As a REIT investor, I got to take in whatever perspective that I can come across about the supply and demand of properties going forward.

Our newest associate adviser have not even started work in the company but he has alerted me to this pretty good interview by the chairman and CEO of Starwood Capital Group.

Some of these people are motivated by their personal interest about the issue, so what they tell us might be a little or very bias.

I think this is a pretty balanced interview.

Starwood Capital group is an investment firm that was born out of the US Savings and Loans Crisis in 1991.

The failed banks had to let go of their properties and Barry Sternlicht raised $20 million from a few New York families to fund the purchases of these properties. Today, they hold $60 billion worth of assets.

I have always associated the Starwood name with hotels but turns out as a group entity, Starwood operates more as an investment firm doing all sorts of deals trading properties, improving portfolio and bringing in investors.

“Starwood Capital sought to acquire well-located real estate assets at a discount to replacement cost that has the potential to benefit from improving fundamentals. In so doing, we have invested in a wide range of distressed securities and non-performing loans, single assets, portfolios of assets, and companies.”

As the head of the firm, the chariman should have a pretty good view about how the state of affairs after Covid-19.

Here is the interview:

The biggest discussion point was on one of the most densest cities in United States: New York.

• In the hotel segment, the cities which typically thrive on big conventions like Chicago, New York, New Orleans will be the most affected. That will take a while to come back
• Zoom meetings will cut the rate of growth (the finance side of him speaking. This will affect the valuations of the properties)
• The office will have less of an impact. Going to the office is an experience that will not go away. Companies will take less space.
• 20 years ago, office spaces have gone denser from 225 sqft to 300 sqft per person. Likely, the density will go back the other direction
• The retail shopping center is the most hard hit. A lot of the retailers are upping their online game and have done really well. So those shopping centers that depend on tenants are going to get a hard hit. This is not an easy asset class to be in.
• Single-family housing is strong
• Barry believes a lot is how the employment will be going forward. If we stay at 20% unemployment for a prolonged period, this will have an impact on demand and rent, which will affect property prices
• New York has a lot of things not going for it
  • Covid-19 and the protests in a very dense environment have worsened the problem
  • Tax rates are high
  • Strong unions mean that generally, the cost of doing business is high relative to other places in the United States.
  • If you tax the rich, the rich leaves, less tax revenue, it places more pressure on those who stay, and that further exacerbates the problem.
  • In the past few years, the more active players are less of the financial firms but the communications and internet companies. The reason they come to New York is that the talents want to be in New York. If the talents had a change in perspective in the future, then the demand for properties may shift accordingly.
  • There is huge pressure on real estate. Rents could drop 25% and expenses could climb 25%
  • However, every foreign investor wants to own properties in New York
  • Just before Covid-19, a law was passed that if you put in investments to the property to improve it, you are not allowed to charge additional rent for it. Effectively, this is rent control and this disincentivizes owners to improve their property. The result of this, as seen in other areas is that the place becomes more and more run down.
  • WeWork was New York’s largest tenant. That likely means this segment in New York will not grow any time soon.
• Starwood Capital prefers to add assets in the Red states (Republican) primarily because they are growing, they are adding people, lower in taxes
• Shared office space makes sense but the valuation of the companies may be wrong. WeWork makes good money from countries like Tokyo and Singapore and it makes less sense in lower-tier cities
• WeWork is paying the rent in the majority of Starwood’s properties
• Barry thinks that WeWork can make pretty good money. He cites the example of their London space which they leased from Starwood Capital. They charge tenants $160 and after netting their cost they earn $130. They then pay Starwood $65.
• Retail is damn tough
  • Properties are bought when rent is $10,000 PSF and if tenants ask to pay the rent at $3,000 PSF, the value of the property will fall so much that it will go back to the financier. So landlords would rather keep the property empty
  • It is very very difficult to underwrite retail properties because you got tenants but you do not know what is the rent that they will charge.
  • It will take some time before they reached equilibrium
  • Amazon is the pandemic of retail. They practice predatory pricing (sell their products below the cost of goods) and in some other industries, this would have to be regulated.
• Barry thinks that there will be a wave of distressed assets coming.
  • The FED just encouraged the banks to work with the borrower but they are not doing it
  • 1/3 or 1/4 of hotels in New York will go bankrupt
• Hotels catering to high-end clients are not much affected
• Hotels that build their business around conventions are going to be severely affected.

