Home Blog Page 25

How much should you allocate to REITs in your portfolio?

1
Asset allocation

For those who have been working for some time, one question that comes up to me often when I speak with these people is the question of asset allocation. How much of my portfolio should I put in REITs?

To tackle the question, let’s first start with how much you should put in stocks, which is an umbrella term that covers REITs.

One school of though advocates putting a percent into bonds based on your age.

If you’re 30 and have S$10,000 to invest, put S$3,000 into bonds. If you’re 40, put 40% so on and so forth. The remainder goes to stocks.

Another school of thought advocates 4 buckets

  • Ultra aggressive: 100% stocks, 0% bonds
  • Moderately aggressive: 80% stocks, 20% bonds
  • Moderate growth: 60% stocks, 40% bonds
  • Conservative: Less than 50% in stocks.

Yet another school of thought suggests you allocate based on your life stage.

  • Fresh graduate? 100% in stocks
  • Mid career with family? 80% in stocks
  • 40’s to 50’s? 50% stocks
  • Retiring? 30% stocks.





Personally, I go with the “bucket” school of thought mixed with where I am in life. The resulting portfolio is an approximation and moves at the edges as markets rise and fall.

I go with the principle that the allocation to stocks falls as one age.

To round up the first part, let’s see what the various portfolios would have returned you over time.

 

Bottom line – the more you put in stocks, the higher return you get. With higher risk of losing your money though.

Vanguard income

Vanguard balanced Vanguard growth





Now to the second part, how much of your stock allocation should go to REITs?

First, let’s understand the nature of REITs. The returns and risk profile is somewhere in between stocks and bonds.

This means that stocks can give you a higher return over time but with higher risk. Among stocks, REITs and bonds, bonds give you the lowest return but lowest risk.

REITs place you somewhere in between. It won’t bag you a 1000% return stock, but it likely won’t cause you sleepless nights when the market falls too.

In this way, REITs can be considered a standalone class, though technically people bucket it under stocks.

For the sake of this thought experiment, let’s work with 3 asset classes, stocks, REITs and bonds for a 35 year old individual.

Based on his life stage, he would have worked for about 10 years, possibly married or going to. He also might have kids.

For a 2 asset class portfolio, an appropriate asset allocation would be 60 to 70% stocks, 30 to 40% bonds.

For a 3 asset class portfolio, I would venture to say that the appropriate allocation would be 40 to 50% stocks, 20 to 30% REITs and 30% bonds.

The stock component would give this person’s portfolio potential for capital gains.

The REIT component would give him a steady income.

And the bond component would provide diversification gains and reduce the portfolio’s overall risk.

So there we have it, a simple and understandable way to allocate your portfolio.

 

Share with us, how do you allocate your investable funds? What amount goes to stocks, bonds and REITs?

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

We accept guest posts.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.




5 things you should know about Keppel DC REIT

1
Keppel DC REIT logo

Keppel DC REIT released their second quarter 2017 financial results in July. This post is a review of their results and the top 5 things you should know from their announcement.

 

Key highlights

Distribution or dividend per unit in the first half of 2017 has improved compared to the first half of 2016, rising from 3.34 SG cents to 3.63 SG cents.

There’s been an improvement between second quarter 2017 and second quarter 2016 too.

Gearing ratio of 27.7% remains one of the lowest among Singapore REITs. The average leverage for Singapore REITs is approximately 35%.

Distribution or dividend yield of 5.56% is on the slightly lower side compared to Singapore REITs’ average of 6.2%. The lower dividend yield is due in part to price-to-book being on the higher side at around 1.2

This means that investors are possibly pricing in future growth, and many of them want to participate in it. They are therefore aggressively buying Keppel DC REIT’s shares, driving its price up.

Portfolio weighted average lease expiry (WALE) of 9.4 years is on the high side. High is good as it indicates a longer lease length of tenants and therefore security of income.

