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Overseas Property Leases and Rentals offers more predictable cash flow

While doing my research into a few companies fundamentally, it seem to occur to me, Singapore stocks investing overseas get a more predictable cash flow from overseas property.

First REIT’s Lippo Siloam Hospitals

First REIT, a healthcare REIT listed for a long time, lease out hospitals for 15 years duration plus an option to renew for 15 more years to its parent Lippo, with a rent escalation of maximum 2% per year.

Their Korean healthcare property is lower, at 10 years + 10

Frasers Commercial Trust’s Caroline Chisholm Centre

Frasers Commercial really overturn Allco’s debacle when they purchase the  other portion of this Australia property, which is leased out for 12.5 years at least

Stamford Land’s Dynons Plaza

Stamford Land developed a grade A building that they were supposed to sell in Australia.

No matter, it was leased to Chevron Australia for a period of 10 years.

This is almost able to  pay for 1.1 cents of Stamford Land’s 3 cent dividend.


Croesus Retail Trust’s Japanese Malls (CRT)

The soon going to be IPO Croesus Retail Trust’s 2 malls are all leased out for at least for 14 years.

This is typical of Japanese retail malls which offers a mixture of base and variable rents.

Advantages and Risks

Whether it is favorable to have long lease or short will depend on whether you are able to lock in the base lease at a reasonable rate.

Should you be able to, it will be like Rickmers Shipping Trust chartering ships for $25k per day for a long duration versus the prevailing rates of $8k per day.

The rental escalation build in must may have to keep up with inflation somewhat.

Parkway Life REIT is famous for its CPI + 1% yearly rental revision, which ensures they are able to keep up with inflation.

The predictability will also have to depend on the stability and financial strength of the renters or lessees. If they go into cash flow difficulty, the renters may have some issues collecting rents and paying out to shareholders on time.

Although these lease terms are long, different countries have their different terms of lease.

Although it is a long lease, there may be clauses as such in CRT that  stipulates in unreasonable terms, the leasees can bail without any material breach if the existing terms are not reasonable.

What other examples can you guys come up with for long lease rentals held by stocks?


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