atans1

The risk Reit buyers bear

In Financial competency, Property, Reits on 25/02/2014 at 4:09 am

CapitaMall Trust recently sold retail bond offering paying 3.08% annually.

Its units trade at a yield of 4.55% as yet yesterday’s close.

The percentage difference (48%) between the two numbers is the willingness that holders of the units are willing to accept (whether they realise it or not) for the higher (but not assured) payout. If Reits, reduce their payouts, the price falls to compensate for the reduced yield. Even if the payout remains constant, high yielding shares are only a good investment if a falling share price does not undo the yield return.

As there are many other Reits that have better yields, reit investors should be mindful of the risk they are assuming in chasing higher yields.

FYI, I’m still a holder of Reits.

Relared posts:

https://atans1.wordpress.com/2014/01/09/why-owning-reits-in-a-rising-interest-rate-environment-may-make-sense/

https://atans1.wordpress.com/2013/11/14/where-reits-can-go-wrong/

CapitaMall Trust launches retail bond offering paying 3.08% annually – See more at: http://sbr.com.sg/retail/news/capitamall-trust-launches-retail-bond-offering-paying-308-annually#sthash.pEWiNljc.dpuf
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