Overall, I think there is nothing new here. What will be difficult is that it is difficult to see demand and supply. This translate to the stabilized rent. And that translate to the valuation.

There will be moderation but we are not sure how the terminal state will be.

This is not unique to real estate but other business segments as well.

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I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
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3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works

Out of the many things I have read, it was a post at Housing Wire that made me wonder whether we are thinking too much in the present and not stepping back and referencing back to the baseline.

Real estate are traditionally less correlated with the equity markets. This time they are really showing less correlation. Various segments are dying together with the equity markets bar a few real estate segments, who are thriving instead.

Tenants have zero revenue and therefore cannot pay rent. The whole chain of parties from landlords, corporate lenders, shareholders, suppliers are all affected.

Many commentators are saying people in history will reference the period before Covid-19 and post Covid-19 as a pivotal period where all things change.

I think they are right but like always it is the extend of the change that may matter more. One of the tough thing to do in investing is valuing businesses because the nature of the business changes and this affect the intrinsic value of the company.

Usually, we are able to put our money down when we have higher conviction. Usually, certain aspect of that company we are certain about. What Covid-19 did was to make us question whether what was once certain will continue to be certain after this or will change entirely.

The real estate sector have been certain for a long time. Even within the sector, there are changes in trends. However, they take place in a past that every stake holders can adjust to.

Now, everyone seem to think that with work from home, there are no need for offices. I think there will be moderation, but this is not new. It will be the pace we are talking about.

Even with 10-20% overall vacancy will kill the valuation of certain property portfolios.

How big will the effect be? I am not sure.

In this post, I pulled together some of the things I have reader on this subject. I will list out some of the main points that stood out to me.

Everyone Down the Line is Affected

Animal Spirits: Investing in Corporate Real Estate >>

An interview with the manager of a USA ETF that focuses on triple net lease REITs, or REITs whose tenant pay for almost all the costs. I first shared about the appeal of net-lease REITs in this post here.

The parent company of the ETF is collaborating with huge asset manager Brookfield Asset Management to carry out sale-and-leaseback deals to help businesses that are hit a deal with cash flow better.

While there are aids provided by the government, it is not enough. The banks are not lending out as they should.

Some of the triple net lease REITs were affected because the tenants are Restaurants, Gyms, Day Care.

Surprisingly multi-family homes may be affected in the long run because of people relocating to other cities.

The appeal of net lease properties is that the tenants have long term contractual obligations. The tenants cannot break the lease easily.

The net lease REITs are taking the approach of working with their tenants to defer the rent, and then amortizing the rent over the rest of the contractual terms.

Everyone becomes a loser:

1. Tenant cannot pay the rent
2. Landlord takes a hit
3. Corporate borrowers take a hit
4. Shareholders take a hit as well

When tenant goes bankrupt, everyone down the line takes a hit as well.

In order to invest, you have to believe that in the long term, things will go back to normal.

That is, you will drop off your kids at day care, you will go to restaurants to eat.

They are seeing business picking up in different industries. Consumer behavior changes and so does how business is carried out. And so the revenue are recovering as well.

They also observed that suburban real estate is really growing.

Facebook CEO’s Future Office Policy in Full

Ramp Capital LLC: What we can learn from Global Workplace Analytics

The Death of Cities >>

Accroding to Gallup, Americans don’t want to live in big cities, they want to live in rural areas. The reason they live in big cities are for jobs and opportunities.

Data from Global Workplace Analytics:

1. Only 3.6% of U.S employee workforce currently work from home 50% of the time or more
2. 43% of employees work from home with some frequency
3. 56% of the employees have a job where at least some of what they could do could be done remotely
4. Studies show desks are vacant 50-60% of the time
5. 80% of the employees say they would want to work from home at least some of the time
6. 35% of employees would change jobs for opportunity to work remotely full time (Millennials much more than Boomers)
7. 37% of employees would do so to work remotely some of the time (Millennials much more than Boomers)
8. Greater than 33% of workers would take a paycut of up to 5% in exchange for the option to work remotely at lease some of the time. 25% would take a 10% paycut. 20% will take an even greater paycut

Moving to suburban places are more appealing. The rents in major cities are too expensive.

