new to this blog. I've written several articles about this stock since 2013. It has been more than 3 years since I was an investor in this company. How time flies just like that. Investing in Japan Reits was a strategy I embarked on 3 years plus ago primarily due to macroeconomic reasons. Japan was starting an aggressive monetary and fiscal policy plan at that time which I saw the opportunity to invest in companies which owns real estate in Japan.

Just last week, there is a potential takeover which was announced by the company and this sent the stock price up as high as $1. The same thing is happening again which happened to another Japan Reit called Saizen Reit. If we see the same takeover as Saizen Reit, Croesus Retail Trust could possibly be acquired at more than $1 which gives a 5%-10% premium to its price to book value.

This stock has served me well over the years as an income investment. Its dividend was close to 10% in the early years and averagely it gave about 8%+ yield. Many were worried if the yield is sustainable but they have proven that it is. The last time I heard from the management face to face was during a retail investor day. I heard from the management on their strategy to grow the company by doing more acquisitions so CRT becomes an indexable stock which will hopefully drive the stock price up. In the end, they did do what they said. From a portfolio of 4 shopping centres, they expanded to 11 now. They also reassured investors that they will be responsible in delivering the DPU which they did consistently.

Whether it will be acquired or not, it doesn't really matter to me as its still a good investment. For those who are already investors in this company, let's see what happens next.

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Japan Rail Cafe @ Tanjong Pagar Centre - Unique Place For Japanese food

I've always been interested in Japan, both as an investment choice and also their culture and food. Me and my girlfriend went down to this new cafe called Japan rail café. We have always been a fan of Japanese food from sushi to sashimi and ramen. There are so many Japanese food to choose from in Singapore but I would say Japan Rail Café is the most unique of them all.

Japan Rail café has an interesting concept. It is not your normal neighbourhood Japanese restaurant. Firstly, they don't have sushi. Secondly, they don't have ramen. You might be thinking what kind of Japanese Café is this without all the mainstream Japanese dishes?

Here is a sneak peak of their menu:

As you can see, the menu consist of mostly Japan western style of food such as burgers. They also have rice bowls which is eaten quite uniquely. I've never eaten a Jap rice bowl like this before. I will elaborate on this in awhile.

Before I go into the details of the food, let me give you some details of Japan Rail Cafe. This cafe is actually opened by East Japan Railway Company (JR East). The new travel themed café is located on the level 1 of Tanjong Pagar Centre, the tallest building connected to Tanjong Pagar MRT Station.

Aiming to promote travel to Japan, JAPAN RAIL CAFE will provide Japan lovers with a one stop Japan-like experience including the latest Japanese products such as trendy items and convenient rail ticketing service for Japan rail passes. It will also serve as a platform to communicate unique information to Singaporeans on the less known travel destinations in Japan.

The cafe is quite cosy and not too big. It is really ideal for couples on a date as well as family and friends hanging out. I manage to talk to the owner of this cafe and found out the concept behind it. The unique point of the cafe is the menu changes every month with different theme for each month. For the month of December, they featured the place in Japan called Tohoku. Never heard it before? That was the purpose for Japan Rail Cafe to introduce less known places in Japan to promote travelling to these places.

The menu is designed in newspaper format. In it are interesting facts of the featured place in Japan such as the popular foods, the scenery and sights which can be seen there. I looked through the newspaper menu and found quite a lot of scenic places in Tohoku to visit. You can find the place on Google and see how beautiful the place is. Tohoku is actually between Tokyo and Sapporo (Hokkaido).

Now, for the food, I ordered their recommended "The Ultimate ABC burger" while my girlfriend got the Twin Flavoured Crispy Chicken Don. A.B.C in the burger stands for Avocado, Bacon and cheddar cheese.

