A leopard refuses to change its spots. Aims AMP Capital Industrial REIT was formerly MacArthurCook REIT. It was listed at SGD 1 dollar and bleed slowly to 21 cents currently.
Those that have held on would have lost quite a fair bit. MacArthurCook sold to Aims and new investors thought that this will herald a change for the better, that they will right the wrongs of MacArthurCook.
This week they raised a private placement of $43 mil to fund the acquisition of a property located at 29 Woodlands Road.
Net property income would jack-up from 7.2% to 7.6%. Gearing inches up slowly to 33.6%
So why am I disappointed?
The private placement will increase the number of units by 15%. Or put it another way, small shareholders like us will get a smaller share of this dividend.
The projected NPI increase due to the property is 14% (5.4mil / 38.5 mil).
Net Net Minority share holders didn’t earn much. The dilution almost equates the increase in NPI.
Who Gains the most?
Aims have the greatest to gain sadly. REIT Managers earn trustee fees and asset management fees as well as transaction fees.
They have 2 tracks
- Only add property that enhances shareholder value. Asset Enhance the current property to enhance share holder value. Re-finance debt where it is favorable.
- Managers are graded by increasing the asset size by buying more assets to manage, generating more transaction. Whether it is yield accretive or not it doesn’t really matters much. They don’t care about the gearing.
Now A good manager would be doing more of (1) than (2). Some would argue that not all of them are the same, and that this change is for the better. But does their actions really show that?