The cities with affordable housing and zero state income taxes may become very appealing to educated and rich workers.

On Facebook’s new policy: If you move away from the city, you are most likely to take a pay cut. There are trade-offs and you have to think about it. It might just be worth it still.

Major tech firms may not need to be headquartered in big cities. This will not kill the cities but will set growth back.

We may see tech firms moving to the suburbs. It will depend on whether the firms take the lead. The workers will follow.

The Increase in Remote Work or Work from Home Job Searches

WSJ: For Many, Remote Work Is Becoming Permanent in Wake of Coronavirus >>

“Just as Intel, HP, and others originally defined how we operated for decades in tech, we’ll see a redefinition for the 21st century by new digital companies.” – Aaron Levie, CEO and co-founder of Box Inc

LinkedIn recorded a 28% increase in remote job postings and a 42% increase in searches using the terms “remote” or “work from home”.

“The response to the pandemic has revealed the viability of remote work for many businesses that had access to the necessary technology, but were hesitant to expand the practice.”

The physical desire among humans to be physically present is hard-wired inside of us.

Jeffry Carter, General Partner at West Loop Ventures: Work From Anywhere >>

The last 10 years have seen a move towards urban city center vertical office campuses. Things might change so that worker can get outside in a less crowded space.

“You strip out a commute and you strip out having to get on an airplane for business meetings and you kind of remove a lot of these other things that crept into the work that you had to do.” – Aaron Levie

Conferences and meetups have more value compared to when on Zoom.

There are things that happen spontaneously in offices because people are in physical proximity with each other. These are the random stuff and conversations and comments. These spark ideas.

Even before Covid-19, CEO have a problem recruiting for their offices in areas like San Francisco, Los Angeles, NYC and Chicago. They were looking for a way to leave or reduce their headcount there.

Covid-19 gave them the perfect opportunity.

There are states that wishes to raise more taxes and there are states that are more “free”. Migration by firms may take place and this may impact not just state policy but also federal policies.

Since 2012, Jeffry have been noticing a trend towards co-working. Home space tends to be too cramped up. It may not be WeWork but other companies will take its space.

Avoiding Our Cognitive Bias to the Analysis of Larger Homes and Office Spaces

HousingWire: Could the coronavirus crisis lead to larger homes and office spaces >>

There are predictions that home size and office space have to increase but may be predicated upon the assumption that the prospect of a viral outbreak is the only factor a buyer considers.

Owners can have 50% of workers that are productive working from home to work from home and another 50% to work in office with better spacing. This may mean status quo.

Long term productivity is also unknown.

“The Spanish flu wreaked havoc on the U.S. economy, and many predicted it would lead to a decades-long recession – but instead, the pent-up demand to spend and enjoy life spurred the roaring 20’s. No one has a crystal ball to tell the future. But we do know that cultural change is usually slow, methodical, and the result of many social inputs. The accuracy of any prediction is incumbent on capturing as many of those input as possible and avoiding the cognitive bias of “What you see is all there is.”

Mass Commuting and Singapore Office

Mass telecommuting will shake up S’pore’s CBD, end work and office life as we know it>>

Human resources technology start-up EngageRocket, the Institute for Human Resources Professionals and the Singapore Human Resources Institute — has gathered more than 2,700 responses on workplace sentiments in Singapore since April 13.

• 8 in 10 employees in Singapore wish to continue working from home at least half the time or more after the circuit breaker
• 40% of younger workers said they were less productive than before. 49% of older workers said they were less productive than before
• Companies cannot just manage employees based on face time
• Peak hour traffic might be a thing of a past
• Grade A office rent will get affected short term
• Companies will fold or they might have multiple offices around Singapore
• Office space might be re-design
• The retail shops, Gyms catering to office crowd are badly affected as well

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works

With the latest move to semi-annual reporting, Prime US REIT will not be announced it’s official financial results.