The Ultimate ABC burger

The Ultimate ABC burger

The burger's patty is actually 160g of juicy Wagyu beef. To me, the burger paid attention to details and was cooked near to perfection. Wagyu beef is known to be very soft and it is different from normal beef. I've tried other Wagyu beef before and sadly this was not the best Wagyu beef I've tried but overall, it tasted really good with the cheese, avocado and bacon.

The bread was very special and one of the best bread I've every eaten before. See how soft the bun is in the picture. I was wondering why the bread tasted so good and I realised they used Asanoya's original soft buns. This is a 80+ year old Japanese bakery which is known to make one of the finest bread in the world.

The portion was really big and I couldn't finish the wedges which were the sides for the dish. They probably had about 15 pieces of wedges on the plate which was too filling after eating the burger. The sides can be customised and you can choose from other sides such as fries, or soup. If wedges is too filling for you, maybe the soup will go along well with the huge burger.

Twin Flavoured Crispy Chicken Don

For my girlfriend. she had this Crispy chicken dish which was also very huge! She is a fan of fried chicken especially KFC popcorn chicken so this dish appealed to her. The whole chicken on the plate covered all the rice below. I manage to try some and the chicken was fried nicely and not dry at all. The rice was of very good quality Japanese rice too.

The dish is no ordinary fried chicken dish. If you see in my picture, there is a tea pot behind the bowl. This tea port is not for drinking tea but to go along with the rice bowl. In it is some rich soup which was quite tasty when poured into the rice. The right way to eat is to only pour the soup into the rice after eating halfway so we get to try the rice with and without soup.

Soup in the tea pot

My girlfriend was impressed with the elegance of the dish with the presentation and special way to eat it. They also had a small plate of sesame seeds, seaweed and fish roe to go with the rice. Delicious!!

Pouring the soup into the rice bowl

Mixing the small plate in

Our dishes for the night

For drinks, my girlfriend had the Kuromitsu Kinako Latte and I had the Uji-Maccha Latte. The Kuromitsu Kinako Latte as described in the menu is a transformation of Japanese sweets into latte using Kuromitsu (black honey) and Kinako (soybean powder). For the Uji-Maccha latte, it is basically maccha tea or green tea which we more commonly know it as. I tried the tea and it had a very rich flavour which I really like a lot.

Uji-Maccha Latte

Kuromitsu Kinako Latte

After having a nice meal, me and girlfriend headed to the front section of the cafe to see the retail stuff on sale and I also noticed they do sell various Japan travel tickets there such as the Japan rail pass (JR pass) and even Disneyland Tokyo tickets are sold there.

Japan Rail models

Japan Food and drinks for sale

Some unique bags for sale. Don't be deceived by the traditional looks of it. As what I heard, some Japanese woman have to wait a few months just to get the bag

Interesting cloths which can be framed up in a photo frame. You can buy different cloths to change the it in the frame

Japan railway line in the cafe

Here's where you can buy your Japan rail pass

Some clothes for sale. Look ordinary but costs hundreds of dollars per piece

Cloths in photo frame again

Some gifts for sale

Tourist brochures for Japan

Explaining which pass to get if you're travelling in Japan

Tokyo Disneyland tickets are sold here as well

Application forms for JR pass

Overall, it was a good experience with friendly staff and good environment in the cafe. I felt they paid close attention to details and make sure guests have an enjoyable time in the cafe with good food and ambience. Thanks to Japan Rail Café for inviting us to try out their food.

If you love Japan too, why not drop by this place to experience it yourself. The menu and theme changes every month so do check out their Facebook page here to see what new things they have in store.

Opening Hours:
Mon – Sat: 11am to 9pm
Sun & PH: 11am to 8pm

Japan Rail Pass Counter: 11am-8pm daily

Address:
Tanjong Pagar Centre, Level 1
5 Wallich Street, #01-20 Tanjong Pagar Centre,
Singapore 078883

Directions: Alight at Tanjong Pagar MRT Station (Green Line EW15) and enter Tanjong Pagar Centre B2 directly in front of the fare gate. Take the escalator up to level 1 and the cafe is located just outside the building on your left.

