Tactical reasons mainly arose from the potential bubbles developing that once burst will send the global economy into recession again (After the rally, what's next ?, Long term investor, time to trim fat on portfolio ???). Apart from that, First REIT fundamental still remain strong. Some of the statistic of First REIT after releasing of its earning on 23rd April 2013.
NAV = $0.836
Annualized DPU = 7.06 cents
Gearing 27.10%
At the price $1.35 which I sold off, it was 1.61x above the NAV. Based on annualized DPU of 7.06 cents, at $1.35, this represented a distribution yield of 5.23% as compared to 11.37% that I am getting from my holding price of $0.6212, a very much compressed distribution yield. As of now, First REIT is having a gearing ratio of about 27.10% as compared to those 10%+ level in 2007 (First REIT then was one of the least leverage REITs in STI). A gearing of 27.10% is not high as compared with most of the REITs listed in STI now having 30%+, nearing the 40% level. The gearing for First REIT could be going up should it acquiring more assets to boost its distribution. Under global low interest environment that seems reasonable with "borrowing cheap money to grow the company" but should interest rate move up and its gearing is on the high end then a re-run of the 2008 scenario for REITs could appear. Current global interest rate is having very limited room to move down further and the only direction next is up, just a matter of time when that will happen.
Intention of the tactical move is to sell another tranche when the price further move up thereby compressing perhaps the distribution yield by another 1% and then holding the remaining for collecting distribution. Should global recession kicks in next, the capital gain from the sale and the dividend collected all along will be poured back to do compound investing. To gain on tactical game is to have the time to wait and patience.
