Commercial Property Exposure

[AyG]

Commercial property is commonly regarded as a good portfolio diversifier. Is there any easy way to get exposure to Thai commercial property (other than buying an office block)? As far as I can tell, all the SET-listed REITs only have a very small number of properties and so seem excessively concentrated/risky. (I also suspect that some REITs here may be run more for the benefit of the former property's owner who now leases back than the investor.)

Failing that, is there any investment vehicle for commercial property across SE Asia?

[fletchsmile]

I look at this from time to time. It's a sector I'm interested in just haven't got round to it. Just to share a few things I came across:

For REITs they are relatively new in Thailand and the market not developed. The framework is in place but not many.

Before that there were Property Fund For Public Offering (PFPO). These are probably the ones you've seen. They are quite narrow in focus as you say, so you want to probably have a few of them if you're diversifying. Also people need to be careful that some are leasehold so the high yields you get also include some return of capital.

On the SET, there's a new sector since Jan of this year (PFUND) that includes these.

There's also a list here under PF&REIT : Property Fund & REITs which lists all the SET companies in the sector

http://marketdata.set.or.th/mkt/sectorquotation.do?language=en&country=US&sector=PF%26REIT

and some background...

http://www.set.or.th/en/products/trading/equity/tradingsystem_p10.html

Siri are also launching an IPO for one this month

https://www.set.or.th/en/company/ipo/upcoming_ipo_propfund.html

Tesco launched a REIT which if I recall was yielding around 6% to 7%. As it had the name Tesco involved I'd expect some degree of transparency and standards. UOB/ING have been linked with a couple, which again nice to see a decent name linked to.

http://www.uobamth.co.th/EN/PropertyFunds.asp

Anyway let us know how you get on, as it's something I'm also interested in, when I get round to it...

Cheers

Fletch

[fletchsmile]

For outside Thailand, I hold the following that may be of interest to you:

commercial property REIT - Singapore and Australia - SGX traded

http://www.bloomberg.com/quote/FCOT:SP

diversified properties - ASX traded

http://www.bloomberg.com/quote/ABP:AU

For residential rather than commercial:

across Asia: SGX traded. Ascott- Plus in addition I've stayed in quite a few of their serviced apartments around Asia while working in different countries

http://www.bloomberg.com/quote/ART:SP

For Singapore and overseas- SGX traded

http://www.bloomberg.com/quote/FCT:SP

All quite narrow in focus, but I figure buying a few of them across commercial as well as residential was OK. Bought mainly for the yield, particularly on the 3 SGD ones as SGD interest rates are abysmal, and the stock market a bit limited. Plus as you say diversification.

Cheers

Fletch

Edited March 20, 2014 by fletchsmile

[paddyjenkins]

For outside Thailand, I hold the following that may be of interest to you:

commercial property REIT - Singapore and Australia - SGX traded

http://www.bloomberg.com/quote/FCOT:SP

diversified properties - ASX traded

http://www.bloomberg.com/quote/ABP:AU

For residential rather than commercial:

across Asia: SGX traded. Ascott- Plus in addition I've stayed in quite a few of their serviced apartments around Asia while working in different countries

http://www.bloomberg.com/quote/ART:SP

For Singapore and overseas- SGX traded

http://www.bloomberg.com/quote/FCT:SP

All quite narrow in focus, but I figure buying a few of them across commercial as well as residential was OK. Bought mainly for the yield, particularly on the 3 SGD ones as SGD interest rates are abysmal, and the stock market a bit limited. Plus as you say diversification.

Cheers

Fletch

Id be buying many of these reits now they have fallen so far but am concerned their reliance on low interest rates makes them extremely vulnerable to future US rate hikes or just a global bond market sell off. Also of concern to me is the competence of their managers in general, having heard one interviewed on bloomberg, who sounded like an idiot.

[midas]

For outside Thailand, I hold the following that may be of interest to you:

commercial property REIT - Singapore and Australia - SGX traded

http://www.bloomberg.com/quote/FCOT:SP

diversified properties - ASX traded

http://www.bloomberg.com/quote/ABP:AU

For residential rather than commercial:

across Asia: SGX traded. Ascott- Plus in addition I've stayed in quite a few of their serviced apartments around Asia while working in different countries

http://www.bloomberg.com/quote/ART:SP

For Singapore and overseas- SGX traded

http://www.bloomberg.com/quote/FCT:SP

All quite narrow in focus, but I figure buying a few of them across commercial as well as residential was OK. Bought mainly for the yield, particularly on the 3 SGD ones as SGD interest rates are abysmal, and the stock market a bit limited. Plus as you say diversification.

Cheers

Fletch

Id be buying many of these reits now they have fallen so far but am concerned their reliance on low interest rates makes them extremely vulnerable to future US rate hikes or just a global bond market sell off. Also of concern to me is the competence of their managers in general, having heard one interviewed on bloomberg, who sounded like an idiot.

And when it comes to other people managing your money these days it is not only incompetence that you have to worry about- its also integrity because there seems to be so little of it about

[midas]

For outside Thailand, I hold the following that may be of interest to you:

commercial property REIT - Singapore and Australia - SGX traded

http://www.bloomberg.com/quote/FCOT:SP

diversified properties - ASX traded

http://www.bloomberg.com/quote/ABP:AU

For residential rather than commercial:

across Asia: SGX traded. Ascott- Plus in addition I've stayed in quite a few of their serviced apartments around Asia while working in different countries

http://www.bloomberg.com/quote/ART:SP

For Singapore and overseas- SGX traded

http://www.bloomberg.com/quote/FCT:SP

All quite narrow in focus, but I figure buying a few of them across commercial as well as residential was OK. Bought mainly for the yield, particularly on the 3 SGD ones as SGD interest rates are abysmal, and the stock market a bit limited. Plus as you say diversification.

Cheers

Fletch

Id be buying many of these reits now they have fallen so far but am concerned their reliance on low interest rates makes them extremely vulnerable to future US rate hikes or just a global bond market sell off. Also of concern to me is the competence of their managers in general, having heard one interviewed on bloomberg, who sounded like an idiot.

And when it comes to other people managing your money these days it is not only incompetence that you have to worry about- its also integrity because there seems to be so little of it about

case in point

Many elderly, retired, or conservative clients have had billions lost or frozen in non-traded REITS recommended by financial advisors at full service brokerage firms and banks. We are currently representing clients who have invested in non traded REITS like the Behringer Harvard Short Term Opportunity Fund, Desert Capital, Cornerstone, and many others recommended to them by financial advisors. Clients at firms like Merrill Lynch, Citigroup Smith Barney, UBS, Morgan Keegan, Morgan Stanley, LPL Linsco, may have been recommended grossly unsuitable investments in highly illiquid and speculative non-traded REITS like Desert Capital, Apple REITs and others.

http://www.reitfraudrecovery.com/

Edited March 22, 2014 by midas

[AyG]

Fletchsmile recently alerted me to the existence of TMB Asset Management's Property Income Plus fund (Factsheet). It is pretty much exactly what I'd been looking for, holding a range of Thai and Singapore REITS giving the diversification I wanted. (Thanks, Fletch.) So, last week I opened an account with TMBAM.

Now, to date I'd been using Aviva's Asia Pacific Property fund for property exposure in the region. It's performed pretty abysmally, losing roughly 18% in the last 3 years, and annoyingly the monthly fact sheets haven't addressed what's going wrong. The reason I started this topic to see if I could find a better alternative.

Anyway, this morning I tried to sell my holding in the Aviva fund to find out that dealing was suspended yesterday; all properties will be sold and the fund will be closed. It's estimated I will have to wait up to 2 years to get my money back. Such unfortunate timing, to say the least.

Details of the fund closure here.

I'm left wondering whether the diversification benefits of investing in physical property are really worth the risk of long lock-ups.

[Time Traveller]

"all the SET-listed REITs only have a very small number of properties and so seem excessively concentrated/risky." ---

I have no idea what you mean by that because there's dozens of property trusts listed on the Thai stock exchange. They are broken between residential, commercial and hotel properties so you'll need to research them.

E.g. CPNRF is one of the more liquid which hold assets such as a number of Central Department stores. If you're worried about concentration then split your investment over several trusts.

