In future, 85% of employees would prefer to work remotely at least two to three days a week, according to a survey by CBRE a commercial real estate services company.
And there’s this:
If a white collar job here can be done from home, it can be offshored somewhere cheaper. Could someone else do it more cheaply from KL, JB, Bangkok, Mumbai or Manila?
Another big problem looming for S’pore
Rock-bottom interest rates, rising inflation expectations and negative real yields are boosting the present value of future cash flows from real estate. Ultra-low interest rates are also supporting property valuations.
But not all real estate is equal, some are more equal than others.
The less equal than others: Covid-19 has accelerated the growth of online retailing with retail, and especially shopping centres taking the largest hit; hurt the hospitality sector and thrown the future of the office into question. On the last: Derwent, a London UK property co says the true impact of Covid-19 has yet to be felt and warns us to expect sweeping changes to the way we work.
As for housing, got no money how to buy that condo?
But industrial properties are expected to perform reasonably well. Remember that they are not only used for manufacturing, but for warehousing all the goods ordered online, and as cheap “office” space.
Yields are good if one avoids the TLC industrial reits. They attract a premium whether justified or not.
IRAS, MAS and MOF jointly issued a press release on 16 Apr highlighting new measures to support S-Reitss following the market collapse caused by the Covid-19 pandemic.
One initiative comes in the form of an extension in timeline from three months to 12 months for S-Reits to distribute at least 90% of their FY20 taxable income to unitholders to qualify for tax transparency.
(Btw,I had advised those who asked my views on S-Reits that I tot this 90% payout rule would be scrapped for this year.)
The second measure is the increase in leverage limit from 45% to 50% with immediate effect to allow more flexibility in the management of capital structures. About time too: our Reits I’ve been KPKBed were too conservative (as per the regulations) in their leverage. Should be 55% to 60%. But seeing the carnage, I’m glad that the regulatory ratio was only 40%.
There’s more: the implementation of a new minimum interest coverage ratio requirement would be deferred to 1 Jan 2022.
In general, brokers are recommending government-linked REITs with strong sponsors
Example OCBC:
Ascendas REIT (AREIT SP) [BUY; FV: S$3.59], Mapletree Industrial Trust (MINT SP) [BUY; FV: S$2.87] and Mapletree Commercial Trust (MCT SP) [BUY; FV: S$1.96]. We also like NetLink NBN Trust (NETLINK SP) [BUY; FV: S$1.10] for its resilient business model.
Research Team
In summary, the models expect recovering GDP growth, extremely low inflation, exceptionally low bond returns, and low but positive equity returns in 2020-22.
Gavyn Davies* talking about the global macro scene for 2020
I tot I would be selling out of my S-Reits in 1Q 2020. Guess I’ll hang around for a bit longer.
*He’s an FT columnist
Gavyn Davies is now chairman of Fulcrum Asset Management and co-founder of Prisma Capital Partners. He was the head of the global economics department at Goldman Sachs from 1987-2001, and was chairman of the BBC from 2001-2004. He has also served as an economic policy adviser in No 10 Downing Street, an external adviser to the British Treasury, and as a visiting professor at the London School of Economics.
FT
“Real estate is TIPS (Treasury Inflation Protected Securities) on steroids,” adds Mr Steers. “Reits are not bonds. The most certain thing is that if rates are rising and you are in fixed income you will lose money.” FT
Mr Steers is from real estate investment firm Cohen & Steers in New York and he’s bullish on US real estate.
Meanwhile in S’pore, CNA reported on 18 November
‘GOOD DEMAND’ FOR SINGAPORE-LISTED REITS
“With the lower leverage threshold, there might be more Singapore REITs who will look to tap this source of funding, given it is still treated as equity instead of debt,” said Mr Tim Gibson, co-head of global property equities at Henderson Global Investors in Singapore. His firm manages about US$123 billion (S$175 billion) worldwide. “Investors continue to seek yield in this environment,” he added.
