Flatiron, AsiaProperties and Energy12 are high yield bonds that could default like Majestic Village.
Credit risk is the main risk, bigger than location risk, country risk etc. In fact, if you were to analyze Flatiron as a high-yield bond (with a 95% put option), then location [1] doesn’t matter in theory.
If we investors have confidence/experience in or deep knowledge on MIH, then Flatiron would be a hot bargain for all of us, to be snatched up within hours. That’s basically what I did with PeakRetail. Perhaps some of the CASA/Skylar investors snatched up the Flatiron small units likewise.
Credibility translates to higher demand and lower “discount” in the form of GRR. If MIH were a prestigious builder operating in the U.S. or Europe, offering their assets as a REIT, the GRR would be much lower, due to stronger credibility.
[1] location risk, maturity levels, asset country risk, retail/Grade-A sector risk, or supply/demand ,,, don’t matter in that theory. However, in reality, location matters at a fundamental level as location underlies credit risk, MIH cash-flow and and appreciation potential.
— history and credibility
- Skylar 5Y GRR paid since 2018
- CASA 5Y GRR paid since 2017
- Ascott partnership since 2017, approved within a month
- non-zero credibility in textile industry
–Compared to the other PP investment “choices”:
🙁 lesser known developer than Oxley
🙂 Ascott lending credibility on the residential portion. Unlike all other “choices”
🙁 high quantum
🙁 location — higher uncertainty, more raw
🙁 location — if no take-off within 10Y, then I would rely on developer to rent out my unit. They may not have my best interest.
🙁 location — may be hard to sell
🙂 location — hedge against the bkk1 district. capture the potential for both
— 10Y GRR 82% (after-tax) over 10 years.
before tax it is 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% = 95%
10Y GRR is quarterly bank deposit
current office space rental yield is 7-8%, lower than shops
— psf
PeakRetail is around SGD 1k psf
Flatiron is SGD 766 psf
— put option : exercising it has a cost — one-time transaction cost (taxes + legal etc) borne by investor. Estimated at 5%
However, after talking to Stephanie of Oxley, I feel this put option is a big insurance, backed by the credit of MIH.
— ask about debt level — no borrowing in Cambodia.
— read the contract on-site. Not too long
— tax payment procedure: Can ask PropNex local people to pay on my behalf
— ask why the GRR is different for hotel
hotel rental yield is less stable, up and down through the year.. But I think it’s due to lower credibility and lower discount; also Ascott takes a big cut. She didn’t object.