I think it is a smart move for responsible listed companies to put excess cash into good use, and owning a freehold office building in the CBD can be a good long term investment move.
Despite the low single digit yield, it is a good alternative as compared to reinvesting in riskier assets, especially if there is low usage for the core business.
Yangzijiang Shipbuilding has agreed to buy a 21 storey freehold commercial building Robinson Point for S$399 million.
Owning prime office buildings in Singapore can be a smart investment strategy for non property groups, especially those who are cash rich.
Same concept as smaller investors like you & I, it is essential to have holding power and avoid being forced to sell a property at an unfavorable time due to cash flow difficulties.
Buying property in Singapore can serve as a hedge against continued inflation and provide stable cash flow, making it an attractive investment opportunity for institutional investors and family offices.
For Yangzijiang, the purchase of a prime office building may seem sub optimal in the short term but it can be a good long term investment move.
Especially when it has strong internal cash reserves and does not need to rely on external financing, saving on the financing costs.