Friday, October 14, 2016

Why Is Accordia Golf Trust Not Acquiring Assets From Its Sponsors

I shared in the recent session sharing last week that there is beauty for Reits to grow through organic and inorganic means even though they are mandated to pay out most of their earnings to shareholders as dividends.

I also spoke about how the role of the management becomes very important because their competency will determine the direction of the Reits. There are good Reits around that is able to increase shareholder's value over time, which will eventually be implied by higher dividends and stronger share price. There are also lousy Reits which will eventually be a dumping ground from their sponsors. I will not talk about this at this point.

One of Accordia's catalyst is through M&A activities for which the idea is to gear up more over time and buy accretive golf assets from its parent. Their current low gearing at 28% loan to value ratio would enable them to buy accretive assets easily since not only they have the means to do so through gearing up but also most of the NOI for the golf assets are at 11% on average.

If you read the parent financial statement and annual report, you would have realized that they are growing through various means, in particular the driving range and also other golf classes activities. The golf assets are asset heavy which the parents does not have the intention to hold for longer period of time. The purpose when they list the trust was always to recycle the capital and develop an asset light strategy. It is the same concept as property developers.

If you read the Chairman's statement, it tells that the main reason why there are no divestment to the trust is mainly due to the land and building issues, which the trusts have been providing updates every quarter almost when the problem surfaces.

For everyone's easy reference, I have appended a table summarizing the update profile quarter by quarter to see where they are right now and how long more before they could resolve these whole issues depriving them.

Things are moving every quarter but it is going on rather slowly.

My take is it will take a long while more (probably 2 years) before they can resolve the issue and M&A activities can take place. Until then, the trust would have to depend on their current existing business which is evidently slowing down, though this is somewhat helped by the stronger Yen in recent months.


  1. Hi B ,
    Yah ! Other than " land titles issues " investors in AGT also need to " 看天脸色“ depending on weather to determine their DPU payout,,, :(
    Cheers !

    1. Haha yeah those are some of the higher risks and profile we need to look at

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