This is a short blog in reply to a reader’s comment in my last blog which was about my largest REIT investments.
When it comes to AA REIT’s unit price, I can only say that Mr. Market will do what it wants to do.
I do not know why the unit price is where it is but I do know that AA REIT should continue to generate stable income for me.
If there is a dip in DPU, it is probably going to be temporary, everything else being equal.
In the grand scheme of things, over a longer period of time, inflation should see prices including asking rent going up.
As an investor for income, I do not usually invest in REITs for a few months only or even for just a couple of years unless I find out it was a mistake which has not been the case for AA REIT.
Why did I add to my investment in IREIT Global and not AA REIT?
You are right in your suggestion that it was due to IREIT Global’s rights issues and the fact that my resources are limited.
Also, I want to add that price is not the same as value.
At $1.60 a unit, AA REIT was trading at a big premium to NAV but its unit price has retraced to a level that is closer to its NAV which means it is a better time to buy now than it was before.
However, IREIT Global is still trading at a pretty big discount to its NAV which helps to make it a more compelling buy.
Warren Buffett famously said that whether socks or stocks, he likes buying quality merchandise when it is marked down.
Could be the case here.
When we take into consideration that IREIT Global holds freehold assets while many of AA REIT’s assets are in Singapore with relatively short land leases, the value that IREIT Global brings to the table now shines brighter.
Having said this, it is important to bear in mind that AA REIT and IREIT Global might both own buildings but they are in different sectors.
They are also in different parts of the world.
Not putting all our eggs in one basket is probably a good idea.
Of course, AK is just talking to himself here and, depending on our motivations, it might or might not be relevant to us.