Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Equity Capital Markets

Samty Residential Investment / Equity Capital Markets

Today after market-close, small-cap residential JREIT <a href="https://www.smartkarma.com/entities/samty-residential-investment" target="_blank" data-smartkarma-citation="entities:31049:1" rel="noopener">Samty Residential Investment (3459 JP)</a> launched a follow-on equity offering (<a href="https://www.samty-residential.com/file/news-4cc7711e97dee5986a62fe2ec3ff5b9eca89d0f2.pdf" target="_blank" rel="noopener">J-only</a>) to fund part of their recent property acquisition.The primary public offer quantity is 57,868 units and there is an over-allotment quantity of 2,893 units. The total size of the public offering could be approximately ¥7.9bn (~US$70mn).In addition to the public offering portion, there will be a third party allocation of 70,339 units which will be allocated for their Sponsor Group <a href="https://www.smartkarma.com/entities/samty-co-ltd" target="_blank" data-smartkarma-citation="entities:18956:1" rel="noopener">Samty Co Ltd (3244 JP)</a> and Daiwa Securities with whom they have a Sponsor Support Agreement. This portion could collectively amount to another ¥9.1bn (~US$83mn). The Offer Price will be determined between 19th July and 27th July 2021 (typically it has been the first day of this window for most JREIT offerings) and the business day following the offer price determination day ("Pricing Date") will be the Application Period. More below the fold.

Today after market-close, small-cap residential JREIT Samty Residential Investment (3459 JP) launched a follow-on equity offering (J-only) to fund part of their recent property acquisition.The primary public offer quantity is 57,868 units and there is an over-allotment quantity of 2,893 units. The total size of the public offering could be approximately ¥7.9bn (~US$70mn).In addition to the public offering portion, there will be a third party allocation of 70,339 units which will be allocated for their Sponsor Group Samty Co Ltd (3244 JP) and Daiwa Securities with whom they have a Sponsor Support Agreement. This portion could collectively amount to another ¥9.1bn (~US$83mn). The Offer Price will be determined between 19th July and 27th July 2021 (typically it has been the first day of this window for most JREIT offerings) and the business day following the offer price determination day ("Pricing Date") will be the Application Period. More below the fold.

JREIT Offering: Samty Residential (3459 JP) - Take It (Vs Comps)

Alpha-Centric ESG Research

Kyle Rudden

Announcements keep on coming from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the <a href="https://www.smartkarma.com/entities/sgx-nikkei-esg-reit-index-futures" target="_blank" data-smartkarma-citation="entities:33480:1" rel="noopener">SGX Nikkei ESG-REIT Index Futures (JRTA INDEX)</a> contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

Announcements keep on coming from Singapore Exchange (SGX SP) and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the SGX Nikkei ESG-REIT Index Futures (JRTA INDEX) contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Comforia Residential REIT / Equity Capital Markets

We have a second JREIT Offering within the first two trading days of the year! A few weeks ago, in my insight <a href="https://www.smartkarma.com/insights/j-reit-offering-primer-get-ready-for-offering-season-2021" target="_blank" data-smartkarma-citation="insights:46416" rel="noopener">J-REIT Offering Primer: Get Ready for Offering Season 2021</a> I discussed how January and February will be busy months for JREIT Offerings and I highlighted that <a href="https://www.smartkarma.com/entities/comforia-residential-reit-in" target="_blank" data-smartkarma-citation="entities:8200:1" rel="noopener">Comforia Residential Reit (3282 JP)</a> ("CRR") could be one of earliest candidates to launch an offering in 2021. <blockquote>
SPECIAL MENTION - <a href="https://www.smartkarma.com/entities/comforia-residential-reit-in" target="_blank" data-smartkarma-citation="entities:8200:1" rel="noopener">Comforia Residential Reit (3282 JP)</a>: This J-REIT has announced an equity offering in early-Jan in every year since 2014 and I expect them to be one of the earliest candidates to launch an equity offering in 2021. </blockquote>Today after market-close, CRR announced a <a href="https://www.comforia-reit.co.jp/file/en-news-17c37663552ef1c7dc6da5194b51b8cbd7d3108f.pdf" target="_blank" rel="noopener">follow-on equity offering</a> to partially fund their <a href="https://www.comforia-reit.co.jp/file/en-news-4efe88d4066425a0c98e8096ed7d18e04811c842.pdf" target="_blank" rel="noopener">acquisition of three residential properties</a>. The primary offering quantity is 20,360 units and the over-allotment quantity is 3,650 units. The size of the offering could be around ¥5.7bn (~US$55mn). The Offer Price will be determined between the 13th of January and 18th of January (typically it has been the first day of this window for most JREIT offerings) and the two business days after the price determination day (pricing date) will be the application period.More below the fold.