However, as with many REITs, they are providing business development updates.

The results looked good on paper. Distributable income rose 12.9% from IPO projection. Net property income rose by 6.7%. One of the main reasons the results looked better was because it factors in about 40 days contribution from new acquisition at Park Tower.

Management was kind enough to update us in a media brief. Here are some short points that I could gather.

1. One of the key criteria for Prime US REIT’s acquisitions is to focus on less dense areas, more affordable areas where there can be population growth and employment growth. Park Tower fits the selection.
2. Prime US REIT do not have much debt refinance obligations to do until 2024. I did not ask what about the debt obligations maturing in 2022 and 2023.
3. Just yesterday evening, Prime US REIT announced that they have proactively restructured their existing interest rate swaps by entering a new agreement with Bank of America that locks in the lower interest rate on its borrowings through 2026. This lowers their interest rate from 3.3% to 2.8%. CEO Barbara Cambon guided savings in excess of US$1 mil through 2023. I would think that the savings are actually more, not sure why it is only $1 mil. In this climate, I think it gives investors confidence that such improvements can be done and show evidence of the long term banking relationship built up by KBS with the banks.
4. Part of the reason the actual numbers looked better than IPO projections was that they can find improvement in interest expenses and trust expenses.
5. The breakdown in the 12.9% variance in distributable income
   1. 3.2% organic growth
   2. 6.6% park tower
   3. 3.1% savings in trust and interest expenses
6. Despite MAS relaxing the leverage to 50%, their strategic leverage level has all the while been less than 40% leverage.
7. Management of Prime US REIT have an aim to see if they could stagger the debt maturity more and diversify their lender base.
8. Kyith: Interest coverage of 5.8 times and unencumbered assets of 84.8% is very healthy buffer levels.
9. Their debt covenant on their debt is 45% loan to value
10. Atlanta, Texas, and Georgia have started plans to re-open for work. Utah was not affected at all during this period.
11. Companies are starting to strongly consider renewing spaces as opposed to moving out of spaces primarily due to the uncertainty of the economy. There is also a cost for them to move as well.
12. Out of the 6% lease expiry in 2020, a large percentage belongs to Wells Fargo bank. Pre-IPO, Prime did a very large renewal with Wells Fargo and as part of the renewal, they have the right to give back two floors of space. So there might be more spaces to lease out. Out of all the tenants that management feels are more unknown, they managed to re-leased 45% of them. The tenant retention for these unknown tenants would be closer to 88%.
13. One of the tenants has sub-leased spaces to sub-tenants. They believe that the sub-tenant will lease the space directly from them.
14. 9% of the portfolio will expire in 2021 and management is actively negotiating with tenants on 50% of those spaces. They feel that going into 2021, they will have a strong year. They were negotiating for new leases but that died down because prospective new tenants could not go and view the properties. COVID-19 has not slowed down the negotiations.
15. Across the markets, there have been strong absorption except for Philadelphia
16. Sodexo’s office is their headquarters
17. Apache has paid their rent and their lease expires in 2024.
18. All top 25 tenants paid their rent in April except for WeWork who did not pay 100% of their rent. Aside from WeWork, Prime has 3 more co-working spaces owned by Regus, who is a more traditional co-working player with private offices.
19. Co-Working spaces represent 3.8% of their cash rental income
20. The WeWork space is in the San Francisco area and a significant portion of the WeWork tenants are enterprise companies. There is an opportunity to establish a direct relationship with these enterprise companies.
21. They have provided deferral of rent to about 12 retail tenants. These form a very small percentage to Prime’s rental revenue
22. Social distancing may become a requirement over time. While leasing may soften, these requirements may mean companies still need quite a fair bit of space.
23. Management believes this is the first test for remote work. Some companies might find a way to make it work while others may find that they still need an office. IBM and Yahoo tried to do the same 10 years ago but eventually reversed that. There are technologies out there that track their employees when they work at home, mainly because productivity is a suspect. California is considering mandating the spaces per square foot per employee. Prime has fielded inquiries from 4 existing tenants (in banking and technology) with an existing very dense seated environment. If the mandate is to have 250 sqft separation between employees and a company that has 20% of their workforce working from home, the company in question will have to double their spaces based on square foot.
24. Some sub-leasing colors (In United States, tenants cannot easily break leases. They can, however, sublease to sub-tenants. There is a sub-lease market):
    1. Village Center I: About 25,000 sqft of space sub-leased out. When that expires, Chartered Communications is obligated to take that space
    2. Sodexo: About 18,000 sqft of space
    3. Rovi Corp at Crosspoint: About 36,000 sqft of space
    4. 222 Main: About 12,000 sqft of space
    5. All added up to about 2% of the portfolio