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Saizen REIT - The Final Closure Of My Biggest Stock Holding

Saizen REIT has been a good investment and this stock is finally coming to a close after it announced that it will be acquired in November last year. I invested in Saizen REIT as early as end 2013. It has been more than 2 years now. Over the years, I added to my position in this REIT and it became my largest stock holding in my portfolio. It is a final closure now and most of the cash will be paid out on 29th March this month.

Since this has been a relatively successful investment, it would be good to understand what are the factors that make it an attractive investment? Let me share the rationale on why I invested it in the first place and what we can learn from this.

1. Macroeconomic Factors in Japan

The first reason why I decided to invest in Saizen REIT was due to the macroeconomic factors in Japan at that time. 3 years back while I was taking my part time degree in Economics, I heard about the QE that Japan was going to embark on. I understand that the QE in US and Europe were roads to easy money which actually brought US out of a recession from the 2007 sub prime mortgage crisis and the EU also averted a major sovereign debt crisis.

In 2013, I wrote this in a blog post:

Japan's real estate prices were rising tremendously from 1986 to 1991. This formed an asset price bubble and the bubble burst in 1991 sending real estate prices down into negative territory. Japanese Yen was appreciating a lot due to the Plaza Accord. This was an agreement to depreciate the US dollar in relation to Japanese Yen and German Deutsche Mark. Both these 2 events lead to the Japanese economy suffering and ended up in deflation. I will leave out the finer details of what happened exactly but i hope you got a rough idea. 

Japan's government has set an inflation target of 2% to reach by 2015. Prior to that, Japan has been in a deflation state for many years. As prices keep dropping, Japanese people defer their buying in the hopes that they can buy it at a cheaper price later. This is completely opposite from our current state in Singapore where people rush to buy properties because they are afraid that prices will keep going up. It's the thought that if i don't buy it now, it's going to get more expensive.

With this inflation target, asset prices in Japan are sure going to go up. With QE, money flow in Japan's economy will be expanded. Interest rates go down, asset prices goes up. This was definitely going to be beneficial for Saizen Reit which owns properties in Japan. 

2. Saizen REIT has stable income from residential properties

Saizen Reit has a portfolio of income producing real estate. These properties are mostly residential properties. As home ownership is low at about 60% in Japan, rental properties are still in strong demand there. Rental prices are set to rise as the Japan's economy recover. mid market rents in the 23 ward area of Tokyo showed an increase of 1.1% from the year 2013. This was very attractive to me as Saizen REIT offers about 6%+ in dividend yield at the price which I bought. 

3. Attractive valuation

Saizen REIT stock price has been low for quite some time. In fact, it didn't really move even though it was trading at a discount to NAV of 23.7%. Gearing level was around 34% which I thought was quite ok. Of course, we can't just look at NAV alone to determine if the stock is attractively valued. Some REITs overvalue their properties which make their NAV seem higher. However, for Saizen REIT, I do know that they value their properties conservatively as there were a few times they manage to sell their properties at above valuation. 

With rising property prices, rental prices and stock trading at a discount to NAV, I believed this was a good investment. 

4. Good risk management 

Interest rates are sensitive for REITs. 88% of its debt are on fixed interest and all its debt is long term in nature. The nearest loan maturity it has is in March 2020. Although Saizen REIT could have benefited if they are on floating interest rates instead as interest rates in Japan were low but that's any issue for now. 

The Japanese Yen was also declining against the SGD which means it could affect the dividend distribution to shareholders in Singapore. I liked they have hedged their currency risks in view of the falling JPY which means dividend yield will be more or less stable moving forward. 

Its time to bid farewell to Saizen REIT from now onwards. Now, I'll have to find another stock which can replace the income I get from Saizen. I have identified another stock which is quite similar to Saizen REIT and am still looking at it. Will blog more about it later on. 