We have a second JREIT Offering within the first two trading days of the year! A few weeks ago, in my insight J-REIT Offering Primer: Get Ready for Offering Season 2021 I discussed how January and February will be busy months for JREIT Offerings and I highlighted that Comforia Residential Reit (3282 JP) ("CRR") could be one of earliest candidates to launch an offering in 2021. 
SPECIAL MENTION - Comforia Residential Reit (3282 JP): This J-REIT has announced an equity offering in early-Jan in every year since 2014 and I expect them to be one of the earliest candidates to launch an equity offering in 2021. Today after market-close, CRR announced a follow-on equity offering to partially fund their acquisition of three residential properties. The primary offering quantity is 20,360 units and the over-allotment quantity is 3,650 units. The size of the offering could be around ¥5.7bn (~US$55mn). The Offer Price will be determined between the 13th of January and 18th of January (typically it has been the first day of this window for most JREIT offerings) and the two business days after the price determination day (pricing date) will be the application period.More below the fold.

JREIT Offering: Comforia Residential Reit (3282 JP)  - Take It (Vs Comps)

Nippon Accommodations Fund / Equity Capital Markets

Tokyo-based Residential JREIT <a href="https://www.smartkarma.com/entities/nippon-accommodations-fund" target="_blank" data-smartkarma-citation="entities:4588:1" rel="noopener">Nippon Accommodations Fund (3226 JP)</a> ("NAF") announced a <a href="https://www.naf-r.jp/file/en-ir_news-38c56d05a6b895abb26f83905c055ce1a919574c.pdf" target="_blank" rel="noopener">follow-on equity offering</a> today in order to fund their recent acquisition of four residential properties. The primary offer quantity is 18,000 units and the over-allotment quantity is 950 units (upper limit). The size of this offering could be around ¥10.4bn (~US$100mn). <div>The Issue price will be decided between the 9th and 15th December (typically it has been the first day of this window for most JREIT offerings) and the application period will be the next two business days immediately after the pricing date. </div><div>More below the fold. </div>

Tokyo-based Residential JREIT Nippon Accommodations Fund (3226 JP) ("NAF") announced a follow-on equity offering today in order to fund their recent acquisition of four residential properties. The primary offer quantity is 18,000 units and the over-allotment quantity is 950 units (upper limit). The size of this offering could be around ¥10.4bn (~US$100mn). The Issue price will be decided between the 9th and 15th December (typically it has been the first day of this window for most JREIT offerings) and the application period will be the next two business days immediately after the pricing date. More below the fold. 

JREIT Offering: Nippon Accommodations Fund (3226 JP) - Take It

Asian property research and analysis, DimSum Property

Kang Ho Chong

Asian property research and analysis

DimSum Property

Established in Singapore, DimSum Property is a private fund-raising platform with an investment focus across the entire real estate value chain, designed to connect real estate players to investors, built on proprietary and well-researched content, and driven by fin-tech innovations.

Our research articles are written by the DimSum Property Research Team led by co-founder Kang-Ho Chong.