Mr Neel Gopalakrishnan, an emerging-markets fixed income analyst at Credit Suisse’s private banking and wealth management unit in Singapore, said: “Most Singapore-listed REITs have good credit quality. Hence, there is likely to be good demand (for their perpetuals*).”
Singapore’s listed REITs had an average debt-to-asset ratio of 34.6 per cent at the end of September, versus 32.8 per cent from a year earlier, according to data compiled by Bloomberg.
The new cap on borrowings takes effect from Jan 1 and the REITs could issue as much as S$12.5 billion of traditional debt without breaching the new threshold, said Mr Hasira De Silva, a Singapore-based analyst at Fitch Ratings.
That leeway narrows to S$7.5 billion if their S$110 billion of assets suffer a 10 per cent depreciation, he said.
CNA also reports:
Falling values, rents and occupancies for debt-backed properties could tip Singapore’s economy into further trouble amid the slowest growth in three years.
Office rents may fall as much as 7 per cent this year and another 8 per cent next year as demand slows, according to property consultancy DTZ, while home prices keep declining as a result of cooling measures and loan curbs.
On Oct 26, office landlord Keppel REIT sold S$150 million of perpetual debt without a so-called step-up coupon, a gradually rising interest rate that is usually a feature of such bonds. It sold the notes at 4.98 per cent, 183 basis points more than seven-year debt it sold in February.
In the same month, business park owner Ascendas REIT raised S$300 million issuing similar notes, while serviced apartments specialist Ascott Residence Trust issued S$250 million of them in June.
The value of Singapore’s office buildings fell 0.1 per cent in the quarter ending Sept 30 from the previous three months, while shop prices declined 0.3 per cent, according to data from the Urban Redevelopment Authority.
Home prices dropped 1.3 per cent, the most since the second quarter of 2009, according to data compiled by Bloomberg.
The FTSE Straits Times Real Estate Investment Trust Index has dropped 11.4 per cent this year, on course for its worst annual performance since 2011.
Meanwhile risks for Reits here will increase in 2016 because weak economic fundamentals will weigh on demand while new supply is added into most sectors, Fitch Ratings said in a report released on 23 Nov.
Fitch expects S-Reits with stronger balance sheets to become more acquisitive in 2016 as they try to boost earnings growth by capitalising on lower asset valuations. Sector leverage – as measured by debt to total assets – is likely to increase in 2016.
On hotel ones, earnings will likely continue declining next year, but at a slower pace, as visitor arrivals into Singapore is expected to recover. Nevertheless growth in hotel room supply in Singapore will continue to outpace demand, leaving operating conditions challenging for the sector.
“We expect ratings of CDL Hospitality Trust (BBB-) and Far East Hospitality Trust (FEHT, BBB-) to remain stable, supported by strong balance sheets, and around 40-50 per cent of income stemming from fixed rent.”
Other hospitality Reits considered in the report include Ascendas Hospitality Trust and OUE Hospitality Trust.
On industrial Reits, pressure on earnings will increase in 2016: the world economy is weak”We expect lower-specification industrial assets, such as warehouses and multi-user factories, to see weaker rental reversions than for higher-specification assets, such as business parks. The demand for business parks is stronger, and a significant part of the new supply is pre-leased,” it said. Ascendas REIT, Mapletree Industrial Trust and VIVA Industrial Trust are among the industrial REITs covered
The strong performance of healthcare Reits is likely to continue in 2016, supported by robust demand for medical services and an ageing population in Asia. Healthcare SREITs’ long-term lease structures with a high degree of rental protection and their high proportion of fixed-rate debt will also support earnings growth.
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*Landlords in Singapore are planning to issue perprtual bonds which are treated as equity to get around new rules curbing their debt amid a property slump. Data from Fitch Ratings showing Reits having issued a record S$700 million of perpetual notes with no set maturity date thus far this year.
