It has been a fruitful journey investing into Japanese Reits for the past few years. Saizen Reit was the first Japanese reit which was acquired earlier before. Recently, Croesus retail trust, a Japanese reit which owned Japanese shopping centres was also successful acquired just last week. What makes them so attractive that both reits from Japanese were bought over at a premium price?
I’ve written extensively on Croesus Retail Trust as early as back in 2013. The timeline of the posts are as follow:
- Looking to invest in Japan’s real estate – November 10, 2013
- Croesus Retail Trust – First Quarter results released and initiated long position – November 13, 2013
- Short interview with Jeremy Yong, Co-founder of Croesus Retail trust – April 10, 2014
- The Japan story – Croesus retail trust and Saizen Reit – June 1, 2014
- Croesus Retail Trust – More than 10% dividend yield! – August 29, 2014
- Croesus Retail trust 2nd Quarter results beats forecast. DPU 3.1% higher than forecast – November 14, 2014
- Investing in Japan’s Shopping Centres – Croesus Retail Trust Retail Investor Seminar – April 29, 2015
- Croesus Retail Trust – Rights Issue 22 For 100 – October 5, 2015
- Croesus Retail Trust – Another Japan Reit Potential Takeover – May 1, 2017
The purpose of the sharing of the previous posts is to look back at my thoughts and why I invested in Croesus in the first place. Time pass very fast. 3 years plus just went past like that. As you can see, in April 2015, I went for a Croesus retail trust retail investor day where I manage to hear from the top management of Croesus itself. I wrote in my blog that I was happy with what I heard and the management knows what they are doing. As soon as a rights issue came, I immediately subscribed to it to increase my holdings in this investment.
Last week, Croesus was acquired at a price of $1.17. My average price for the reit is about $0.80. This represents a gain of 45%+. Including dividends, the total ROI for this particular investment works out to be about 81%. It was a long journey nevertheless.
What caused the Reits to get acquired?
The most important lesson is to find out what cause the reits to get acquired and hopefully we can always buy into the right companies which generates value for shareholders. In the case of Croesus, when I first invested in it, it was purely base on the fact that the Japanese government was aggressively trying to expand their economy through quantitative easing. They had a target of 2% inflation back then when Japan was facing decades of deflationary economy. Noticing that this was an opportunity, I went to search for companies which deals with properties in Japan. Saizen Reit and Croesus came up as an investment choice.
Next, I looked at the stability of its income which is important for a reit or business trust. Saizen reit was in the residential rental business so it was really stable. It was rare for a reit to be in the residential business. Croesus on the other hand is involved in shopping centres which had some risk in itself. However, upon a closer look, Croesus management were quite committed in achieving good value for shareholders through the many positive rental yield acquisitions and AEIs. They were committed in keeping the company’s balance sheet healthy also.
Finally, the Japanese reits was trading at an attractive price which was below their book value. Many of their properties were valued conservatively when you compare their properties valuation against the other nearby properties. Furthermore, Japanese real estate and rental prices were going up steadily over the years which was an added positive development. All these attracted other big investors to offer attractive prices to takeover the 2 companies. Sure enough, it happened and shareholders got rewarded.
There will always be more opportunities in the future for those who missed it. For fellow shareholders of Croesus retail trust, congrats to all!
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