Key highlights

 

Portfolio update

Going further into the lease expiry profile of Keppel DC REIT, most of the leases are due to expire only after 2022. Only 5.1% of leased area is expiring for the remainder of 2017, with even lesser at 0.9% in 2018, before rising slightly to 2.0% and 1.9% in 2019 and 2020. It thereafter rises sharply to 13% in 2021.

It is likely that WALE for Keppel DC REIT will continue to remain high, given the length of leases signed by data centre tenants.

From the slide appendix, a lot of the tenants have signed leases of at least 3 years, some rising even to 10 years.

Portfolio update

 

Stable portfolio

Keppel DC REIT’s income continue to be generated mainly by colocation tenants.

Co-location is defined by Keppel DC REIT as follows –

“[…]typically entered into by end-clients who utilise colocation space for the installation of their servers and other mission critical IT equipment. Keppel DC REIT is
usually responsible for facilities management in respect of such colocation arrangements […]”

Of their portfolio properties, these are the tenants on a colocation scheme.

  • Keppel DC Singapore 1, 2 and 3
  • Basis Bay Data Centre in Cyberjaya, Malaysia
  • Gore Hill Data Centre in Sydney, Australia
  • Keppel DC Dublin 1 in Dublin, Ireland

Stable portfolio

Prudent capital management

On the financial side, Keppel DC REIT has a healthy 83% of borrowings which are hedged. This means that even if interest rates rise, Keppel DC REIT has locked down at least 83% of the present amount of borrowings into a fixed rate.

This 83% translates into about S$365 million of borrowings.

Presently, the average cost of debt is 2.2% per annum, one of the lowest among Singapore REITs. Despite the alternative asset class that Data Centres is, the REIT has managed to get such a low cost of borrowing and this is likely due to their strong sponsor, Keppel Corporation, and major shareholder, Temasek Holdings.

Prudent capital management

Prudent capital management (cont’d)

Lastly, the forecasted distributions or dividends up to second half 2018 from Keppel DC REIT are hedged. This means that even if the Euro, GBP and AUD depreciates and impacts the revenue that Keppel DC REIT receives in SGD, investors need not worry too much as investors are guaranteed a certain amount.

Hedging by itself is a form of insurance, but it does come with a certain cost. Keppel DC REIT is paying that small amount to ensure that investors get the dividends they deserve.

Another way Keppel DC REIT manages currency fluctuations is by borrowing in currencies that match their investments. So if there are more investments in Europe, Keppel DC REIT will seek to borrow in that currency.

These borrowings can come from European banks or from local banks like DBS, OCBC or UOB.

Prudent capital management 2


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

5 REITs with low gearing ratios

0

Why is a REIT’s gearing ratio important?

The gearing ratio for a REIT is an important indicator as to how healthy it is. Higher gearing ratios mean that the REIT is paying banks and bondholders a higher amount of interest expense, and that would mean a lesser amount of money available for distribution to you as investors.

If there’s one thing to take away from this post, a lower percentage of gearing is always better than a higher one.

Two reasons for this

  1. Interest expense is likely lower, resulting in a higher net property income margin
  2. These REITs have more debt headroom for future acquisitions compared to other REITs that have a gearing level closer to SGX’s 45% limit.




Average gearing ratio for Singapore REITs

Across the Singapore REIT market, the average gearing level is 34.6%. It differs across various sectors, with office REITs having on average the highest amount of gearing at 36.3%, followed by industrial at 35.7%, hospitality at 34.8%, healthcare at 34.1%, retail at 32.8% and data centres at 27.7%.

How to pick REITs based on gearing levels

If you are looking to pick a REIT, one way to filter out of the 37 available is to pick those that have a lower than average gearing level.

In this case, you’ll know that if interest rates, these REITs won’t get punished by the stock market for having a higher than average gearing ratio.

One thing I know is that institutional investors sometimes like to compare figures to averages. Such as year to date returns versus a past 5 year average, present P/B ratio versus past 5 years etc.

When they start comparing gearing ratios to decide which REITs to take profit on, one filter they would probably use is the individual REIT’s gearing level compared to the market.

Gearing ratio

5 REITs to look at with low gearing levels

Here are 5 REITs that have low gearing for your consideration to invest in.