The Monetary Authority of Singapore is capping borrowings of Reits at 45% of assets from next year, and debt that can be considered equity (Perpetuals) offers landlords a way out.
Under global accounting rules, bonds with no fixed maturity that allow the deferral of coupon payments can be treated as equity.
(Or “S-Reits: Is an amber light flashing?”)
Regular readers will know that I’m up to my eyeballs in Reits (AMP, Fraser, Lippo and Ascendas India, ya I know AI is a biz trust, but it’s a Reit except in form). Greedy for the yield, what with inflation at above 5%. And no high salary to fall back on. In fact no salary at all. (((
Generally Reits are up 10% in 1Q, and taz without taking into account the payouts! So I’m not complaining.
But I’m getting concerned abt future total returns (price + payouts) when the expected appreciation of the S$* is given as a reason to buy Reits. “If they [investors] expect the dollar to appreciate … there will be more interest in Singapore-dollar-denominated assets … Reits that are listed in Singapore and traded in Singapore dollars will benefit as well,” someone senior from SIAS Research was quoted by MediaCorp as saying recently. And remember that SIAS is the self-proclaimed watch dog for retail investors!
WTF, ever heard that quite a number of Reits are diversified geographically, or are exposed to a specific country like India, China or Indonesia? If a Reit has oversea income, that income would be “reduced” when translated into an appreciating Singapore dollar.
Anyway, as of last week, DBS Vickers liked Mapletree Logistics Trust, Ascendas India Trust and Frasers Commercial Trust. These were Reits to accumulate ahead of payout declarations because it expected the payouts to exceed mkt expectations.
CIMB favoured CapitaMall Trust and Frasers Centrepoint Trust for their retail exposure and strong growth potential. And OCBC prefered industrial REITS, which offer yields in excess of 8% to outperform.
But do remember that unlike companies, Reits have by law to payout out 90% of their income. There is no such thing as keeping something for “a rainy day”. Something that “dividend stocks” like Haw Par, SPH or F&N do. With a Reit, if income drops, the payout drops and the share price will drop to reflect the reduced payout.
As a Reit investor, you got to sell when the going gets good, or be prepared to hold it through down-cycles and be prepared to cough up monies then for rights issues to shore up the financials. Net-net, could use up the payouts you got in gd times.
————–
*Following the recent announcement by the central bank to allow the Singapore dollar to appreciate at a faster pace.
Our constructive, nation- building media are promoting Reits as “safe” investments, so maybe it’s time to read or reread “Initially, I wanted to title this post “The Disastrous Singapore REITs Model” but decided otherwise”, written late last year?
It analyses what went wrong in the S-Reit sector in the period up to massive rights issues in 2009.
In a report issued last Thurday, CIMB identified K-Reit Asia, Frasers Commercial Trust (FCOT), Ascott Residence Trust (ART) and Suntec Reit as those likely to engage in equity fundraising in the near future. “The first signs of more cash calls to come have surface.”
The Reit industry is stronger than it was three years ago, CIMB said. Across the sector, the proportion of short-term debt to total debt stood at 8% in September, much lower than the 38% in June 2008. With reduced pressure from short term liabilities, Reits are less likely to make cash calls, even if the industry’s average gearing did climb to 36% (from 34% in 2008). But some Reits -(especially those in the office sector) could be vulnerable to asset devaluation as a downturn looms. Lower property values push up gearing ratios.
According to CIMB K-Reit, ART and Suntec Reit had gearings of 42%, 41% and% respectively at end-Sept, higher than the average of 36%.
The risk of a cash call is greatest for K-Reit. Its aggregate leverage remains high despite a massive rights issue (17 for 20) now underway to fund the purchase of Ocean Financial Centre from parent Keppel Land, and 20% of its debt is due for refinancing next year.
ART not only has high leverage but its European assets could see a devaluation, raising its leverage- a vicious cycle. But if it divests Somerset Grand Cairnhill, which has provisional approval for redevelopment into a residential and hotel project, a near-term cash call could be avoided.
