Investment Portfolios Updates- S$630k (1 July'22)- Uncertainty in US Office REITs Occupancy and Mounting Losses from Keppel DC REIT

The last 2 months has been a blood bath for my investment portfolios in banking stocks and REITs. The net assets for investment thus went down to S$630k from the S$640K during my last review at the end of April'22. The good thing about being an income focused investor is that I am not too worried about the fluctuations in valuation due to market volatility as well as unrealised losses. My only concern is whether the stream of passive income from dividends/distributions from investee companies will be drastically impacted if there are fundamental changes to the business. Expected dividends per annum now approximates S$60K at gross level and S$51.2K at the net level after accounting for financing charges from utilization of my margin facility with Maybank.

The COVID downturn that happened 2 years back was another creature altogether with devastating economic lockdowns leading to an almost immediate more than 50% cut in dividends & distributions. I believe that the upcoming recession will not lead to such drastic cut in dividends & distributions and that my current portfolio can ride out any incoming headwinds.  

1. Portfolio 1- Stocks held in SGX Central Depository 

(Note: This portfolio is designed to provide immediate dividends for use (if required) as it is under my own CDP account and the dividends credited goes directly to my bank account.)

The only adjustment I made here was to acquire additional units of the undervalued United Hampshire US REIT which focuses on grocery retail tenants that has proven itself to be resilient even during the COVID crisis. On 9 June 2022, it was announced that the REIT will be acquiring Upland Square Shopping Center in Montgomery, Pennsylvania for US$85.7Mil. This DPU accretive deal will push up future annual distribution yield to 10.38% based on previous closing price of US$0.610 per unit. Please see "United Hampshire US REIT Acquired New Grocery Anchored Shopping Center- Improved Forward Distribution Yield Of 10.38% Per Annum".

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and also to repay annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

My data centre REITs and US office REITs performed horrendously. UOB and OCBC stock price also took a beating during this dark period. I have sold off a substantial portion of my UOB and OCBC stocks to take profits and also to reduce my leverage by S$10k. I have also bought additional S$10K worth of Keppel DC REIT when its price plummeted to below S$2 per unit (at S$1.94 per unit in June'22). 

For US Office REITs, a number of analysts have high targeted prices for Prime US REIT, Keppel Pacific Oak REIT and Manulife US REIT. However, I am not as optimistic at all as I am seeing trends of decreasing occupancy in some of their quarterly operations reporting. The post COVID economy has escalated the remote working culture that sees possibility of a permanent decrease in required office space by companies.  As such, I have not made additional investments into the US Office REITS albeit the crazy low prices- one could end up catching a falling knife.  Please see "Manulife US REIT High Distribution Yield of 8.67%- Rosy Future Or Just A Value Trap?".

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here

(i) Added 400 more shares of Alibaba (HKEX 9988) at an average cost of HKD83 per share.  

(ii) Added Q&M Medical Group. Please see "Investment Into Q&M Medical Group- Further Diversification Away From REITs Centric Portfolios"

(iii) Dasin Retail Trust has good news recently on 20 June 2022. Its bankers has allowed it a 6 months syndicated loan extension (instead of the previous 3 mths) while it explores sales of its 2 biggest shopping malls to pare down debt. Investors thus get to see another distribution from Dasin for the 6mths ending 30 June 2022.

In addition, it was reported that on 22 June 2022, 50 million units of Dasin Retail Trust representing 6.3% of total units, changed hands at a premium of S$0.345 per unit relative to the average of S$0.30 market transactions per unit. On 3rd June 2022, Harvest Private Wealth Thematic Fund has also increased its stake in Dasin to 8.45%. Current distribution yield hovers around 16% with NAV of S$1.41 per unit.

Summary:

I look forward to the upcoming dividends and distributions in Q3 2022. For now, I think that I will be adopting a wait and see stance and will be building up my cash reserves on hand and also paring down my margin loan to prepare for the worsening economic downturn due to the relentless increasing of borrowing rates by the US Federal Reserve in their fight against inflation..