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Related Posts:

1. The Japan story - Croesus retail trust and Saizen Reit
2. Looking to invest in Japan's real estate

3. Saizen REIT - Income from Japanese residential properties?

Saizen REIT entire portfolio is bought by Lone Star for an offer price of S$1.172

Just after less than 1 week of posting on the possibility of Saizen Reit being acquired by another firm on my blog, the news is confirmed!! Existing shareholders of Saizen Reit would be happy hearing this news. Saizen Reit has been a good investment for me for the past 2 years. It is sad to bid goodbye to this stable income producing investment. 

This is the confirmed news:

"Japan Residential Assets Manager Limited, in its capacity as manager of Saizen Real Estate

Investment Trust (“Saizen REIT”, and as manager of Saizen REIT, the “Manager”) wishes to

announce that HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of

Saizen REIT, has on 31 October 2015 accepted an offer (the “Offer”) for the acquisition of all the real estate assets (the “Properties”) in Saizen REIT’s portfolio in Japan by Triangle TMK for an agreed purchase consideration of JPY44,660.0 million (S$517.3 million) Triangle TMK is a Japanese affiliate of Lone Star Real Estate Fund IV and Lone Star Funds.

The Purchase Consideration is at a 3.4% premium to the appraised value of the Properties.

The Purchase Consideration is estimated to translate into an implied net offer price of S$1.172 per unit of Saizen REIT (“Unit”), or a slight premium to Saizen REIT’s adjusted net asset value (“NAV”) per Unit based on audited figures as at 30 June 2015, after taking into account estimated transaction-related costs and expenses

.

The estimated implied net offer price of S$1.17 per Unit represents a 36.9% premium above the

closing price of S$0.855 per Unit on 22 October 2015, being the day immediately prior to the

Manager’s announcement of the Offer on 23 October 2015, and a 40.9% premium above the 1-month

volume-weighted average price per Unit as of 22 October 2015."

The offer price to me is quite reasonable at $1.172 as its a premium to its NAV. I think this exceeds the expectation of many existing shareholders. Its a 30% rise above the closing price of 92 cents last week before trading halted. 

Looking back, I've written a series of articles on Saizen Reit which affirmed my decision to invest in the Japanese real estate market. Saizen Reit is the largest investment I have in my portfolio. With this gone, I'll have more cash to deploy to the next best investment in search for better dividend income. 

Congratulations to all existing shareholders of Saizen Reit!

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Related Posts:

1. Saizen REIT - Income from Japanese residential properties?

2. The Japan story - Croesus retail trust and Saizen Reit

3. Looking to invest in Japan's real estate

Saizen Reit - A surprise rise in stock price?

Saizen reit has been an investment which I've talked about for the past 2 years plus. I personally made my investment in this reit 2 years back. Much has been said about how this reit is trading at a discount and they have been able to sell some of their properties at above valuation which means the reit could be worth even more than what they valued their properties at. The net asset value could have been higher than what they had reported.

For the past 2 years, the stock price of Saizen reit has remained mostly stable with slight declines. Just last week, its price went up suddenly which made a lot of investor curious. It rose 8.2% on Friday alone. What caused the stock price to rise so much?

Saizen reit released a statement thereafter saying that they had actually received a firm's offer in relation to the assets of Saizen Reit. This simply means there's a possibility of an acquisition from another firm which caused the unit price to rise.

Here's the announcement:

"the  Manager  wishes  to  announce  that  the  Manager  has  received  a  firm  offer in  relation  to  the assets  of  Saizen  REIT  which  the  Evaluation  Committee  and  the  joint financial  advisers  are currently  reviewing  and  evaluating.  No  definitive  agreements  have been  entered  into  and  there is  no  assurance  that  the  offer  will  be  accepted  and  that  definitive agreements  will  be  entered into."  

However, it is still speculative at this stage on whether the acquisition will go through. With Saizen reit's net asset valued at  $1.14 currently, any potential buyout may be higher than its current stock price below $1 thus the stock price rose from 80 cents plus to 93 cents on Friday.