Also many of the listed Property developers hold commercial assets in there own company as well.

[AyG]

"all the SET-listed REITs only have a very small number of properties and so seem excessively concentrated/risky." ---

I have no idea what you mean by that because there's dozens of property trusts listed on the Thai stock exchange. They are broken between residential, commercial and hotel properties so you'll need to research them.

E.g. CPNRF is one of the more liquid which hold assets such as a number of Central Department stores. If you're worried about concentration then split your investment over several trusts.

Also many of the listed Property developers hold commercial assets in there own company as well.

CPNRF is a typical example of why I consider Thai REITS to be unattractive.

(1) CPNRF only owns five properties. A typical UK equivalent would own dozens.

(2) All the properties owned by CPNRF are related to the Central group so the trust will be very strongly subject to the good or bad fortunes of Central. Furthermore, 4 are in the Bangkok area - again not good diversification.

(3) 26.29% of the shares are held by Central, and a further 3.35% by Arunee Chan of the Chirathivat family which owns the Central Group. It would be for the trust to be run not for the benefit of the shareholders, but for the benefit of a certain family.

Splitting investment over several trusts is not an attractive option:

(1) It takes a lot of time to research an individual investment, and in the case of Thai REITS (a) most of the available literature is in Thai, and ( accounting and disclosure standards are poor.

(2) The concentration of exposure to individual businesses (Central in the case of CPNRF) means that to achieve a reasonable level of diversification one would need to hold 15-20 REITS. I certainly don't have the time to monitor that number of individual investments.

(3) And anyway, the fundamental problem remains that in many cases these REITS may not be run for the benefit of the shareholders.

[Time Traveller]

"all the SET-listed REITs only have a very small number of properties and so seem excessively concentrated/risky." ---

I have no idea what you mean by that because there's dozens of property trusts listed on the Thai stock exchange. They are broken between residential, commercial and hotel properties so you'll need to research them.

E.g. CPNRF is one of the more liquid which hold assets such as a number of Central Department stores. If you're worried about concentration then split your investment over several trusts.

Also many of the listed Property developers hold commercial assets in there own company as well.

CPNRF is a typical example of why I consider Thai REITS to be unattractive.

(1) CPNRF only owns five properties. A typical UK equivalent would own dozens.

(2) All the properties owned by CPNRF are related to the Central group so the trust will be very strongly subject to the good or bad fortunes of Central. Furthermore, 4 are in the Bangkok area - again not good diversification.

(3) 26.29% of the shares are held by Central, and a further 3.35% by Arunee Chan of the Chirathivat family which owns the Central Group. It would be for the trust to be run not for the benefit of the shareholders, but for the benefit of a certain family.

Splitting investment over several trusts is not an attractive option:

(1) It takes a lot of time to research an individual investment, and in the case of Thai REITS (a) most of the available literature is in Thai, and ( accounting and disclosure standards are poor.

(2) The concentration of exposure to individual businesses (Central in the case of CPNRF) means that to achieve a reasonable level of diversification one would need to hold 15-20 REITS. I certainly don't have the time to monitor that number of individual investments.

(3) And anyway, the fundamental problem remains that in many cases these REITS may not be run for the benefit of the shareholders.

Why would that be an issue unless you we're going to put everything into just one REIT ?

Like I said, you could divide your investment allocation over say 5 or 6 different trusts, and have exposure to dozens of commerical properties.

1. Again the time spent researching is irrelevent unless you plan to turnover investments very frequently. Secondly, Thai accounting and disclosure standards are not poor by any measure. I've invested in Thailand for close to 2 decades, and I'm quite sure there is less corporate fraud among listed securities in thailand than there is in countries like USA, Canada, Australia, Japan.

2. REITs are designed for people who want income. What monitoring do you need to do unless you plan frequent turnover? It really sounds like you care more about capital gains, so why are you even discussing REITs?

3. What are talking about? Everyone understands what a REIT is. They own property(ies). A manager takes a commission to manage it, and then the distribute the income to unitholders.....Seriously, you're delusional. Name another easier/cheaper way to get exposure to commercial real estate without buying a office building by themself?

Edited July 23, 2015 by Time Traveller