Suntec Reit may not need a cash call until it is ready to acquire Phase 2 of Marina Bay Financial Centre and its capital expenditure needs could be partly met by proceeds from selling Chijmes.
FCOT is a potential candidate for a rights issue because of its relatively high leverage of 37% and low interest coverage ratio. Also, all of its debt is maturing next year. But it could divest KeyPoint. Given F&N as its “big brother”, it could refinance its debt at lower interest rates.
But CIMB believes that Reits are still safe, maintaining its ‘overweight’ call on the sector.
We believe stocks are currently priced for a slowdown but not a recession. Our strategy would be to adopt a stock picking strategy in the property sector. Within the office segment, office landlords are trading in excess of -1 standard deviation to historical RNAV discount while S-Reits are trading at less than 1 SD to the long-term yield.
We believe office stocks have more than priced in the muted outlook and valuations appear attractive currently. While we have widened target price (TP) discounts and lowered TP for landlords given the higher risks going forward, upside to our TP remains significant.
Our top picks remains Keppel Land and UOL. Keppel Land is currently trading at 46 per cent discount to RNAV of $5.57 and offers 40 per cent upside to our lowered TP of $4.18.
We remain positive on UOL, thanks to its multiple growth engines that spans commercial, residential as well as hospitality. Our TP of $4.96, based on a wider 20 per cent discount, offers 9 per cent upside. We have lowered our call on Singland to Hold due to its large 75 to 80 per cent exposure to the office sector.
In the recent equity market sell off, the FSTREI (S-Reit index) while corrected by some 5 per cent versus the 12 per cent and 25 per cent fall in the STI and FSTREH (property developers index) respectively. S-Reits now offer a prospective FY11-12F distribution yield of 6.5-6.7 per cent, which represent a 500 basis points spread above the long-term government bond. It is now closer to -1 standard deviation of the sector historical yield trading range. We believe that S-Reits continue to offer a compelling investment proposition.
We reiterate our preference for retail Reits. Even in the event of an economic downturn, retail Reits’ exposure in necessity shopping (eg supermarkets, F&B outlets) have kept earnings fairly stable. Industrial S-Reits also offer strong stability and visibility given a larger proportion of their income deriving from master-lease structures. While we continue to see hospitality Reits delivering good numbers going into a seasonally busier 2H11, we believe that growth momentum should be slowing down.
We see value emerging in CapitaMall Trust (Buy, TP $2.05) which is our big cap pick with attractive FY11-12F yields of about 5.3-5.9 per cent. Mapletree Commercial Trust (Buy, TP $1.09) is attractive for its strong organic growth coming off from a first renewal cycle at its VivoCity retail mall. Among the industrial Reits, Mapletree Logistics Trust MLT (Buy, TP $1.07) stands out post an active H1 FY11 and is poised to deliver strong earnings growth into H2 FY11. We continue to see relative value amongst the smaller cap S-Reits – Cache (Buy, TP S$1.07) and Frasers Commercial Trust (Buy, TP $1.05), which offer higher than average yields with limited earnings downside.
S-Reits are the flavour of the moment. Witness this gushing report.
“The current yield gap between S-Reits and the 10-year government bond is attractive to us at 5.1 percentage points versus 0.8 percentage point during the 2007 boom, and an average of 3.4 percentage points over the past seven years,” said Royal Bank of Scotland analysts in a report last week.
The report put S-Reits yields for 2011 and 2012 at 6.7 per cent and 7.1 per cent respectively. The high yields now being provided by S-Reits are well supported by a stable rental outlook, low interest costs and acquisitive growth potential, the RBS analysts said.
RBS has an ‘overweight’ call on the S-Reit sector.
As reported earlier https://atans1.wordpress.com/2011/08/21/cimb-on-reits/, CIMB is “neutral” on developers as a whole but “overweight” on S-Reits.