Saizen Reit has a portfolio of income producing real estates. These properties are mostly residential properties. It is hard to find an investment in residential properties which was what attracted me to invest in Saizen reit in the beginning. The company is certainly trading at a discount plus residential properties are stable income producing assets especially in Japan where the majority of the population rent their homes.

Saizen Reit is my biggest investment to date as I've added my positions over the years at lower prices. I've collected dividends over the years while waiting for the Reit to unlock its true value. Whether there's an acquisition or not, this has still been a good investment till today.

Let's see what happens next.

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Related Posts:
1. The Japan story - Croesus retail trust and Saizen Reit
2. Saizen REIT - Income from Japanese residential properties?

Croesus Retail Trust - Rights Issue 22 For 100

Croesus Retail Trust is a company which I invested in since November 2013. This is a business trust which owns shopping centres in Japan. It currently has 7 properties in its portfolio and is buying the 8th property in Kyushu island. This is the reason for the rights issue which was announced just a few days ago.

I will be subscribing to the rights issue and also will be applying for excess rights. This has been something which I've been waiting for quite some time now. The dividend income I've been getting from this stock has been quite stable for the past 2 years which I believe the management knows what they are doing.

I attended the retail investor seminar of CRT just a few months back which reaffirms my decision to invest in this stock. You can read more about what the management of CRT said during the seminar here: Investing in Japan's Shopping Centres - Croesus Retail Trust Retail Investor Seminar

Croesus Retail Trust Acquires Torius Property in Fukuoka Prefecture, Japan for JPY 7,997 million

Torius Property will be the eighth property in Croesus Retail Trust’s (“CRT”) portfolio, marking its first foray into Kyushu Island, and will be the fourth property acquired by CRT since its IPO in May 2013. The rights issue will be offered for Units of twenty-two (22) Rights Units for every one hundred (100) existing Units at S$0.610 per Rights Unit.

Torius Property is a large-scale suburban retail mall located in the satellite town of Hisayama-machi of Kasuya-gun, which is approximately 13 km from central Fukuoka City in Fukuoka Prefecture, on Japan’s Kyushu Island. It comprises of 36 single or double storey buildings and offers a diverse and unique mix of 145 tenants. Some of Torius Property’ tenants include Costco (wholesale supermarket), Nafco (interior and furniture, DIY), United Cinema (cinema), Rakuichi Rakuza
(amusement centre) and Daiso (100 yen shop). Other notable facilities at Torius Property include a petting zoo, as well as an outdoor barbecue park that enhances the mall's appeal as a family outing and gathering destination.

The current stock price for CRT is about S$0.815 per unit. Getting the rights units at S$0.610 will improve the yield I receive from this stock moving forward. Subscribing to the rights issue shows my trust in the management to provide good income for shareholders in the future.

The new property that they will be buying has good NPI yield of 7.84% as compared to the NPI yield of CRT's existing portfolio of 5.3%. Torius Property has a high occupancy rate of 95.3%.

The commencement of trading of rights entitlement will start on 9th October 2015 and end on 19th October 2015. The last date and time for acceptance of the Rights Entitlements and payment for Rights Units will be on 23rd October 2015.

Its time for more dividend income!

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Related Posts:
1. The Japan story - Croesus retail trust and Saizen Reit
2. Investing in Japan's Shopping Centres - Croesus Retail Trust Retail Investor Seminar

Croesus Retail Trust - More than 10% dividend yield!

Croesus Retail trust year to date distribution per unit (DPU) is 8.98c. This exceeds forecast by 6.3%. That is $89.80 per 1000 shares that we invested. For the price that i bought, the dividend yield which i got was 10.26% year to date. 10% dividend yield do exist. However, the dividend i got was from the period 10 May 2013 to 30 June 2013 which is more than a year. Q4 FY2014 DPU is 2c. Annualising a quarterly DPU of 2c gives us 8c which represents a yield of 9.14% at the price i bought. Still not too bad. Share price of CRT has also appreciated by 12.5c since I blog about it in November 2013. This is an increase of 14.28%.

