Accordia Golf Trust is an interesting IPO to list on SGX. It is basically a business trust which own golf courses in Japan. It is unique as there is no other stock on SGX that is quite like this one. The advertised yield of 7.0% also makes it look really rather appealing. So I decided to research further.
There are 89 golf courses in total and the majority is concentrated in the Greater Tokyo area. The Net Operating Income breakdown corresponds roughly to the value of the courses in the different regions.
All the resources you'll ever need as an investor
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Golf courses are somewhat different compared to the other property trusts or REITs which I am used to studying. So firstly, let’s look at the metrics to determine usage, similar to how you would determine occupancy. Utilisation rate = Total number of visitors per 18 holes/Total operating days × 200 persons.
Both utilisation and number of visitors have been going up gradually over the years, so it is a good sign.
Since this is a business trust and not a REIT, the trust can choose to pay out lower dividends. However, the dividend policy listed is to dividend out 100% in 2015 and 90% of distributable income from 2016 onwards.
Yield at 6.8% to 7.0% looks not bad for Accordia. However, when I was looking for the leases left on the properties, I am surprised I couldn’t find any information. More shocking is that it seems like a lot of the golf courses are not owned directly by Accordia’s sponsor.
Poor Ownership Structure
There are some which existence of conversion permission from agriculture to commercial cannot be confirmed. Some which do not possess the title, ownership rights or lease hold interests are not registered. Others have unknown land owners while minor ones are no building certificates for buildings and no clear delineation of boundaries.
All these are red flags as I have not seen any REIT or business trust which do not own the assets directly. Almost all of the golf courses owned are affected to some degree. While the sponsor is willing to provide indemnity for up to 10 years, it still doesn’t make much sense for a highly developed country like Japan not to have clear ownership rules. For that matter, it is really difficult to determine the value for these properties. Given such unclear ownership structure among other risks such as exchange rate, I find it hard to justify an investment in Accordia.