  1. SPH REIT (25.6%)
  2. Keppel DC REIT (27.7%)
  3. EC World REIT (29.2%)
  4. Frasers logistics and industrial trust (29.3%)
  5. Mapletree Industrial trust (29.8%)

With the exception of EC World REIT, one look at these REITs show they also have some form of corporate governance. The sponsor is strong and reputable, and is likely to be helpful to the share price.

On a macro-basis, these REITs also operate in a decent macro environment. For example, SPH has a balance of one city centre and one suburban mall, allowing it to capture both discretionary and non-discretionary shopper trends.

Keppel DC REIT has good exposure to a fast growing data centre industry. Frasers Logistics is mainly focused in Australia where the industrial trends are healthier than in Singapore while Mapletree have a sizable industrial portfolio outside of Singapore, giving it some diversification benefit.

For more information on Singapore REITs, check out this handy table.


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

How to read a Singapore REIT’s acquisition document – Tsing Yi Case study

0

On the back of MLT’s acquisition of Tsing Yi warehouse in Hong Kong, I thought I’d do a comprehensive “How to” on understanding the announcement they put out and what it means for investors.

I will point out the implications of certain portions for investors and briefly explain how the Tsing Yi acquisition affects them. The document will be screen-shot to make it easy for us to get through it.

MLT’s acquisition announcement consisted of 23 pages. Let’s start with page 1.

In this acquisition, MLT the manager is making the announcement.

HDBS Institution Trust Services (Singapore), the “Trustee” is entering into the share purchase agreement with Mapletree Overseas Holdings (“MOHL”) for this Tsing Yi deal.




A short description of the property containing information on the address, number of storeys, years of lease left, floor area and other technical information is provided.

Tsing Yi introduction

The ownership structure is as follows

Mapletree Investments owns Mapletree Dextra which owns Mapletree Overses Holdings Ltd which owns Mapletree Titanium which owns Mapletree TY (HKSAR) which owns 30 Tsing Yi Road.

This is therefore an interested party transaction.

The total purchase consideration does not equal the property value as there are other assets and liabilities on the balance sheet of Mapletree Titanium and MTYL.

It is however genearlly quite close.

Following the transaction, the trustee will own 100% of the ordinary shares and 100% of the redeemable preference shares of Mapletree Titanium.

Tsing Yi acquisition structure

After the acquisition, Mapletree Logistics will be the new owner of Mapletree Titanium which will be the owner of Mapletree TY (HKSAR) Limited and of the property.

The property value agreed between MLT (buyer) and Mapletree Titanium (seller) is S$834.8 million.

This is a 2.4% to 3% discount to the valuer’s estimate of S$834.8 million.

The share purchase agreement outlines the conditions precedent of the transaction.

Conditions precedent is legal jargon for “what needs to be done before deal completion”.

Conditions precedent include

  • Unitholder’s approval at EGM
  • Approval by SGX for the listing and quotation of new units
  • Listing and commencement of trading of new units
  • Receipt by Trustee of the proceeds of the equity fund raising
  • Licenses, authorizations etc to be in place
  • No material damage to property
  • No compulsory acquisition of the property or any part of it
  • No statute, regulation or decision which would affect the acquisition
  • MYTL being able to show, prove and give good title to the property

Tsing Yi purchase price and conditions

The acquisition cost of S$847.6 million comprises of the total consideration (price paid to seller for the holding companies), acquisition fee and professional fees.

Collectively, they are called the “total acquisition cost”.

Tsing Yi acquisition cost

For REITs, they sometimes take acquisition fee payment in the form of units, rather than cash.

MLT has chosen to take 0.5% of the fee in units which translates to about 3.6 million units at $1.15 (the issue price per new unit).

MLT gets a cool S$4.2 million just for doing this deal! Year end bonus here I come!

In actuality, MLT should receive 1% as acquisition fee, or S$8.3 million. Half of it was received in units.

Passing mention is given to how the purchase will be financed – by equity fund raising and drawdown of loans.

SGX also requires the REIT to list out their rationale for doing the transaction.

