Volf, your post irritated me and I stopped reading it halfway through. Then I thought about it, realised your knowledge of finance was greater than mine, read it properly, and learnt something. Thank you for taking the time to write all of that. I am usually very conservative but it takes a level of optimism to invest in the stock market. We always think the worst will never happen and when it does, taking prudent action earlier always seems so obvious in hindsight. Everything you wrote about diluting shareholders to raise equity at the worst possible point in the downturn was correct. I do a lot of reading about stocks, but when you start talking about 'weighted cap rates' I realise it's getting a bit technical for me and I need to pay close attention
I held a REIT called MCW in 2007/8. I was horribly over-invested in it. It was a painful lesson. One of the few things I did correctly was to not sell at the bottom. It took a few years for the price to recover. Interestingly, Charter Hall bought the REIT and it became our sister listing CQR. I have been very, very weary of anything retail-related ever since.
Peter, you mentioned "Poland", which is exactly the nonsense MCW (Macquarie CountryWide) were involved in back in 2006-2008. It should have been a flashing red sign saying "sell". What the hell is an Australian REIT doing buying assets in Poland and telling investors how it's a growing market and a safe investment. I tend to remember MCW finally selling those assets either during or shortly after the GFC "to focus on core assets in the Australian market" and not doing too badly off the sale -- so perhaps management were right. They should have been focusing on the Australian market in the first place. CLW's purchase of the David Jones (or was it Myer?) building in Sydney was a surprise and something I looked closely at. Thankfully there haven't been any more purchases in recent months.
I couldn't understand the price drop today. I thought the ex-distribution day was tomorrow (my mistake). It wasn't just CLW to lose a lot of ground today. Stockland, Centuria, RFF... quite a few REITs went ex-distribution and fell heavily. We had the misfortune of going ex-distribution on a day the ASX fell by 1%. GPT fell by 5.6% which was hard to understand. HomeCo Daily Needs REIT went ex-distribution. 2.2 CPU and its unit price only fell 3.5c. Our volume didn't seem particularly high. I assume it was just a down day with few incentivised, although by the end of the day, buying volume and buyers exceeded sellers.
REITs always seem to fall by much more than the dividend on ex-distribution on the first ex. day. then recover quickly in the following week or two. Fortunately, we don't have half-yearly payments like GPT. The quarterly distributions smooth things out a lot better.
I'm going to reiterate what I've written previously. As Volf said above, don't buy the dip, be sensible averaging down, and don't let yourself get over-exposed. If your REIT position feels heavier than you are comfortable with, take 33% or even 50% off the table. If prices fall heavily from here there's an opportunity to add a little back in on an even higher yield (and perhaps a bit more certainty about interest rates. I suspect rates will not rise as much as some expect. And that this time next year, the talk will be about cutting rates to stimuate a stagnating economy.
It comes down to risk vs. reward. If you buy CLW now you'll probably do okay in the next couple of years. But there is the risk Volf mentioned (which is always so obvious after everything goes pair-shaped). It occurred to me on 1st January to sell everything because this year was always going to be challenging. I told myself I was being ridiculous and too negative. Hindsight is always perfect! Risk vs. reward. Over-exposed to CLW and everything goes okay...share price recovers to $5.50. Perhaps make 30-40% including dividends from here. Put the money into high quality, unloved, mid-cap consumer discretionary type stocks and potentially double it, with the same dividend (or higher) as CLW and the same risk -- perhaps less.
Finally, the unit purchase plan suspension is puzzling. The unit price was $4.66 yesterday. Add ten percent to that we're at a very respectable $5.12. It is nothing for a REIT to be down ten percent. I am not sure I buy a suggestion here on HC that it was suspended 'to avoid dilution'. Even at today's price if you add 12% to where we were a month ago it's at $4.90 and everything is normal. It's not like the price has fallen 40-50%. We are only really at the bottom of a 12 month range. Personally, I'd rather have the extra shares than the cash. CQE, the Charter Hall Social Infrastructure REIT (Charter Hall have three REITs in total, plus the listed CHC main entity, which is kind of like Goodman Group) also went ex-dist. today and they are offering the full DRP as usual. Interestingly, CQE was only down 3.6% today (roughly half that of CLW). I recall a while ago in an announcement (perhaps August last year or February this year) CLW said that 'if share price weakness compared with NTA backing continues we would consider capital management strategies', or words to that effect. I can't find the announcement now. At the time, the unit price, from memory was $4.60-$4.80. I took this to mean a unit buy back strategy. I wonder if that's on management's minds now and the reason why extra units aren't being issued? GPT had a buy back plan in-place last year and also had cancelled their DRP. Charter Hall is a good operator. I wouldn't be surprised if they started buying back units given our large discount to NTA. It annoys me I can't find that announcement. I'll probably spend half the night looking for it now!
Anyway, all the best to my fellow CLW investors
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