Sunday, 7 October 2018

Debt Profile of my REIT Holding - The Impact of Interest Rate starting to be felt?

It seem now I start to feel the impact from US Interest rate hike start, my home loan that is tie to the Fix deposit rate has been increasing few times this year every time US raise their interest rate.

With this, I assume it will be the same for loan to the business and it will start to impact the REIT especially those correlate to USD interest rate hence its trigger me to review the loan of my few largest REIT holding

First REIT

  1. Proportion of debt based on fix rate has been reducing from 92.3% to 60.7%
  2. 100M is due to be refinanced by 2018
  3. No information on the average interest rate in their financial report.

First REIT has been having a few negatives news that make me worry as well
  1. The Sponsor financial instabilities and with Rupiah depreciating against USD, it might add more issue to the sponsor. 
  2. OUE has taken over the REIT Manager which I don't really like as based on the other 2 REIT under OUE, it has not been performing well and more like dumping ground.

With the above,
Interest Rate hike might hurt First REIT distribution as only 60% with fixed interest rate.

If REIT manager under OUE make the 1st non-dpu friendly acquisition from OUE, I guess it is the time to say bye to First REIT before it destroyed further.

Now i am pondering if I should reduce further my holding in First Reit as it is currently my largest holding.



Frasers Logistics & Industrial Trust

  1. Debt mainly in AUD and Euro, natural hedge.
  2. Proportion of debt based on fix rate has increase in Q318 to 81% from 79% in Q217
  3. Average cost of borrowing at 2.5%

With the debt mainly in AUD and EURO which yet to start their rate hike even with US raising the interest rate, I guess it should be safe for now



CapitaLand Retail China Trust

  1. 80% of the debt is currently hedge into fixed rates hence 20% in variables
  2. Average cost has been inching up from 2.51% in 1Q18 in March to 2.6%  2Q18 in Jun
  3. Debt is in SGD

With the debt in SGD, the interest rate hike will definitely impact CRCT once the hedge expired and need to re-hedge



Maple Greater China Trust

  1. 90% of debt is hedge into fixed rate increase from 78% in March 18.
  2. Natural debt in HKD, RMB and Yen
  3. Average interest rate 2.44%

Hong Kong has been following US on the interest rate hike to 2.5%
Japan yet to start to raise their interest rate.

I guess, the average might be going up due to interest rate hike in Hong Kong as it is still the majority of loan proportion.



Summary

Seem most of my main holding in REIT will be impacted except FLT for now.

Turbulence coming?

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