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(03-06-2020, 11:41 AM)setan Wrote: Hi Karlmax,
May I know in your opinion is a reasonable cap rate to invest in a property company for OPMI? Thanks.
As mentioned, the market values most properties at about 5%. It varies depending on the type of property; residential, retail, industrial, or commercial. But generally, the ones which are perceived to be lower in risk will have lower cap rates.
It is up to an investor to decide how much they want to pay, or how much they think the cap rate of a property should be. Some of the factors which an investor may consider in their evaluation: management alignment with opmi, management's ability to create value, quality of the properties, future demand and supply of similar properties, and level of gearing.
Since my assumption is that the future of HK grade A office demand will be more similar to the past than otherwise, HKL looks cheap to me.
As for the impact of 2047 on the lease and valuation of HKL's HK properties, it is also something investors should weigh in their consideration. But right now, no one has a definite answer to that.
I think it is highly improbable for the leases to expire in 2047; that would be extremely destabalising for HK, and will probably result in the end of it. My current assumption is that they will be given a fresh 70 years lease. This issue will probably be addressed perhaps some time in 2037 or so.