Also check out noomxx's post(s) on CQR and other REITs by using the 'search' function. He has been consistently correct about this sector and obviously knows what he is talking about. A shout out and thanks to
@noomxx for the educational posts.
I have a small holding with an average price around $4.00. You're right, it has been a horrible investment.
To give a flippant answer -- you only have three choices: buy more to get your average price lower; continue to hold and ride out the current trouble; or sell at a loss.
I suppose a fourth option would be to sell part of one's holding at a loss and leave the other part in your account. If the price drops another 10-15% you could average down with that re-claimed money. Take a smallish haircut / tax loss now on a percentage of the holding. If it rockets non-stop to $5.00 on an unexpected take-over offer (!!!!!) you've still got X percent exposure. None of this is advise. Only options.
The 10 year US bond yield seems to go up every day. Every time I check it's higher, and our share price drops lower. However, whilst the A-REITs have been hit, the Charter Hall REITS have been smashed when compared to just about any other REIT. CLW is trading on about a 40% discount to NTA. I can believe the NTA should be lower, but not 40% lower. A cap raise has been priced in, a huge cut to the distribution, and then a cap raise has surely been priced in again.
It will drop further after the distribution is paid on Friday too.
Some considerations would be: Will rates go much higher or are we near the top? How reliable is the dividend yield? How reliable is Charter Hall management? Do you trust the NTA figure to be even approximately correct? What effect would an announcement of a large property sale announcement make on the unit price? If bond yields start falling sharply because Biden or the Fed boss makes some unexpected comment, how much of a rebound is likely? Is CLW over-sold at the current price? What is your opinion of CLW's debt hedging (I think it's about 50/50 hedged/unhedged). Is the current situation akin to 2016 (bad) or 2008 (disastrous)?
I held a REIT from 2007 to 2015 through the 90% drop of the GFC and I can tell you it's not much fun.
I don't understand why CLW discontinued the distribution re-investment plan which would have allowed it to retain some of the earnings for the past 12+ months.
Avi Anger (fund manager) confirmed recently that any funds from the sale of buildings would be put towards reducing the gearing NOT into new purchases. I've read that smaller, unlisted funds have been eager purchasers of buildings this year, whereas the larger listed Trusts have been selling (at a discount to NTA). Surely even if we were to sell some properties at 10-15% discount to NTA that would be favourable.
I just about wish they had announced a cap raise @ $4.00 and got it over and done with if it's inevitable. I read somewhere that our gearing is approaching 40% but according to Avi we are well within the covenant range (presumed to be 50%). I can't remember where I read this. It's bookmarked somewhere deep in my Google Chrome no doubt!
Good luck to you, mate.
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