When $1 is selling for 40 cents, why use technicals? P.S. no offence but I don't work as anyone's unpaid personal analyst/research assistant. Go online and do the legwork yourself, if you are interested. Now if you have something of value to offer, I'd consider trading info like for like - but not value for nada.
One would think that if this were a good slamk dunk trade, the arbs would have already taken the spread out.
Not necessarily. Natural gas trusts were cheap in 2001 AND paid a good dividend. How can you arb an entire sector when it is out of favor? Another way of putting this is that there are short term arbs and long term arbs. Natural gas trusts got "arbed" eventually.
But, with the purchase of a natural gas trust, what would one do to offset the position and capture a spread? 99% of arb opportunities are short term, like when the front month of wheat goes into delivery, and the cash and futures come together, not even leaving 1/4 cent per bushel on the table. These opportunities occur in a very short time frame.
If I understand this trade correctly, there is no offset. Borrowing the yen is to take advantage of the low margin rate, and allow leveraging up somewhat. If the yen increases in value, that is just fine, one would be holding Japanese denominated assets after all. The assets can continue to fall in value, that is one risk, and Cutten mentioned one possible approach to mitigate that. I know in the U.S., historically, when property values are flat or fall, rental rates tend to stay steady or go up, in general. I have no idea if Japan would backtest similarly, but it seems like a reasonable possibility in this current economic scenario.
I find cutten's idea idea very interesting. Thanks for the contribution. I keep thinking about overseas equities but so far I have not ventured beyond overseas currencies and futures. It is time.
If it's an arb, where's the short leg? Shares in REITs are not fungible with buildings, so by definition it cannot be an arb. I put it out as a value play, not an arbitrage. The conventional "carry trade" after all has no hedge whatsoever.
Dalton to raise $950 million for Japan REIT, buyouts Wed Jul 2, 2008 11:31am BST TOKYO (Reuters) - Activist fund Dalton Investments KK said it could raise up to about $450 million to invest in struggling Japanese real estate investment trusts (REITs) and another $500 million for a management buyout fund. Junichiro Sano, head of the Japan affiliate of California-based Dalton Investments LLC, told the Reuters Japan Investment Summit the timing was right to invest in REITs with most trading well below the value of property on their books. "We really like real estate and at the same time we really need the concept of distress," Sano said, adding that it has already secured capital commitments of about $300 million from overseas investors for a distressed REIT fund. On top of that it will look to raise $150 million in Japan, Sano said. Dalton also plans to raise about $500 million later this year for another management buyout fund. It already has a buyout fund that was launched in 2003 and currently has some $450 million in assets under management, Sano said. Sano said there is no shortage of companies in Japan that are closely held and influenced by founders that would prefer to go private in a management buyout rather than deal with noisy investors. "The owner would really like to take it back because they don't like activists like us. It's going to be a treasure island," he said. (Reporting by Nathan Layne; Editing by Jean Yoon)
Property stocks are bargains, LIM says Tue Jun 24, 2008 9:17am BST By Eriko Amaha SINGAPORE (Reuters) - Asian property stocks are ultra cheap but investors could be losing out because they prefer private equity property funds to property securities funds, Hong Kong fund manager LIM Advisors said on Tuesday. Japanese real estate investment trusts (REITs) are trading at more than 40 percent discount to net asset values, while shares of Thai and Philippines property developers are all bargains, according to Peter Churchouse, director for LIM Advisors. "Private equity guys are having an easier time raising capital today than securities guys," Churchouse said at the Reuters Global Real Estate Summit in Singapore. "In a way you should be looking at it the other way around, because these private equity guys are going to pay full dollar, full price, to buy real estate and you can buy real estate stocks at half the price of the assets. "Logically, you should be buying Japanese REITs, not Japanese property." Mori Hills REIT 3234.T, for instance, is trading at 35 percent discount to NAV, Churchouse said. Amid lingering concern about the global credit crunch and its impact on the real estate sector, many property stocks in Asia and other parts of the world have headed south. Japan's property sector has fallen 10 percent so far this year, Singapore's 14 percent and Hong Kong's 25 percent. As a result, shares of high-profile developers and property companies are now trading at discount. As of June 13, Japan's largest property firm Mitsui Fudosan (8801.T: Quote, Profile, Research) was trading at 37 percent discount to NAV while Southeast largest developer CapitaLand CATl.SI was at 40 percent discount, according to a UBS report. There has been a significant mismatch between the capital markets and the physical property market which underpins the value of share prices and this mismatch is offering buying opportunities. But investors are not ready to jump into the market and for LIM Advisors, which is in the process of raising a fund to invest in Asian property stocks, the going has been slow. "Appetite for real estate debt and equity dwindled pretty significantly," Churchouse said. While there are many bargains in the region, Churchouse said there are some exceptions and Chinese property stocks are one of them. "Earnings are extremely pretty vulnerable. Companies are too highly leveraged. There are huge amounts of land premium payments these companies are committed to, but they don't have cash to pay them," he said. "Chinese companies are in a little bit of a bind." Churchouse said some funds raised or being raised by private equity may head to Europe and the United States where many distressed assets have come onto the market. "A lot of big private equity guys who are raising lots of money right now, or intending to, are basically taking back to that money to Europe or the States," he said. (For summit blog: summitnotebook.reuters.com/) (Editing by Kim Coghill)