All about Croesus Retail Trust

CRT owns shopping malls in Japan. From the initial 4 properties in Japan, they have acquired 2 more properties right in the capital city, Tokyo. This sums up their total number of properties to 6. CRT's debt or gearing ratio is quite high at 51.7%. 20% of its debt is maturing in FY 2017, 60% in FY 2018 and the remaining 20% in FY 2019. The high gearing ratio may be a concern for some.

Two of the properties in Tokyo:

Luz Omori in Ota Ward, Tokyo. located at the intersection of a traditional shopping street and a retail street with strong shopper traffic that leads directly to the JR Omori Station.

Nis Wave I in Tachikawa City, Tokyo. Connected to the JR Tachikawa Station

Net asset value has increased slightly to 90c. At the current price of $1, this represents a premium to fair value. At current price of $1, if we annualised a DPU of 2c to get 8c, it represents a dividend yield of about 8%. This is still quite good. However, we have to ask ourselves whether CRT is still able to give a annual DPU of 8c? Will it be more or lesser in the next FY? With this, we have to bear in mind that CRT's policy is to distribute 100% of its distributable income in FY 2014 and FY 2015 and then at least 90% thereafter. So, there is a possibility that DPU will decrease after FY 2015. For now, we may see the same or more DPU in the next dividend payout assuming rental rates and occupancy rates remain stable.


The future of Croesus Retail Trust

CRT owns only 6 retail properties now. In future, i guess they will continue to expand their portfolio of properties which will hopefully increase DPU for investors. However, with CRT's debt already at quite a high level, they would most likely finance the purchase of further properties by other means. One possible way would be to offer a rights issue to existing shareholders. If that happens, existing shareholders would have the opportunity to accumulate more shares of CRT at an attractive price. Whether the management will do this is anybody's guess now.

Japan's economy is undergoing a recovery. I've blog about the Japan's economy for a number of times before already. The YEN has devalued quite a bit in the past 1-2 years. The devaluation of the YEN is a game changer. Previously, businesses were struggling due to the strong currency. Both exports and tourism suffered due to high costs for foreigners buying Japanese goods. This resulted in a decade of deflationary economy which depress rents and property prices. However, now we see inflation coming back and rental rates will definitely pick up along with a increase property prices.

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Related Posts:
1. Croesus Retail Trust - First Quarter results released and initiated long position
2. The Japan story - Croesus retail trust and Saizen Reit

Saizen REIT - Income from Japanese residential properties?

Saizen REIT is one of the biggest investment in my portfolio. Owning shares of Saizen REIT effectively means owning 138 residential properties across Japan. Yes, Saizen REIT has a total of 138 properties across 14 cities in Japan. Saizen REIT has reported its full year 2014 financial results just 2 days ago. I've blog about the reason behind investing in Japan previously which i mentioned that i also invested in another Japanese business trust called Croesus Retail trust. Croesus owns shopping centres in Japan and separately announced its financial result just this morning. I'll write up on it in another post.

Credit: Saizen REIT FY2014 result presentations

FY2014 financial results

Saizen's revenue and net property income increased by 3.4% and 2.6% as compared to FY 2013. DPU of 3.1 cents has been announced and adding the previous DPU of 3.25 cents in February, the total DPU for the whole year works out to be 6.35 cents. With the current stock price at 96 cents, the dividend yield is about 6.6% p.a. Of course if you've bought at lower price, the dividend yield would be much higher.

On its debt profile, its gearing ratio is 37%. This is the percentage of debt it has over its total assets. 88% of its debt have fixed interest and all its debt is long term in nature. The nearest loan maturity it has is in March 2020 which is almost 7 years from now.

