Cache Logistics Industrial Trust is an interesting logistics REIT that was listed in Singapore around May 2010.
Back then, majority of its properties was from CWT, a large logistics company in Singapore. The WALE was 6 years which is a long lease expiry by local REIT standards.
However, 6 years later, as the lease are expiring, most of the leases, which was under master tenancy was turned into multi tenanted. This reduces the overall occupancy and the rental income.
As of today, Cache Logistics Trust give a dividend yield of 7.1% on my Dividend Stock Tracker.
So what we have is a REIT that:
- Performed well as marketed by a very good IPO profile
- Then as lease expired, the dividend per unit went downhill
- Only one rights issue which is a 18 for 100 rights issue in Sep 2017 at 63 cents
I was doing some data collection and I wonder how good the returns would be if you are an investor that contributes an equal amount annually into Cache Logistics Trust.
This means that you set aside $12,000/yr and invest in one short yearly into Cache Logistics Trust since 2010:
- 2010 Dec: Invest 12,000
- 2011 Dec: Invest 12,000
- 2012 Dec: Invest 12,000
- 2013 Dec: Invest 12,000
- 2014 Dec: Invest 12,000
- 2015 Dec: Invest 12,000
- 2016 Dec: Invest 12,000
The above chart shows the historical price movement of Cache Logistics Trust.
Since IPO, due t the profile of the assets, and a good manager, the share price went on a good run, peaking in the 2013 REIT boom.
Since then, as the lease starts expiring and the assets are converted to multi-tenancy, the DPU goes down and so did the share price.
Overall, since invested in Dec 2010, this investor have invested for 7 years and contributed $94,094 in capital including the recent rights issue.
The average price is $0.92 which is higher than the current share price of $0.86, thus he is making a loss of 6.26% overall.
However, due to the dividends collected in these 7 years the overall XIRR, or the internal rate of return is 6.92%.
The internal rate of return, takes into consideration the amount of capital put into work, and at different time.
6.92% is respectable, but it is lower than what most of the REITs have garnered over the same period.
If we examine the buy transactions, you notice that majority of the purchase was at prices above the average of $0.92.
What is saving the returns was the dividends, but also that the recent rights issue was at a discount.
The above is a log of the purchase and dividend transactions. Observe that the yield on total cost is going down. This reflects the reduction in dividend per unit of a REIT that did not grow well over time.
Overall, if the REIT is not able to operate well and grow its portfolio, its DPU, dollar cost averaging into this REIT will result in heartache, lost opportunity costs.
At this juncture, this hypothetical investor would start losing money at $0.67, or a 22% fall from the price of $0.86.
I did some of these REIT internal rate of return profiles in the past. You can read about them: