Virtual Condo Portfolio, covers RENT. Future Gains?

[FriarToo]

Targeting 9M cost, for Virtual Condo, instead of P13-15M in 2nd Hand Market

Smart move? Instead of buying the Condo, Buy the VC Portfolio and use the Divs to RENT at 55,000/mo.

x 8.14% Yield = P732.6k / 12= P61,050 x90% (after-Tax): P55,000 (54,945 ave.)

Dividends are sufficient to RENT the target Condo at P55,000 a month, with some timing issues, see below 

Virtual Condo, 9Million, 3.Nov.23

4stk  Areit: Mreit: RCR: Filrt :   4 REIT Stocks
M’s:   2.25,  2.25,  2.25,  2.25 :  Millions of Pesos
Last 32.65:12.20: 4.76:  2.99 :  Price at 3 Nov.'23
Div.  P2.06: .982 : .391:  .301 :  Last 12 months
Yld  6.31%:8.05% 8.21%:10.0%: Div. Yield
Ave 8.14%, x 90%= 7.326%    : Aver. Yield, After-Tax
Shs 68.9k, 181.k, 473.k, 752.k: 000's Shares Bought
DPa 142.k, 181.k, 185.k, 226.k: Dividends per annum.
D/yr: 734.k
P/mo 61.2k, monthly average : 61.2k= 55k. Af-Tax
/ 55.1: +11% increase in Div. on 9M port. since 1 year ago, as stock got cheaper
====

Paying 9M cost (and locking in a 35% savings) for a Virtual Condo, instead of P14M to buy an actual unit in 2nd Hand Market... 9M covers the RENTAL costs thru AT- Dividends.  Your RENT is paid, and If the portfolio rises, you can buy the actual unit later at a smaller premium.

( Why does this work?  Because the REIT portfolio returns MORE per 1M - like 7.3% AT, than you get from buying the actual Condo, and earning a 4.7% "Use Yield".  I expect that GAP to narrow, as the REITs outperform the Condo. )

[FriarToo]

END OCT. 2023, REITS chart. TLT/ Bond prices near $85.00 (= about 5.0% Yield)

RCR vs.TLT: Update: Jul'22: YTD: 10d /TLT:  Y.Curve   

US.Yield.Curve: 2yr: 5.08%, 10yr: 4.88%, 30yr: 5.02%  at 10.31

Closer look at MEG : Ytd: Price (P2.00) vs. Book Value (P6.64), that's just 30% of BV

Note:  Look how closely MREIT tracks TLT / Long term US Bonds!  

AT 11.07.23:  MREIT (12.20) is 13.85% of TLT/Bonds ($88.06) ,

AFTER 11.08 trading, Bonds rose 1.70% rise overnight to 89.50, I expect MREIT higher on Thu/ it was, briefly.

 MEG : YTD: 10d (P2.00) vs. MREIT (12.18), that's 13.92% of TLT ($87.50, thu) - Friday, $87.98

LOOK how well MReit tracks TLT / Bonds.  (BTW, so does RCR.)

RCR  (4.74) : 5.39% of TLT ($87.99), MReit (12.20), 13.9% ... AReit (32.70), 37.2%; Filrt (2.97), 3.38%

Question: How much of MEG's Value is MReit?  (About 27-28%), based on:

MEG vs. its holdings of MReit, GERI and ELI

Valuation Type        Php.Bn : PerSh. (% NAV)
Net Asset Value      209.2B : P6.64 : 100.%
Mkt.Cap, 31.5B sh.   63.0B : P2.00 : 30.0% of Bk.Value
Mreit 12.20 x1.41 B=  17.2B : P0.55  (55.6% of 2.53B sh)
GERI  0.76  x8.25B=  6.27B : P0.20  (75.0% of 11.0B sh )
ELI     0.145 x12.0B=  1.74B : P0.06  (81.7% of 14.7B sh )
Mreit +GERI +ELI  =  25.2B : P0.81 : 40.5% MEG's MktCp

[FriarToo]

Month-by-Month Cash flow, Virtual Condo.
Depending on when you start, a P70,000 credit facility may be required

P9Million Condo fund, expected 2023 Divs. =

Mo: Areit: Merit:  RCR :  Filrt :              aft.Tx: Aver.
sh : 68.9k: 181.k: 473.k: 752k: ==== x90%: ( 55.0)
last 0.53: .2476: .0978: .071 < Last div. declared
Timing :   :   
Mo: Areit: Merit:  RCR :  Filrt :  Total: aft.Tx: Cum’l
J :     -    :     -    :     -    :    -    :     0.0 :   0.0 : ( 55.0)
F :     -    :  44.8 :  46.3 :    -    :    91.1 :  82.7:  ( 27.3)
M:  36.5 :     -    :     -    :  53.4 :   96.9:  87.2:   + 4.9
A :     -    :     -    :     -    :    -    :     0.0 :    0.0:   (50.1)
M:     -    :     -    :  46.3 :     -    :   46.3:  41.7:   (63.4)
J :  36.5 :   44.8 :    -    :  53.4 :  134.7: 121.2:   + 2.8
Jl:     -    :     -    :     -    :      -   :      0.0:    0.0:   (52.2)
A :     -    :     -    :  46.3 :     -    :   46.3:   41.7:   (65.5)
S :  36.5 :  44.8 :     -    :  53.4 :  134.7: 121.2:    + 0.7
O :     -    :    -     :    ?    :      -   :      0.0:     0.0:   (54.3)
N :     -    :    ?    :  46.3 :      ?   :    46.5:   41.9:   (67.4)
D :  36.5 : 44.8 :      -    :  53.5 :  134.8: 121.3:   (  1.3)
======
=   146.0 : 179.3 : 185.0: 213.6:  723.9k  /  12= 60.3k, pre-Tax  > rose to 60.71, +0.68%

x.9 131.4 : 161.3 : 166.5: 192.2:  ====: 651.4= 54.3k, afterTax > rose to 54.64 (below)
651.4 afterTax / 12= 54,280 Divs. (average per month)         

REIT : exD, & Pmt. Dates

AReit: 03-07, 03-24; 05-26, 06-16; 08-26, 09-13;  11-30, 12-15 
MReit: 01-19, 02-15; 06-24, 06-19;  08-17, 09-14;   11-17, 12-14
RCR   : 02-15, 02-28; 05-17, 05-31;   08-18, 08-31;  11-20, 11-30
Filrt,  : 02-28, 03-14; 06-09, 06-30; 08-20, 09-20; 11-28, 12-15
====

UPDATES: New divs announced for MREIT, RCR... etc

sh : 68.9k: 181.k: 473.k: 752k: ==== x90%: ( 55.0)

Stock: prev. :  new :   ex-Div : pmt. :  change : x shs. = Qtr
Areit : 0.530, 0.550:   11-30: 12-15 : +3.77%: 68.9k: 37.89k
Mreit : .2476, .2460:   11-17: 12-14 :  -0.65%: 181.k : 44.53k
RCR  :  .0978, .0979:   11-20: 11-30 : +0.10%: 473.k: 46.31k
Filrt   :  .0710, .0710:   11-28: 12-15 : +0.00%: 752.k: 53.39k= 182.12/3= 60.71k x.9= 54.64
ddmpr .0254, .02548: 11-03: 11-28 : +0.35%
Vreit    .0396, .04000: 12-13: 01-09: +1.00 %
==========

[webmaster]

Using VCP as a tool to gain control & ownership 

of a Target Condo unit, at 30%+ Discount   

 (Divs=RENT: 732k pa = 61k/ mo. = 55k ave. AT)

1. Rent desired Condo
2. Build V-Condo portfolio, targeting Div. Income
3. Target: Enough A-Tax Div. income to pay rent
4. Buying now is buying near bottom REIT pricesV
5. V-Condo should be at least 30% < Condo
6. Falling interest rates will push up REIT prices*
7. If REIT prices jump 30-50%, VCP => Condo price
8. WATCH for: Opportunity to Sell VCP, Buy Condo

9. If interest rates come down enough, Investor
      might take bank loan to buy Condo; Keep VC

10. V-Condo is a more flexible way to hold wealth

==========

Choice A: BUY :  Choice B: RENT
1 BR, at 13M     :  Portfolio, 9M
P 55,000 /mo.  :  P 55,000 ave.
"use value"/rent  Net Divs. received
==========  :  =============
Furnish, 300K  :  2+1mo +P70k=235K
Inflation Risk?  :  Div pmts. up or down?
Transaction Costs:
10 - 12% in/out :  2%? in/out
Search Delays  :  Flexible, easy out
Liquidity issues : Fast sale: few days
ONE SIZE- 1BR  :  Partial size is easy

With the Virtual Condo, you can start out 
small, at 1%, 10%, 50%, whatever.
Build your portfolio as you go, and 
More and More of your RENT will be covered
by incoming Dividends you receive.

You can easily change your mind about
which Condo, or which property you buy.
And even NOT buy, or Buy elsewhere.

[webmaster]

BUILDER Stocks, Note #1, late Oct.

+ The Return on Builder stocks is 25%.  This is based on a very simple metric, PE Ratios,  This the average of a portfolio of Seven selected Property stocks that I will be discussing in a breakout group.  IMHO, this area of investment has been mostly neglected in our Saturday meetings, and I want to address that neglect, by having a small group with a stronger focus on stocks.  we will probably meet in a different location

+ It is interesting to see now the that currently reported PER ratio of that Group of 7 stocks is:  3.96x which means an Earnings Yield of 25.3%.  The average Dividend Yield of the same group is 4.72%. That is below the average REIT yield of about 8%.  I now think there is potential for strong rises in dividends, since Earnings are rising post-Covid and the average payout is only 19% of Earnnings.  This group also trades at only 26% of Book value.  And book value is growing thanks to the low payout ratio.

+ Here are my estimates of expected returns over the next 2-3 years, based on some quant measures:  

PRICE TARGETS, BUILDER STOCKS, based on PEAK Comparisons
==========================
+ % Book : 25.6% > 60-66%, = +134% -158%
+ PE Ratio: 3.96x > 5.8-9.1x. =  +46% - 130% (+earnings rise)
+ Div.Yield: 4.72%> 3.6-3.2%=  +31% -  48% (+divs. rise )

+ My opinion overall is AVERAGE of these stocks could rise 50-100% over the next 2-3 years, as the US TBond market stabilises and undervalued builder shares return to more normal Discounts to Book Value, PE Ratios, and historical dividend yields.  RISES will be accelerated if they raise dividends faster than Earnings rise

 

[webmaster]

BUILDER Stocks, Note #2, late Oct.

STRONG SHANG, beat weak Bonds.  HOW??

UPDATE: Low PERs suggest room for big DIV. rises in many Builder stocks

Strong SHNG rise came from Div. increases, ahead of rising long term rates.

=== YE’2018: Low’22: late Oct: ‘22>chg.
SHNG: 3.12     :  2.45   :   3.59   :  +46.5%
div. /    .200     :  .124   :   .289   :  +133.%
yield     6.41%  : 5.06% :  8.06%
ROCK   2.01     :   1.20  :   1.43   :  +19.2%
div. /    .070     :  .035   :   .075   :  +114.%
yield     3.48%  : 2.92% :  5.26%
MEG :   4.75     :  2.00   :  2.00   :  +00.0%
div. /    .060     :  .042   :  .066   :   +57.1%
yield     1.26%  : 2.10% :  3.30% :
10yr :    2.69% : 4.35% :  4.63% :
TLT  :   121.50  :  92.00 : $87.50 :  -4.90%
===========

MEG-etc: Ytd: 10d: 2.02-P1.59:/SHNG:3.61: 56.0%; ROCK 1.35=37.4% CPG 0.30=8.31% @ 11-24-23

2.02-SHNG:3.61:-P1.59, 56.0%  ROCK 1.00=70.0%  CPG 0.34=9.42% MEG @ 11-10-23

ROCK-etc: 1.50,-VLL: 1.60: (P0.10), 93.8% FLI 0.65=40.6% VLL

Future PRICE TARGETS, based on Peak Comparisons
=================         :  Possible Rise
+ % Book : 25.6% > 60-66%, = +134 -158%
+ PE Ratio: 3.96x > 5.8-9.1x. = + 46 - 130% (+ any earnings rise)
+ Div.Yield: 4.72%> 3.6-3.2%= + 31 -  48%  (+ any divs. rise )

Quant Measures in late October

Stock : Last: Bk.V.: %BV: PER: E.Yld : D.Yld : Div%: LastD: ex-Div
MEG. : 2.01 : 6.64: 30.3% 4.06: 24.6% 3.28% 13.3%: .0660: 10.26
SHNG: 3.58: 8.43: 42.5% 3.77: 26.5% 8.08% 30.5%: .1344 : 09.07
CPG. :  .315 : 1.85: 17.0%: 4.75:  21.1%  3.84% 18.2%: .0061: 09.28
ROCK:  1.37 : 4.16: 32.9% 3.28: 30.5% 5.49% 18.0%: .0752: 08.17
VLL.  :  1.65 : 9.07: 18.2%: 2.70: 37.0% 3.76%: 10.2%:  .0620: 10.16
FLI.   :  .610 : 3.69: 12.1%: 4.63: 20.8% 5.90%: 28.3%. .0360: 05.09
ALCO: .445 : 1.90 : 26.1%: 4.56: 21.6% 2.70%: 12.5%. .0120:  07.12
==  Average of 7 : 25.6% 3.96=25.3% 4.72%: 18.7% =====
==  Old.Ave. of 7 : 27.0%  4.20=23.8%  4.19%: 17.6%  =====
Compare Big 3:
ALI.   : 28.65 17.30 166.% 19.44 5.14% 0.99%  19.3%.   ?
SMPH 30.70 12.58 242% 25.00 4.00% 0.77%  19.3%.   ?
DMCI: 10.26   7.79: 132.%  5.11 : 19.6% 14.0%.  71.4%.   ?
==  Average of 3 : 180.% 16.5 =9.58% 5.25%: 54.8% =====

[webmaster]

RentToOwn Summaries, Avida  (Per Agent. Indicative ONLY, may not be available now)

 

( Note*: Following prices should be compared with "normal" installment purchase.)

Southpoint 23.3sq. Jr.1BR, #29th Fl
9.081M= 389.7k: 50,454 R: 2,165psm
7,265M (80%)  +20k    x36 = 1,816.3k

Verge ,  22.6sq. Jr.1BR, #25th Fl
6.368M= 281.8k: 34,824 R: 1,541psm
5,094M (80%) +20k    x36 = 1,253.7k

Vireo,  23.4sq. Studio, #15th Fl
6.276M= 268.2k: 34,314 R: 1,466psm
5,021M (80%) +20k    x36 = 1,235.3k

==> Notes: Calculate Cost above Market Value.
If 500 per sq extra x23= P11,500 x36= P414k  
If Option premium: 414k/ 5M= 8.3% Strike

RENT PerAnnum /Yield: VCondo  List:   Pct.
50.5k x12= 606k / 7.3%= P8.3M  P9.1M  91%
35.0k x12= 420k / 7.3%= P5.7M  P6.3M 90%

Alternative: Fund the 80% Balloon, with VCP
7.265M: x7.3%= 530k /12= 44,195  is 88% of 50,454
5,050M: x7.3%= 369k /12= 30,720 is 89% of 34,500

(The Fund will help make nearly all the Monthly payments,
and provide a war chest to pay the Balloon at 3 years, if needed.
Or give the bank collateral, so they will be more comfortable
to LEND money to a foreign buyer.)  

*NOTE: In assessing whether these deals make sense,
you need to compare with standard instalment plan purchase terms.
I don't have those figures, but I would want to see monthlies, and
the size of the balloon after three years.)  
CAUTION: an agent friend told me that RTO prices are inflated.

[webmaster]

(BPI Report, Oct.11, 2023): price then: 3.00 (TLT:88.47: 3.39%), last: 2.80 (89.62: 3.16%)

FILRT at Inflection Point

Initiating coverage with BUY:

We assume coverage on FILRT with a BUY rating and DDM-based end-2024 target price of Php3.80/shr, implying potential upside of 26.7%. We believe rental income and occupancy rates are at an inflection point going into 2024. We expect avg. vacancy rates to peak this year and stabilize at the 16% level. We then expect rates to gradually improve to 15%/14% in FY24/25F on the back of the firm’s aggressive origination efforts and our view that the cheaper rents in Alabang (where rental rates are 20-50% below those in other major Manila CBDs) will help stoke demand. Furthermore, our forecasts assume: 1) expiring leases will renew at lower rates (~8% lower on avg vs previously contracted rates), and 2) a 95% AFFO payout ratio (vs historical avg of 110%, based on our computation). We believe concerns about FILRT’s lower-than-peer occupancy rates (84% as of 1H23 vs peer avg of 95%) have been more than priced in following the stock’s steep 45.5% YTD sell-off (vs PCOMP’s 4.6% decline). At current levels, we find the stock’s FY24F dividend yield of 9.5% attractive against the current 10- year BVAL of 6.6% amid a potential backdrop of falling interest rates in the next 12 months. DPU growth to resume next year, occupancy rates have room to ramp up.

From our projected 24% decline in dividends per share (DPU) this year, we expect DPU to grow ~4%/9% in FY24/25F to Php0.29/0.31 underpinned by: 1) steady improvement in occupancy rates (85%/86% in FY24/25F), and 2) healthy core earnings growth (5%/12% in FY24/25F) supported by the implementation of the 5% annual escalation rate of existing lease contracts and forecasted margin improvement (+20bps YoY to 59.7% FY24F NOI margin) as costs remain in-check. Management noted that around 17%/9% of total GLA will expire in FY24/25F. For now, we assume expiring leases will be renewed at lower rates considering the current office supply glut in the industry (18.4% 1H23 NCR office vacancy rate from Colliers, with 2.5M sqm of vacant office space). Any positive rental reversion poses an upside risk to our estimates...

DPU... Dividends per Unit, "Con.sus" below is consensus opinion

Year: Con.sus: BPI : Quarterly, Actual
2021A    0.45             0.1125
2022A   0.36             0.0900
2023E  P0.30  : 0.28 0.0700: 0.071, exD. 11/28/23 (announced 11/09)
2024E  P0.32  : 0.29 0.0725:
2025E  P0.33  : 0.31 0.0825

[webmaster]

Virtual Condo, 8.53M, 24.Nov.23, was 9M

4stk  Areit: Mreit: RCR: Filrt :   4 REIT Stocks
M’s:   2.25,  2.25,  2.25,  2.25 :  Millions of Pesos
Last 32.65:12.20: 4.76:  2.99 :  Price at 3 Nov.'23
Div.  P2.06: .982 : .391:  .301 :  Last 12 months
Ave 8.14%

