Tuesday, June 30, 2015

[SGX Portfolio] Bye OUE Comm REIT

OUE Comm REIT was one of my first few purchases that I made back in August 2014.


I made the investment based largely that it was trading 24% below its NAV. Although it has been a sturdy soldier in my army so far, today I decided to let go of it at a price of $0.815, which is 10c above my initial position.

With the 10c capital gain and 2 dividend distributions of 24.2c and 28.4c respectively, I'm walking away with a gain of 62.6c which is a total return of 7.7%. Taking into account transaction costs, I get 7.2% returns over the past 11 months, which is decent, but still lower than my portfolio IRR.

One of the things that irks me is that fact that OUE Comm REIT only has 2 properties under its name. They are now planning to acquire One Raffles Place and are raising money to do so. They are raising money through debt, CPPU and rights. I quite like that the CPPU is at at 15% premium to the TERP. It looks like a good deal for current equity investors actually.

As much as I'd like to say that I'm part-owner of such a landmark building like One Raffles Place that defines the Singapore skyline, I'm trying to de-risk my portfolio to more comfortable levels. While OUE Comm REIT has really been a steady investment so far, I feel that I am going to be able to find much more attractive investments in the near future and I'd rather hold cash until such opportunities arise.

With Singapore's CPI at -0.4% and Core Inflation at 0.1%, the "inflation monster" is not scary to me. I'm perfectly fine holding wads and wads of cash. I don't really see a need to take unattractive risks currently and the opportunity cost of cash is not painful at all.

To quote Jeremy Grantham from GMO, "You don't get rewarded for taking risk; you get rewarded for buying cheap assets. And if the assets you bought got pushed up in price simply because they were risky, then you are not going to be rewarded for taking a risk; you are going to be punished for it."

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