I think it was a good update for me. There is a lot of uncertainty about how real estate will be like after this Coronavirus situation. Everyone is guessing what will happen, and someone is bound to get it right and some will get things wrong.

The situation on the ground probably reflects the real situation: Everyone is trying to figure this out. We hear that prospects are enquiring. Even before this episode, there are companies that have rationalized and have sub-leased out spaces. Existing tenants are enquiring about how to increase their spaces.

Update: This morning, I came across this post talking about how Coronavirus may prompt Americans to move out of cities.

I think a lot of these things are abit of hyperbole. If the best jobs are still going to be in cities, then you got to stay near there. However, it might make sense to stay close by. This could be like the situation for both Manulife and Prime in their Sacramento purchase. It is to tap into the proximity to the more expensive San Francisco area.

Anyway here is what the experts think:

Hopefully this update can give you a better idea about this US Office REIT. Prime US REIT has run up in price a bit. Still provides a prevailing dividend yield of 9.4% based on a unit price of $0.74.

You can learn about REITs from my REIT Training Center below. It is free btw.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works

There are probably 7 REITs that up to this point have announced their results or put out notes on their latest quarter of business development.

3 of the REITs have cut their latest quarter of dividend per unit that is distributed to shareholders.

If you look at the dividend per unit cut, they are very drastic. What it shows is that based on the net cash flow that the REIT earned in the last quarter, they decide to pay out 50% to 80% less.

The REITs that have announced but did not cut their dividends to this drastic extend are Keppel REIT, Keppel Pacific OAK, Parkway Life, Sabana, Keppel DC.

The reason this is done is to conserve cash flow.

The Singapore Government and Australian Government have announced that landlords cannot evict their tenants. They have provided landlords with property tax rebates and expect that these rebates are passed on to the tenants.

Contractually, the tenant are supposed to pay rent. But tenants are pushing back that if I am not operating my business, if I am not earning any revenue, why should you still continue to charge me rent?

So a few REITs have passed these rebates provided by the Government to their tenants, and some have extended their own cash to support their tenants.

Cash flow needs to be conserved because, for the next quarter, the properties are not going to get much revenue due to forced locked down. If this drags on, the next quarter is going to get effect.

Even with no revenue, you can minimize management fees paid to the manager through paying in units, but there are some ancillary costs of landlording that you cannot stop paying.

Most important, the landlords still have to pay the interest on loans.

If you look at the REITs who have cut their dividend per unit, they are mainly the retail-centric REITs. Together with the hospitality REITs, they are the most hard-hit because they are forced to close.

So almost zero revenue for the month, yet still have to pay costs. Of course, the natural thing to do is to conserve cash, even if it means losing certain tax transparency.

In order for Singapore REITs to enjoy certain tax transparency, they would have to pay out 90% of their distributable income to their shareholders.

When a REIT conserves it’s distributable income and not paid out, they do not enjoy that. What Monetary Authority of Singapore did was to give some flexbility there to allow the REITs to delay their dividend payout to no later than Dec 2021.

In this way, the Singapore REITs can still enjoy that tax transparency.

What This Means for You the REIT Investor

When distributable income is cut, this means that if you depend on the income for your upcoming needs, you do not have it.

This is more impactful if the majority of your portfolio are in specific sector of REITs.

Or majority in REITs for the matter.

If your REIT survives COVID-19 and go back to some semblance of normacy, then in 2021, your REIT would backpay the distributable income that they conserve.

So this means that you are not going to stop seeing this money.

Is This a Black Eye On the REIT Model?

I think there are enough people having an eye on the REIT ran up the last few years and say this is a bubble.