So what can go wrong? Nomura Singapore said that one of the current concerns of investors in the Reits space is the potential risk of recapitalisation if asset values were to fall significantly. In simple English, investors are afraid of rights issues if the gearing of Reits goes sky high if property values supporting the loans collapse. This happened in late 2008.
Even if property values don’t collapse, Reits could face banks refusing to renew their credit facilities, and asking for their money back if the banks face a liquidity crunch. This too happened in late 2008.
Retail Reits are expected to see positive rental reversions going forward, supported by the current positive consumer sentiment.
Frasers Centrepoint Trust (‘buy’, TP: $1.73) is expected to deliver a good set of numbers in the coming quarters, as reconstruction works at Causeway Point have passed the most crucial stage, with committed occupancy at over 99 per cent. In addition, the impending purchase of Bedok mall will act as a re-rating catalyst for the stock.
Mapletree Commercial Trust (‘buy’, TP: $1.05) should also see strong reversions in rental growth of about 10 per cent in the coming quarters, coming off from a first renewal cycle at its VivoCity retail mall.
S-Reits have collectively acquired about $1.9 billion of assets year-to-date, which should start contributing to earnings in the coming quarters.
After two months of relatively flattish distribution per unit, we believe Mapletree Logistics Trust (‘buy’, TP: $1.07) is poised to deliver a strong uptick in earnings momentum, boosted by recently completed acquisitions
FYI, yields for the above trusts are very decent and all three trusts have strong Tai Kors. F&N for Frasers and Temasek for the other two.
Frasers Centrepoint — 6.8%
Mapletree Commercial — 5.7%
Mapletree Log — 6.7%
We see relative value among certain smaller-cap S-Reits. Cache Logistics Trust (‘buy’, TP: $1.11), which currently offers a yield of over 8.0 per cent, is attractive, backed by transparent earnings structure and armed with a low leverage of 26 per cent, having the headroom to acquire further.
Frasers Commercial Trust (‘buy’, TP: $1.05), at a P/B of 0.6 times, is unjustified in our view, given that the yield-enhancing steps taken by management and plans to re-finance its expiring loans should result in future interest savings.
I’m glad someone sess value in FCT where I have a holding. Yields 6.77%.
Ratings agency Moody’s Investors Service reiterated its ‘stable’ outlook on Singapore-listed Reits (S-Reits) for the next 12-18 months.
“We expect S-Reits to use their well-capitalised balance sheets to continue acquisitive strategies and assume they will fund potential acquisitions with a mix of debt and equity while maintaining leverage within targeted limits of 40-45 per cent”.
In a research report dated 10 December 2010, OCBC Research writes most of the Singapore real estate investment trusts (S-Reits) emerging stronger from the financial crisis, with healthier balance sheets, forthcoming acquisition proposals and more asset enhancement works.
Three Reits listed on (SGX) this year, Cache Logistics Trust, Mapletree Industrial Trust (MIT) and Sabana Reit. This was in stark contrast to a year ago when most of the S-Reits were burdened with deleveraging plans, decompressing cap rates and asset sales.
The FTSE Reit sub-index is up 15.9 per cent year-to-date. It has since recovered 145.1 per cent from its trough during the financial crisis in March 2009 and is 38.2 per cent shy of its peak in June 2007.
If we use 2006 levels as a benchmark, the FTSE Reit sub-index still has 25 per cent of headroom before reaching the 2006 summit, and it is only 9.2 per cent above of its 2006 nadir.
Stepping into 2011, we think there is still upside potential for the index to reach 2006 levels, and this recovery momentum is already playing out nicely among some of the S-Reits.
Despite being touted largely as defensive yield plays, we have witnessed some S-Reits (such as CapitaCommercial Trust, K-Reit Asia, Fortune Reit and ParkwayLife Reit) appreciating more than 25 per cent year-to-date.
Going into 2011, we upgrade our rating for the S-Reits from ‘neutral’ to ‘overweight’.
