Friday, October 21, 2016

Book Review: Singapore's Real Estate - 50 Years of Transformation

In my previous post, I alluded to my interest in developing competency in REITs analysis. However, there is quite a limited selection of reading materials that delve into the topic. For this reason, I broadened my scope and began sourcing for real estate materials in the local bookstores.

Today, I will be highlighting some of the points which I have gleaned from reading "Singapore's Real Estate - 50 Years of Transformation."

- The Real Estate Development Life cycle illustrates how an empty plot of land is converted into a building: (1) Land Assembly and Preparation, (2) Planning and Approval, (3) Construction and Project Management, (4) Marketing and Leasing, (5) Occupation and Use, (6) Upgrading, Renewal, Redevelopment. From there, the authors expanded what is done at each stage and by which players (e.g. government organizations, developers, etc.)

- Back then, when capital was scarce, developers recycled their capital by subdividing their properties into strata-titled units and selling these individual units to buyers.

- Some land parcels are designated as "white sites." Developers are given the freedom to choose what the land is used for. This allows the developers to be responsive to changing market conditions. In return, developers have to pay a premium for such flexibility.

- The government uses the Sales of Sites Programme (SOSP) to regulate housing prices by controlling the supply of land. URA and HDB is responsible for administering the SOSP.

- Real Estate Service Providers grew with the industry. In the early years, they provided mainly valuation services. Today, they serve as consultants providing a wide range of services ranging from fund management, capital advisory, project management, facilities management, etc. They might be undergoing digital disruption as data pertaining to the industry is freely available on government websites and websites.

- Interestingly, the authors cited a paper stating that real estate assets are usually priced at significant discounts to NAV while held in the developers' book. Guess we shouldn't really consider developers (and their respective real estate assets) trading below their book value as a plus point for investment? I have yet to read the actual paper though. *mental note to self to read it*

- It does not mean that REITs with healthy levels of occupancy rates are immune to bankruptcy. Even though New City Residence Investment, a residential J-REIT, had healthy occupancy rates, they were not able to refinance maturing loans and were forced to declare bankruptcy. Therefore, we should not conflate occupancy rates with debt servicing.

- UK Real Estate education focused on valuation, law, economics, construction, and planning. In contrast, US Real Estate education focused more on the business aspects: management, administration, finance, etc. Singapore adopts an eclectic approach by combining aspects from both models.

Prior to reading this book, my understanding of the Real Estate industry is just limited to the REITs I invest in. Reading this book provided me with a better understanding of where Singapore's Real Estate has come from to where it is today. As an investor, I think that the information provided in the book is good to know, but may not be directly used to improve my REITs investing acumen. Still, it makes me more appreciative of the Real Estate aspect of Singapore which I used to not have any knowledge of.

Meanwhile, I have to look elsewhere to further my REIT education. Maybe the references within the book is a good starting place?

Tuesday, October 4, 2016

Musings on life

One long-standing concern which I hope to eventually eliminate from my life is my lack of career stability. Since graduation, I have been holding on to contract jobs as a social science researcher. While there are the lucky few who managed to secure permanent research positions as a degree holder, the majority of organizations in my field are looking for Masters or PhD holders.

With plenty of me-time in-between jobs this time round, I reflected quite a bit:

I could never get used to this feeling of being a sojourner of sorts. Once I am finally comfortable with the people and the daily routine at work, my contract ends, leaving me with a bittersweet feeling. This time round, all is not lost. My next project is cross-organizational; I will be working with my ex-colleagues very closely. I am very grateful for this opportunity.

One recurring thought which I had while employed in my previous workplace was my willingness to accept a permanent position at said workplace if they ever offered me one. Though my bosses and my bosses' boss did brought up such a topic, they did note that I was unqualified because I lacked a Masters Degree, Without taking into account the admin staff, all employees had at least a Masters Degree and 40% of my colleagues/superiors had a PhD.

Competition for those permanent positions is rife though. PhD applicants have been applying for Masters-level positions. This is not a good sign.....

Side Interests/Personal Development
I enjoyed this short-term break from work. Besides reading up on books (see here and here), I have also completed the Health Insurance Module offered by the Singapore College of Insurance (see here).

Another of my medium-term goals is to complete the CFA. As I am a slow learner, I have not signed up for the level 1 examinations yet. Instead, I purchased the abbreviated Wiley Level 1 CFA books so that I can read to my heart's content before even attempting the examinations. The material on financial statement analysis has been an illuminating read. I am not sure whether is it because I got the abbreviated textbook, but there is not much material on REITs.

There goes yet another potential source of information regarding REITs investing. Other REIT-education alternatives which I am considering are as follows: (a) taking up the CMFAS Module 10, (b) read up on property books available from your major bookstores, (c) complete all the necessary exams to be a real estate agent, and (d) familiarize myself with JTC + other government websites. In times like this, I'm banging my head against the metaphorical wall out of frustration. I want to improve in my investing acumen but the information I need to improve with is either beyond my level or floating around piecemeal in cyberspace.

It is also during this period of time where I started this Unintelligent Nerd blog.

Personal Finance
Personal finance-wise, I am doing alright. As planned, my emergency fund kicked in when my contract ended. The only drawback was that my warchest is a bit on the low side. After purchasing a counter on my watch list recently, I'm almost out of ammunition.

Formal Education
This is a tricky bit. On one hand, I would love to delay taking my Masters so that I can invest more in this uncertain financial climate. On the other hand, I can't be delaying too long to get a permanent job!

A PhD is out of the question. While some have advised me to hide in a PhD programme to weather the recession, I do not find this a good idea. First, I am a slow learner. I would very much prefer to build at least the most shallow of foundations for my PhD topic first before even applying for a PhD programme; I have not done so. In investing, this is called margin of safety. :D Next, my dividend income from my portfolio is meager. This is exacerbated by the proportion of REITs in my portfolio. Cash calls during PhD with only a stipend income? GG (good game)! Third, I am still straddling between my social science research career and another field. So, which field do I go into? If I choose the latter, I could be committing academic suicide because of my poor foundations.

Masters then. Yet another problem. A Coursework Masters or a Research Masters? In my original field or jump to another field? I would love to do a Research Masters (more esteemed by research-centric employers) in that other field. But I have to play it cautious.

A Research Masters in Social Science? I've thought of a highly niche subfield where there are only 2 Singaporean researchers in it. Wait a minute, there are now 4 researchers in this area. Guess blue oceans do not remain blue for long.

In the interim, my strategy is to take up 1-year academic programmes sequentially. I have just completed and graduated from one such programme earlier this year. I will be starting on another of such programme in a few weeks' time.

Just one year back, I have been nagging encouraging my school mates and my colleagues who are on contract to continually upgrade themselves and to keep their skills sharp. I could hear the crickets chirp! Now, one of them is spamming Coursera courses to boost his CV; the other is seriously contemplating doing those 1-year academic programmes which I am currently doing. Has shit hit the fan in the job market? I'm not sure. Things could worsen further.