Last 29.20:12.00: 4.67:  2.85 :  Price, 24 Nov.'23
Div.  P2.20: .984: .392:  .284 :  Current x 4Q's
Yld  7.53%:8.20% 8.39%:10.0%: Div. Yield
Ave 8.53%, x 90%= 7.677%   : Aver. Yield, After-Taxos
Vs: TLT (4.55%, 3.98%), 10yPhl (0.00%, 0.00%)

Shs 68.9k, 181.k, 473.k, 752.k: 000's Shares Bought
M’s:    2.01,  2.17,   2.21,  2.14 :  Millions of Pesos
== 8.53M - 5.22%

DPa 152.k, 178.k, 185.k, 214.k: Dividends per annum.
D/yr: 729.k (previously 734.k)
P/mo 60.8k, monthly average : 61.2k= 55k. Af-Tax

[webmaster]

The LONG CYCLE in (distressed?) Secondary Market prices :

At our next Stocks Meetup, I want to talk about the Long Cycle in Property, and why we may be in an ideal window for buying Property related stocks.  (Not all, but many look very cheap now, brought down by rising rates.  If inflation is now past the peak, and rates start falling, that could help property... and meanwhile the historic inflation may work its way into Rents.  Yet many of these stocks are near Historic lows.  Charts follow.)

  

Above is my Long CYCLE Forecast for Phl.Property, Secondary market as charted in early 2022.

In fact, I have the same forecast since mid-to-late 2019 .  It remains unchanged, ie "Expected END 2024 Low."  

As I have explained Property Stocks could bottom up to a YEAR before that important Low in overall secondary market prices.  So we may be at the beginning of the "Bottoming Window" for the average Builder stock here already in late 2023.

The Ratio of ALI /AyalaLand to TLT (Bonds) may help to pinpoint important turning points

Long Cycle w/ TLT/ Bonds:  PEAK: Jul.15,'19: 53.5/131= 40.8%.   LOW: Mar.19,'20: 23/148 = 15.5%,

: 2016: Ytd: ALI : 29.85 /TLT: 90.=33.2% at Nov.19,'23.  The '23 Low, Jun.20,'23: 23.15/103 = 22.5%

MEG (2.05) etc., can follow SHNG (3.61)

The Ratio of ALI /AyalaLand to TLT /Bonds may help to pinpoint important turning points

[webmaster]

:: NOTE / LINK to SAT PORTFOLIO ::

BUILDER Stocks, Note #1, late Oct.

+ The Return on Builder stocks is 25%.  This is based on a very simple metric, PE Ratios,  This the average of a portfolio of Seven selected Property stocks that I will be discussing in a breakout group.  IMHO, this area of investment has been mostly neglected in our Saturday meetings, and I want to address that neglect, by having a small group with a stronger focus on stocks.  we will probably meet in a different location

+ It is interesting to see now the that currently reported PER ratio of that Group of 7 stocks is:  3.96x which means an Earnings Yield of 25.3%.  The average Dividend Yield of the same group is 4.72%. That is below the average REIT yield of about 8%.  I now think there is potential for strong rises in dividends, since Earnings are rising post-Covid and the average payout is only 19% of Earnnings.  This group also trades at only 26% of Book value.  And book value is growing thanks to the low payout ratio.

+ Here are my estimates of expected returns over the next 2-3 years, based on some quant measures:  

PRICE TARGETS, BUILDER STOCKS, based on PEAK Comparisons
==========================
+ % Book : 25.6% > 60-66%, = +134% -158%
+ PE Ratio: 3.96x > 5.8-9.1x. =  +46% - 130% (+earnings rise)
+ Div.Yield: 4.72%> 3.6-3.2%=  +31% -  48% (+divs. rise )

+ My opinion overall is AVERAGE of these stocks could rise 50-100% over the next 2-3 years, as the US TBond market stabilises and undervalued builder shares return to more normal Discounts to Book Value, PE Ratios, and historical dividend yields.  RISES will be accelerated if they raise dividends faster than Earnings rise