Net asset value per share decreased slightly from $1.24 to $1.22 in FY2014. With the current price at 96 cents, this represents a discount to NAV of 21.3%. Saizen REIT is still at a good price. Of course, as stated earlier, investing at the current price would mean a dividend yield of 6.6% if DPU remains the same next year. If you're investing for income, you have to decide if 6.6% p.a is a fair return on investment?

Credit: Saizen REIT FY2014 result presentations

The good thing is Siazen REIT DPU has been stable and increasing for the past few years since 2011. From a DPU of about 2.5 cents in 2011, DPU has increased to about 3.1 cents now. This represents an increase of about 20% for the past 3 years. It looks like it will continue to increase as rental rates pick up in Japan when the economy recovers and inflation starts to kick in after the various monetary policies implemented by the Japanese authorities.


Growth prospects for Saizen REIT

Currently, the average occupancy rate for the REIT is 91%. There is definitely more room to grow their property income even if they do not expand their portfolio of properties. According to a report as mentioned in their financial report presentation, mid market rents in the 23 ward area of Tokyo showed an increase of 1.1% from the year 2013. Rental rates should begin to pick up in other cities too. Japan has been suffering from deflation for many year now. It is time for them to get out of deflation. Well, its what the government hope so as they had set an inflation target of 2% by 2015 which is next year.  

As inflation happens, property prices should pick up too. This will increase the NAV for Saizen. It will be interesting to see how the situation develops in Japan. Read related posts below to understand the motivations behind my investments in Japan. So far it has been good and maybe its time for a trip to Japan before prices rise to even higher levels.

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Related Posts:
1. The Japan story - Croesus retail trust and Saizen Reit
2. Looking to invest in Japan's real estate

A night of experience with Japanese food

I have written on the Japanese economy and invested in Japanese properties. Today, I had the experience with Japanese food and find out why they are so popular even in Singapore.

My first stop was at Ramen play which sells amazing Japanese ramen with one of the best soup I've ever had. This concept was brought from Japan to Singapore by the well known BreadTalk group. BreadTalk is a very successful business with its restaurants and bakeries positioned almost everywhere in Singapore. I've ate at its the popular Din Tai Fung, bought bread from its BreadTalk bakeries and also had breakfast at toastbox before. Ramen play is a first time experience for me.

I ordered a double soup cha su ramen for $12.80. The presentation of the ramen was fantastic. With the lighting in the restaurant positioned in the right place, the noodles seems to be shining directly at me.

Can you see the bowl shining out?

The restaurant was quite packed at dinner time. Business is fairly good. There is no doubt about the quality of the food but of course the price is a bit pricey. But if you compare to other restaurants such as Ajisen, this is actually quite competively priced. So far, I've been impressed with all of Breadtalks' business concepts. They indeed focus a lot on quality which has gained them many loyal customers and a good brand name. No wonder their share price have been constantly rising. Those who've invested in the company in the early days probably are laughing away till now. 

The next stop was an experience in a place called the ministry of food. Similarly,  they also had a Japanese theme concept restaurant. I only had deserts there and these are the food I ordered to be shared with a friend:

A green tea shake and a red bean shake. Apparently, Japan is famous for their green tea and red bean. 

Red bean paste with Japanese dumplings and green tea ice cream

Ice cream with assorted fruits and Japanese Kanten Jelly

Ministry of food is a Singapore based company which started in 2006. The restaurant is fully packed even at 9pm. Their business is really good. They have a good environment for you to relax and chill in. Their menu really have a lot of deserts to choose from. I think I counted over at least 20 different deserts. However, price is not cheap. For that few deserts, it was already $34. 

That's all for my once in awhile indulgence. June is a month of bonus and pay increment for me. I also just got a small promotion on my job. Another good news is I'm already half way towards my 100k target by the age of 28. Even after all these indulgence, my financial state is still healthy and I'm still on track. 

