My Saizen Reit windfall!

Music to my ears

One of my favorite REIT (Siazen Reit) has announced on 30th Oct 2015, that  they have accepted the offer for Triangle TMK to buy over their entire Reit’s portfolio at S$517.3 million.

You can read the official announcement here.

This offer price translate to a 3.4% premium to the appraised value of the properties. Which is not not very high, but reasonable.

But the best part of the story is that since their trading price has always been below NAV, the estimated net offer price of S$1.17 per unit, translate to a whopping 36.9% premium above the closing price of S$0.855 on 22nd Oct!

Personally, I have invested in this counter since late 2013 at about $0.858 per share and have been getting about 7.5% of dividend yield every year. So this exit works out very well for me.

Why I bought Saizen Reit

I have wrote an article here about my basic consideration when picking REITS here. Basically, I filter my REITS using a single simple ratio of Yield over Price/NAV.  At that time, Saizen Reit came up top of the list and went ahead to invest a few months later. I must walk the talk right?

The basic principle of that ratio is look for the highest yielding REITS and are trading at a discount at that time. Of course I also take in other considerations, but that was one of my single more important ratio.

I have also wrote about Saizen Reit when the REIT ETF was at a all time low here. Basically, Siazen REIT is on my top 5 counter to invest.

Why I did not sell earlier?

There were opportunities to sell this counter during my 3 years holding period but I kept it because I like what the management team is doing for the portfolio. I have written about their unique model here. In essence, unlike many other reits, they hold a lot of cash. They are making full use of the very low interest rate environment to make their capital work hard for them. Plus I do buy into the story that property value will increase whenever a country host the Olympics. Tokyo will host the Olympics in 2020.

PLUS…after attending their AGM, I got to learn more about the Japanese home rental environment and walked any quite confident of their strategy.

End result

With a potential capital gain of 36% and yearly dividend yield of 7.5% over 3 years, my IRR (internal rate of returns) works out to be around 17%. Which is about twice the return of STI ETF. I am a happy camper.