Portfolio update : Capita Commercial Trust

I made my first addition to my portfolio this week, to purchase 2,000 units of Capita Commercial Trust. The market is generally high this start of 2017, with rising oil prices and Trump's presidency giving a boost to the STI and SP500 which I was intending to get a position in to build up a basic portfolio. I am not sure how long this upswing will last, if at all, so I decide it is best to wait and see before I commit any funds.

At the same time, I had spare time and liquidity the past week and thought I would see if there was anywhere to better allocate my additional cash and start accruing higher dividend yields.

While I was more interested in Aims Amp Reit initially, due to possible conflict of interest I decided had to pass on it. Although the yield is not as good as some other REITs (though 6% is pretty good too), CCT got my attention because it was trading below NAV, which is a comforting thing for just starting up my portfolio, where I do not want too much risk.

Besides the NAV, I felt good about this investment for several reasons. Firstly, I liked that most of the properties were in Singapore, and also properties which I knew of, some of which I even see daily on my way to work. These were mainly office buildings which were well known in town, and I felt confident that, even in a weaker office rental climate, will have tenants. Not that I think other properties or locations are surely more risky, but while I am still building knowledge, I think its better to stick to what I know.

Secondly, while the general outlook for office properties is not that optimistic, I think office spaces will always be needed, especially over in the CBD. Also, the outlook also probably translated into a better price, so I should start adding to this sector of my portfolio, and buy into others when the market is less optimistic. At the same time, I am hoping that there will be some momentum for office leases, which did see some positive news of good demand for space in Capita Green, the new Marina One, and Fraser Tower.

My main concern with this investment was the high P/E ratio I am getting (around 17), which appears to be above other reits and the market average. With my limited knowledge of reading the financials, I think this is partially due to additional expenses in acquiring an interest in CapitaGreen, and thus, profits for the rest of this year should improve as this investment brings in returns.

I would have put down a bigger investment if the price was lower, but I shall stay conservative for now while I watch the economy.