And you have REIT investors looking at these people and think they are laughing at them.

However, I do think it is not really a broken model. It is just that it is misunderstood.

What we have today is pretty unprecedented:

1. Almost all your tenants, no matter how diversified, don’t have revenues or cannot work
2. It is an uncertainty which of your tenant is going to survive, despite how “blue chip” their status is
3. You still have expenses
4. You still need to pay interest

I want you all to touch your heart, and think if you are corporate planning this, how would you risk managed a situation where you have zero revenue from a diversified tenant base, across geogrpahical regions, when all of them stop paying you.

I think you can put it out there, but to really execute on it is rather tough.

In a severe downturn, at least some of the businesses are still bringing in revenue for you. This time it is not.

The Single Property Experience is Not Perfect Either

If this is a poor model, then I wonder about the alternative, which is to purchase a single private property and rent it out.

One of the reasons people would gravitate to a portfolio of stocks and bonds is that they witness first hand that they go through periods of tenant vacancy and the maintenance cost of repairing your place for the next tenants.

If you own a single private residential property, you would face the same problem as the REITs, but you are better off because the government allows you to defer your mortgage payments. But you still need to cut the rent of your tenants as they negotiate with you.

The Ineffciency of “Lao Kok Kok” Property Companies

The biggest gripe, of a lot of people, is paying out almost all their cash flow.

They say it will be better if it is not a REIT model like Hotel Grand Central or those “Lao Kok Kok” (old) property companies.

To me, these Lao Kok Kok property companies are doing the same thing.

If you observe whether they can cover their dividends with their cash flow, a lot of them tries to cover their dividend payment almost equal if not pay out more than their recurring rental cash flow from their investment properties and operating business.

This is no different from what a REIT does.

Their payout ratio is lower… because not all their business is in buying and renting out properties. It is mixed with property development or other things.

There is also a reflexive effect.

The REITs are rated by the market better because they are cleaner. People see them as a portfolio of buy to let properties. There is a clear dividend payout policy. The management job is to grow AUM and get properties to rent.

They are build-to-suit for certain investment purpose.

If you contrast it to others, the narrative is not so clear cut. It is up to the discretion of the management who tends to hold their cards closed to their chest.

When you package everything clearer, the market gives them a better price. And we see them trading close to their price to book.

In contrast, many mixed-property companies, they tend to trade below their book value.

You make money from these mixed-property companies when development profits shows up, and during price dislocations where the price trades closer to book value.

Whichever way, you can go ask the owners of non-REIT properties whether they have or do not have the same problems as the REIT landlords.

The Frustrating Thing About Looking at Investors

If we go back to finance 101, we know that dividend payout is not mandatory. Interest payment on debts is an obligation.

Dividends are paid out only when times are comfortable.

REITs are essentially still stocks. So dividend payment is not mandatory.

It is just that, due to the specific nature of this property sector, the probability of a company not having comfortable cash flow is low.

Well, we have a period now.

I get frustrated when investors or prospective investors say “Cannot cut dividends. This shows poor management. They should have anticipated this”

Sometimes, I wonder if they talked to people in real business or been in business themselves.

It is not always plain-sailing.

These businesses are listed probably because they have stabilized in a certain way. But for those SME, we been like fighting tooth and nail over different business decisions and capital decisions.

I think these shareholders prefer the situation where the stock they own

1. lays off 100,000 workers
2. they can commit to paying out dividends

This is what is happening at Disney now.

I used to be someone who just looks at the black and white. The numbers just tell the management decisions.

The managers can get you in a meeting or seminar and talk all the flowery stuff but at the end of the day the numbers support it.

I would say this is still right at this point but I tend to think knowing certain qualitative aspect is important.

But if you look at the context of this COVID-19 situation, the shareholder perhaps are the more unreasonable ones. This is not a black swan but a real tail event.

Some of these employees or certain services got your dividends in the past, and now when the going gets tough you just want to cut them off.

I dunno. I think it just sounds plain selfish.

Think I still have something to say but going into a daily standup meeting soon. Perhaps that will be for tomorrow.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

I break down my resources according to these topics:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works