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The Japan story - Croesus retail trust and Saizen Reit

Croesus retail trust and Saizen Reit have been two of my favourite investments since day one. One is a business trust while one is a real estate investment trust. One owns shopping malls while the other owns residential properties. What do they have in common? They are both from Japan.

The investments in these two companies have proved to be a good one. Recently, the stock price of these two companies went up one after the other.

Croesus Retail Trust

Saizen Reit

My first write up on investing in Japan is here: Looking to invest in Japan's real estate
This was written in November last year before the run up.

The whole motivation behind investing in Japan's real estate is fundamentally due to economic reasons. As readers would know, Japanese prime minister Shinzō Abe has launched Abenomics which is a combination of measures such as quantitative easing (QE), increased public infrastructure spending and the devaluation of the Yen. All these stimulate growth which will increase asset prices. Investing in Japanese property may be a good choice if growth does set in and bring the Japanese economy out of a decade of deflationary economy.

Croesus and Saizen were the two Japanese companies that are listed in Singapore. Investing in them was the way to gain access to the Japanese market. Let's take another brief look on Croesus retail trust and Saizen Reit to understand what they do and whether its still a good investment at the current price?


Saizen Reit
Saizen Reit has a portfolio of income producing real estates. These properties are mostly residential properties. To date, it has 139 properties spread across 14 cities in Japan. Occupancy rate is at 91.1%  in 3Q FY2014. As home ownership is low at about 60% in Japan, rental properties are still in strong demand there. Rental prices are set to rise as Japan's economy recover.

The NAV of Saizen Reit is $1.17 as at 31 March 2014. At the current price of $0.96, this still represents a discount to NAV of about 18%. The annualised dividend yield is about 6.67% at the current price. It's gearing ratio is about 38% as at 31 March 2014. This represents the total debt it has to its assets.

Moving forward, will Saizen Reit be able to maintain or even increase its dividend payouts? This is an important question to ask for investors investing for income. The first dividend payout this year was comparable to the first dividend they gave out last year. All else remaining equal, we should still see dividends in the range of 6.5% for FY2014.

At 6.5% dividend yield, is it still a good offer? I personally would prefer a yield of at least 7%. But with the stability of Saizen Reit which owns residential properties, the yield is still quite a good offer for investors.


Croesus Retail Trust
Croesus retail trust is a business trust which owns shopping centres in Japan. Currently, it has 6 shopping centres all located in Japan. When i invested in it, the trust had only 4 shopping centres and recently it acquire 2 more shopping malls located in Tokyo city itself.

The NAV for the trust is at 88cents. At the current price of 94.5 cents, this represents a premium to NAV of 7.4%. The gearing ratio is at 53.5% which is rather high. The gearing ratio was 41.8% before it acquired the 2 properties in Tokyo. With this, the annualised dividend yield is 8.2% at the current price of 94.5cents.

The trust has manage to declare higher dividend yield than what they previously forecast. They will pay out 100% of their distributable income for the first 2 years ending June 2015 and at least 90% of distributable income thereafter. After June 2015, if rental yields remain constant, the annualised dividend yield should decline to below 8% at the current price.

Now, is it still a good investment if dividends decline below 8% and gearing ratio remain high at more than 50%? I would think the risk is higher as any investor who buys now is buying at a premium to NAV. Buying at fair value of 88cents may be a better choice but anyway, nobody will know how the stock price will move thereafter. It may move up or it may move down. I cannot foretell the future.


I believe Japan will continue to benefit from the monetary policy that they are embarking on now. The Yen has fallen significantly boosting exports and attracting investors into the country. QE has worked in the US, UK and also for the European region. It cushions the impact of a full fledge crisis. Of course there will be side effects such as inflation rising too fast which is the main concern. But Japan is in deflation so i don't think inflation is any concern as of now. It's still interesting to see how the situation will unfold in the future. For now, its just taking the ride up by investing in Japan.

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Related Posts:
1. Looking to invest in Japan's real estate
2. Short interview with Jeremy Yong, Co-founder of Croesus Retail trust