The persistently low interest rate environment is expected to stimulate the property market and continue to drive prices higher.
Together with ‘hot capital inflows’ pouring into Asia, it is likely that spot rental rates and asset prices will continue to be inflated.
At the same time, many Reit managers are capitalising on the recovery cycle for further asset enhancements initiatives and acquisitions.
Being an inflation hedge, we think investors’ interest in S-Reits is likely to remain piqued in 2011.
However, we noted that different sectors may experience different rates of recovery.
In our opinion, the recovery is likely to be more pronounced for the office sector, followed by the industrial sector as the catch-up potential is greatest for these two sectors.
The retail sector is likely to remain subdued with moderate rental escalation, new retail supply with additional 612,000 square feet of leaseable retail space in 2011, and lessened spending power from foreign visitors affected by the appreciating Singapore dollar.
Within our coverage universe, our preferred picks for large-caps are Mapletree Logistics Trust (‘buy’, fair value: $1.00), Ascott Residence Trust (‘buy’, fair value: $1.38) and for small-caps, Frasers Commercial Trust (‘buy’, fair value: $0.18), Starhill Global ( ‘buy’, fair value: $0.66).
This piece of news (Sabana) in Monday’s ST did nothing to support the stock, because although it reported insiders buying at higher prices to support the IPO (issue price; 1.05), it also reported that a substantial shareholder had dumped shares. If this shareholder came in via the placement, if I were Sabana, or FreightLinks or other keystone investors, I’d be upset with the placing broker.
It went on falling. On Wednesday it closed at0.95, having fallen to 0.94 on Tuesday.
But SIAS research was quoted by ST as saying that at last friday’s closing price of 0.975? Sabana was a buying opportunity.
Well SIAS Research is part of self-styled shareholders’ champ SIAS. But wouldn’t it have done better to point out that AIMSAMP industrial reit gives a yield of 9.5% and trades at discount to last reported NAV of 18%?
Me, I think Sabana is attractive at 0.81, when over 10% yield and a 18% discount to NAV of 0.99cents. As to whether it gets there
Know for a surety each must play his game,
As from heaven’s dice-box fate’s dice chance to fall.
BTW, I have no economic interest in AIMSAMP. It is on my “Feel like buying, but no hurry” list.
Related post
https://atans1.wordpress.com/2010/12/01/calling-all-muslims/
As regular vistors to this blog will know, I’m a sucker for yield and NAV plays. So I was starting to think abt CitySpring Infrastructure Trust which offers a prospective yield of abt 7%. It is also a Temasek-linked trust and could possibly be trading at a discount to NAV. An investing sweet spot.
Fortunately before I even got to reading up the basic data on the trust, I chanced across a Kim Eng Eng Research report dated 30 November, which called the trust a ” sell”.
To forestall a credit rating downgrade of the three bonds issued by Basslink, CitySpring Infrastructure will set aside A$20 million (S$25.4 million) in an escrow account for this asset before next January. Although this move may resolve the CreditWatch placement by Standard & Poor’s (S&P), a capital structure plan involving an equity cash call seems inevitable in our view. So, while the forward yield of 7.1 per cent based on the previous DPU guidance appears compelling, there is no denying the risk of dilution.
… The bonds, worth a total of A$866 million, face a potential ratings downgrade that will trigger a cash lock-up at Basslink and affect CitySpring’s distribution policy … CitySpring will still need to submit a capital structure plan that will satisfy S&P’s stringent risk assessment. It plans to do so by next September. As one of the options, Basslink’s cash flow may be applied to reduce debt … A capital structure plan involving an equity recapitalisation seems highly possible in our view, given the presence of other debt obligations, such as the $142 million corporate loan due in August 2011 and the $130 million City Gas loan due in 2012. Even if Basslink continues to pay a distribution, unit-holders’ yield may still suffer a dilution.