Thematic (Sector/Industry)

Bid to win, or bid to try your luck...Developers often enter into land bids with different strategies. They may aggressively “bid to win”, especially when their landbank has been depleted. Other times, they may choose to bid low, just to try their luck, hoping that no one else bids above them. Very often, these strategies will lead to different outcomes for their profit margins.<ul><li>Land is the most basic and important ingredient in a development project. In Asia, as land that is zoned for property development becomes more scarce, we see developers competing more and more aggressively for  land parcels, hence driving up land prices.</li><li>Given its relatively transparent and public data-rich land bidding system, we have chosen the Singapore land market as a case study to analyse and understand developers’ behaviours when they bid for land.  </li><li>Our model (between 2007-2016) suggests that since 2016, developers operating in Singapore have been finding it hard to win land parcels, due to greater competition for land. Combined with the pressing need to replenish their depleting landbank, many developers strategized to go all out to win in their land bids.</li><li>These aggressive bids have led to higher land costs and lower profit margins for developers, especially in an environment of falling home prices. We estimate net margins fell to ~15% in 2015, down from 22-36% in 2009-12. We expect them to continue lowering to single digits in 2016-17E.</li><li>Even in the face of a potential margin squeeze, many developers are still jumping in to bid for land, as they seek to fulfil “non-profit driven” strategies such as the need to restock, deploy cash, gain market share, or protect the value of a nearby land which they previously acquired.</li></ul>

Bid to win, or bid to try your luck...Developers often enter into land bids with different strategies. They may aggressively “bid to win”, especially when their landbank has been depleted. Other times, they may choose to bid low, just to try their luck, hoping that no one else bids above them. Very often, these strategies will lead to different outcomes for their profit margins.Land is the most basic and important ingredient in a development project. In Asia, as land that is zoned for property development becomes more scarce, we see developers competing more and more aggressively for  land parcels, hence driving up land prices.Given its relatively transparent and public data-rich land bidding system, we have chosen the Singapore land market as a case study to analyse and understand developers’ behaviours when they bid for land.  Our model (between 2007-2016) suggests that since 2016, developers operating in Singapore have been finding it hard to win land parcels, due to greater competition for land. Combined with the pressing need to replenish their depleting landbank, many developers strategized to go all out to win in their land bids.These aggressive bids have led to higher land costs and lower profit margins for developers, especially in an environment of falling home prices. We estimate net margins fell to ~15% in 2015, down from 22-36% in 2009-12. We expect them to continue lowering to single digits in 2016-17E.Even in the face of a potential margin squeeze, many developers are still jumping in to bid for land, as they seek to fulfil “non-profit driven” strategies such as the need to restock, deploy cash, gain market share, or protect the value of a nearby land which they previously acquired.

Land Market – Bid to Win, or Bid to Try Your Luck?

Japan

Japan Rental Housing Investments Inc. is a real estate investment trust (REIT) which invests in securitized real estate products.  The Company mainly invests in residential properties.

Japan Rental Housing Investment (8986 JP)

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Japan Rental Housing Investment (8986 JP)

JREIT Offering: Samty Residential (3459 JP) - Take It (Vs Comps)

The Samty Residential offering is a small offering on a small REIT with a higher-than-market and higher-than-size-cohort dividend yield. Follow the...

Janaghan Jeyakumar, CFA

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Singapore Exchange just launched the SGX Nikkei ESG-REIT Index futures contract. A multi-win for SGX, but it also serves as a reminder of how...

Kyle Rudden

JREIT Offering: Comforia Residential Reit (3282 JP) - Take It (Vs Comps)

As I predicted late last year, Comforia has come with an equity offering to fund the purchase of three properties. Buy the Offering as it has...

Janaghan Jeyakumar, CFA

JREIT Offering: Nippon Accommodations Fund (3226 JP) - Take It

This is a $100mm REIT offering by a Residential J-REIT. It is worth buying. Buying precedent offers has resulted in positive relative returns 3 of...

Janaghan Jeyakumar, CFA

Land Market – Bid to Win, or Bid to Try Your Luck?

Bid to win, or bid to try your luck...Developers often enter into land bids with different strategies. They may aggressively “bid to win”,...

DimSum Property

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