i think is safer to go for good sponsor reits . later kena trap!


Strong gut feeling, agreed.


There are some investors who still believe that ESR's merger with VIT was a very good move. I guess that some men think that size is everything ;)
Let's go through some of the benefits that ESR listed in their merger presentation.
1. More competitive cost of capital. The merger does not turn ESR into a Mapletree, more that a year after the merger ESR's Weighted Average Cost of Debt is 3.98% which is slightly higher than the 3.55 to 3.76% before the merger. Since interest rates have gone up, it is still way above MIT's current WACD of 3.0%. It's even higher than tiny SoilbuildBiz latest WACD 3.52%.
2. Improvements in operating cost efficiencies. Since the manager's fees are directly link to the AUM, they must be refering to the property expenses. If you compare the property expenses in the first half of this year the cost went up 158% compared with the first half of 2018 before the merger. The Gross Revenue increased by 94%, if we are to see improvements in efficiencies then the increase in cost should be less than 94%.
3. DPU accretion of 5.6%. I have already shown that this did not happen. I already know this before the merger and questioned ESR management on this during the merger EGM. They did not dispute my claim that the DPU will fall after the merger after considering the effects of the PO just before the merger and the loss of income support of VBP. Instead the CFO replied that ESR will be self managing the property management instead of 3rd party and the cost savings from this should offset the loss of income support. Guess what happened?
The Property Management went to ESRPM which is wholly owned by the sponsor, not the Reit. Every investor should read the details of the Property Management Agreement (PMA) which I have attached. The details had to be released as it's an Interested Party Transaction (IPT). Besides paying a fee of 2% of the property revenue, the Reit must pay all the staff salaries, office space and of course all the expenses incurred for the property. So the sponsor has a 100% profit margin. Anyway this not new or confined to ESR.


Reply to @Pizzaprata : Their latest prata is about the dates of the upcoming rights. I clearly remember the ceo mentioned (after egm proper) that it will not come that quickly, most likely after a month soonest. But look what happen? Immediately after the egm, the rights notice lai leow. Closing date 4oct. I suspect they trying to vacuum existing shares from common retail shareholders. Unlikely to katok us jialat jialat so fast. Now They still trying to build relations n trust. Just b extra vigilant when dealing with this one

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