Research in REVPAR

Dear Fellow Investor,

Dolly and I just returned from a 3 day trip to Singapore to attend the Singapore REIT Convention at the Sun Tech Convention Center.

Doggy 240 is a famous Orchard Road sculpture across the street from ION Shopping Mall. It is a massive bull dog made of bronze painted with bright colours. Orchard Road is famous for unusual sculptures as well as high end hotels and luxury shops.  The world famous master Salvador Dali has one of his bronze statues on display.

 

We were in Singapore 2 months ago and it seems business in the retail shops/ hotels and restaurants is picking up. Tourists and business people from China, Indonesia/ Hong Kong/ Thailand/ India  and   Malaysia are returning.  Village Hotel Albert Court where we stayed   is running at 90 % + occupancy  according to the manager.

We learned in the REIT convention that REVPAR (Revenue per available room is picking up in the Singapore hotels.)  Property prices appear to be stabilizing.  Occupancy in prime office Reits such as Kepple Reit and retail mall Reits such as Capital Land  are at 94- 98 % and they have rental reversion contracts in their leases. 

The CEO of Motley Fool, David Kuo  gave the keynote address as to why Singapore Reits should be in every investor’s portfolio as they provide above average income of between 5 and 6% to long term investors- much better than saving deposit rates of just more than 1 %.   

He said that if you think people will still shop, go to hospitals, conduct business 10 years from now you get the growth on top of the generous dividends. 

There is no growth with fixed deposits or savings accounts.   Using the rule of 72, David explained why the dividends alone will return your capital in about 12 years and with growth can do so in less than 7 years.  

Prominent Reit CEOs, including those from Sun Reit, Mapletree Logistics, QUE Hospitality Trust, Capital Land and Kepple Reit described their challenges and plans going forward. They were all open, frank and generous with their knowledge.

I was surprised at the number of attendees- well over 6000 was my rough estimate.  That shows the wealth and savings of Singaporeans. The CPF has over 35 billion SGD available for investing in Reits and as investors begin to realize the potential of quality Reits more money will flow into Singapore Reits. 

Singapore at 6 % average pays the highest average Reit yields in Asia. The US by the way is only 3 % .  The other benefit is the strength and stability of the Sing Dollar.

It looks like the US may delay interest rate increases for now as the worst job creation numbers in 6 years was reported last Friday by the US Labour Dept.  This will also give a boost to the Reits as they act like bonds as far as interest rates are concerned. In fact David said Reits are a hybrid dividend stock and bond and benefit from both income plus growth.

Gold shot up over USD 40 per ounce while the USD weakened. I will post a mid week report on the KLSE should conditions warrant.  MGS should benefit from this worse than horrible jobs report. Trumps poll numbers went up after the jobs release as Hillary is perceived to be more of same as far as weak Obama economic policy is concerned.

Invest well and grow your wealth,

Bill