We cut our DPU forecasts for FY March 2012 and onwards from 4.2 cents to three cents to factor in the removal of Basslink’s contribution. Our TP is lowered to $0.52, reflecting our assumption of a capital injection of $100 million to reduce gearing. Downgrade to ‘sell’.
Looks like the perfect storm. And I’ve found out that it’s last reported NAV is 0.34cents.
But I’ll monitor the trust, waiting for the capital raising exercise which I agree must come. It might then be like AIMAMP industrial reit or Fraser Commercial* — gd yields and discount to NAV to compensate for the overhang of units created by the rights issue. BTW, for waz it’s worth, I read in Monday’s ST that OCBC’s reit analyst and DBS’s head of asset-backed structured product like industrial and office reits.
Investors in the Mapletree s-reits may want bear in mind that this trust was once a high-flying investment trading way above NAV, and giving gd yields. Until it the managers went walkabout in Oz Outback. Being part of the Temasek stable doesn’t mean that one can “close eyes and buy and hold”.
*office and malls (here and in Oz)
Sabana Reit needs yr help.
This is the first Shariah-compliant reit listed on the Singapore exchange (SGX), and the world’s largest listed Shariah-compliant reit by total assets. Looks like analysts were wrong to expect Sabana to attract Middle Eastern investors saying there are not many such Shariah-compliant REITs in Asia ( M’sia has three, and this is all it seems). Either they got no money, or there are more attractive investments elsewhere or in more lucrative products.
At yesterday’s closing price of 0.97 its first yr projected yield is now slightly more than the 8.22% at the IPO price of price of 1.05.
But it trades only at a “peanuts” 2 cents above NAV of 0.99 in cash. But the properties to be injected in will only give an NAV of the 0.99.
For the time, being this infidel prefers AIMSAMP industrial reit which trades at a yield of 9.5% and an 18% discount to last published NAV. True gearing is at 35% versus Sabana’s 25%,: but the former has big Aussie insurer AMP as big brother, and the latter can only “borrow” from a limited number of “lenders” and via complicated structures. And I don’t have enough info to make judgements on its big brothers.
BTW looks like Temasek’s Mapletree industrial reit has beaten this Shariah-compliant industrial reit performance-wise in IPO terms. They IPOed within weeks of each other recently.
Moral of the tale for pious folk of any religion: God may rule in heaven but on SGX, investors prefer to invest in a Temasek-linked reit, rather than a religious-compliant reit. The blasphemous (not I) may want to shout, “Harry rules OK” or “In S’pore, God takes advice from MightyMind”.
Reits’ attraction are dividend yields of 5 — 9% when compared with the paltry 0.125% offered on bank deposits.
So what can go wrong? Plenty as a recent ST article reminds (extracts below). My value-add to the extracts is to suggest that one should add a margin of safety by buying those Reits that trade at a substantial discount to their lasted reported NAVs. This is not possible if one focuses on TLC/ GLC-related Reits, though there is an exception but there are reasons for the exception. BTW, this might be useful http://reitdata.com/ when thinking of investing in Reits.
… the best way to enhance returns is to resort to bank borrowings to finance their property purchases. That is why they look their best in a low-interest rate environment.
To give an example, let us suppose a Read the rest of this entry »
S-Reits offer the best yields. Gd, useful article
Much safer than investing in prayer at City Harvest Church? So far no S-Reit manager has been raided or investigated by the cops. God be praised.
Update — excerpt from BT
MOODY’S Investors Service has revised its outlook for Singapore’s real estate investment trusts (S-Reits) to stable from negative, reflecting its view that the sector’s fundamental credit conditions will neither erode nor improve materially over the next 12 to 18 months. ‘The stable outlook is supported by three primary factors: the strong rebound in Singapore’s economy; the stabilisation of rents across the retail, office and industrial property sub-sectors; and the steady performance and lower refinancing risk of the rated S-Reits,’ said Peter Choy, a Moody’s vice-president and senior credit officer.
Thoughts of a Cynical Investor 