Reasons for AIMSAMPIREIT Purchase

This AIMSAMPIREIT is the former MI-REIT which almost went bankrupt and had to do placements and issue rights to finally stay above water.

So on the initial look, it might look like a shady investment in a company whose management might be extremely bad because of the saga. However, on deeper exploration, this REIT appears to be offering itself at an extremely reasonable price.


A very brief history:
MI-REIT, short form for McArthurCook Industrial REIT, IPOed in 2007 at a price of $1.20. (Btw, my mum bought 2 lots at IPO). Something went wrong with their financing, and they had to give placement shares, as well as issue 2 for 1 rights at 0.159, to ensure the REIT stays solvent. Since then, the original manager of MI-REIT has moved on to Cambridge Industrial Trust (CIT), and the REIT is renamed as AIMSAMPIREIT to reflect the white knights.

Reasons:
For a start, AIMSAMPIREIT is at 28.7% gearing, among the lowest in the industrial REIT sector. The calculation of the yield is at a conservative minimum of 8.8% at the moment assuming an annual yield of 1.9cts per share although I'm expecting at least 2cts. Only First REIT, LippoMapleTree and CIT offers higher yield, with First REIT and Lippo having lower gearing, but most of their assets in Indonesia, and CIT offering higher gearing and a management I don't really trust.

AIMSAMPIREIT's white knights are from AIMS Investments and AMP Capital, two rather big investment companies originating from Australia. To me, the fact that they are willing to take the plunge and stepped in to save the REIT shows that they are not a simple lot. And in fact, AMP Capital manages a lot of pension funds for Australians, giving credibility to their financial muscle. This fits one of my criteria for a REIT that it must have a strong sponsor. This is it.

Also, almost all of AIMSAMPIREIT's properties (with the exception of 1 Japanese building) are in Singapore. The tenants have moderately long leases, and this ensures constant rental income for the next few years, and likely too, a constant DPU, even if it's not increasing.

Finally, looking at the chart, AIMSAMPIREIT is one of the few REITs left that are not very far from its lowest point in March 2009.

The normal Technical Analysis that we commonly learned might not appear as well on this chart as the volume is extremely low. However, the lowest post-rights was about 0.175, which isn't too far from my purchase price of 0.215. More upside could likely be seen. Even if market were to crash now, I believe that the 20c mark would be a stronghold against the bears.

These.... are some of the simple reasons which I considered before putting my money into AIMSAMPIREIT at 0.215...