REIT or Business Trust? - Part Two -

Flipping through today's Business Times, a couple of articles (one on REIT, one on business trust, one on half-REIT half-business-trust) caught my attention. Check out my previous post on the key differences between a REIT and a business trust even though both provide access to yield-bearing assets.

At the end of the day, it is the individual investors' responsibilities to find out more about the business that they are putting their money into. Learn about the possible risks so that you will be prepared for it when the time comes.

“Never invest in a business you can't understand.”
- Warren Buffet

1. Tenants Sue CIT Manager, Trustee Over Deal (J91U)

The manager and the trustee of publicly listed Cambridge Industrial Trust (CIT) are being sued by two tenants of an $18.5-million industrial property owned by the trust. The tenants claim that Cambridge Industrial Trust Management (CITM) and RBC Investor Services Trust (RBC) reneged on a deal to sell the property to them, while CITM and RBC - in their response to the lawsuit - claim they honoured the agreement.

The two tenants, Chartered World Academy Pte Ltd (CWA) and Armorcoat International (AI), claim that CITM and RBC "went behind the plaintiffs' backs" to sell the property to a third party, Liquorland Distribution Pte Ltd. They claim the defendants "have not acted in good faith and have tried to sell the property to two different parties ... for (the defendants') own agenda of extracting more money than the agreed purchase price of $18.5 million".

Depending on the result of the lawsuit, will there be any impact to revenue and dividends? There is no such thing as a risk-free-and-collect-dividends investment and investors must be aware of this.

2. Port Workers In HK End 40-Day Strike (NS8U)

Port workers at billionaire Li Ka-shing's Hongkong International Terminals (HIT) ended the longest strike at Hong Kong's container terminal as they accepted a 9.8 per cent wage increase, resolving a dispute that damaged the city's reputation as a trade hub.

HIT is operated by Hutchison Port Holdings Trust, whose largest shareholder is Mr Li's Hutchison Whampoa.The daily financial loss caused by the strike was "significantly" cut in the last two weeks in April, HIT said on April 23, without elaboration. The daily loss narrowed to HK$2.4 million on April 5 from HK$5 million earlier.

And so, it was suffering a daily loss for a long period of time of 40 days? What does this mean for investors of Hutchison Port Holdings Trust? Lower dividends?

3. A-HTRUST To Hold EGM For Park Hotel Clarke Quay Buy (Q1P)

Park Hotel Group (the "Group") is pleased to announce that it has entered into a conditional Sale and Purchase Agreement with Ascendas Hospitality Trust ("AHTRUST") on 05 April 2013 to sell Park Hotel Clarke Quay (the "Hotel"), at a purchase price of S$300 million. See this article here if you're interested to know more. Also, note that this is their first Singapore property.

The Managers intend to fund the Total Acquisition Cost through a combination of debt and equity financing. The Managers will work with the Joint Bookrunners to determine the Issue Price to be offered in the Equity Fund Raising and the most appropriate structure and launch timing of the Equity Fund Raising so as to ensure its success.

I'm guessing, rights issue? If so, are investors in a good position to partake in the rights issue? Not everyone may have the sufficient cash flow to subscribe, which may end up in a dilution of their stake. For a separate case study, recall how CapitaMalls’ unit-count had ballooned from 1.67b at the end of 2008 to 3.46b at the end of last year due to a 9-for-10 rights issue (that’s 9 rights for every 10 shares that are owned) that happened on 2nd April 2009.