Tsing Yi financing methods and rationale

The following lists out more reasons supporting the transaction.

How will the transaction impact MLT’s portfolio?

Note clearly that NPI yield is defined as Annualized net property income from 1 Jan 2018 to 31 Mar 2018 divided by agreed property value.

This is a forward looking metric. In place income is not being used to computer NPI yield.

MLT has taken the liberty to list out the accretion impact at a range of issue prices.

Note this are all forecasts because they are 2018 figures.

They list a range because equity market conditions can change in a few weeks or months down the road when they issue new units.

MLT makes it very clear the analysis is for ILLUSTRATIVE PURPOSES ONLY. This is because MLT is forecasting their portfolio’s DPU at the beginning of 2018, subject to a whole bunch of assumptions in note (2).

If one believes the assumptions by MLT are robust and fair, then the DPU at the beginning of 2018 is expected to be 1.887. It will be between 1.892 and 1.931 after the acquisition.

Imply: good for investors. Reality: there are so many moving parts one can only hope the transaction goes through well.

Tsing Yi portfolio impact

More reasons supporting the acquisition.

  • Increase exposure to the HK market
  • Increase occupancy rate (duh)
  • Enhance tenant diversification
  • Reduce tenant concentration risk
  • Increase free float and liquidity.

All these can also be found in the presentation slides.

Tsing Yi acquisition rationale

The equity fund raising will comprise a private placement and non-renounceable preferential offering of new units to existing unitholders.

Citigroup, DBS, HSBC are joint bookrunners. Payday for these banks!

These bookrunners will underwrite the equity fund raising.

According to SGX’s listing manual, the issue price for new units cannot be more than 10% discount to the volume-weighted average price for the full market day on which the underwriting agreement is signed.

Equity fund raising details will be announced on SGXNET.

Tsing Yi fund raising

MLT states how they will use the funds from equity fund raising.

Tsing Yi use of money from fund raisingTsing Yi pro forma financial effects

According to SGX, REITs must announce how the acquisition would have impacted their audited financial statements.

This is done via a pro-forma model.

Basically, what SGX wants is – how will your most recent audited annual financial numbers look if the acquisition (Tsing Yi in this case) were injected at the beginning of the financial year.

Let’s say a REIT’s financial year begins 1 Jan 2016 and ends 31 Dec 2016. We are now in Aug 2017. The most recent audited yearly financial numbers are for 1 Jan to 31 Dec 2016. So we have results as at 31 Dec 2016.

SGX wants to know how the 31 Dec 2016 numbers will be like if the acquisition had been completed on 1 Jan 2016.

I know MLT’s financial year does not begin on 1 Jan, but for illustration, I.e. If MLT had bought Tsing Yi at 1 Jan 2016 and held it all the way till 31 Dec 2016, how will 31 Dec 2016 distribution per unit look?

This is the gist of the section below.

On this basis, the Tsing Yi acquisition is accretive, as distribution per unit rises from 7.44 SG cents to 7.567 SG cents.

Tsing Yi pro forma distribution per unit

The Pro Forma NAV calculation is done on the same basis as above.

On this basis, NAV per unit rises from S$1.04 to 1.05. This implies there could be upward pressure on stock price as the P/NAV gap is closed over time.

Tsing Yi pro forma NAV

Legal requirements on a whitewash resolution. Not my area of expertise but I understand it as follows

MLT owns more than 50% of the target company (because MLT is owned by Mapletree Investments, and Mapletree Investments also own Mapletree Titanium (the holding company of Tsing Yi).

Since MLT will own additional shares of Mapletree Titanium, MLT is supposed to make a takeover bid.

The whitewash resolution takes MLT ‘off-the-hook’, so to speak, from being required to make a takeover bid.

Tsing Yi whitewash resolutionTsing Yi whitewash resolutionTsing Yi whitewash resolutionTsing Yi unitholders approvalTsing Yi interested person transaction

Importantly, the independent financial advisors, KPMG, gives an opinion of whether the acquisition is on normal commercial terms.

Tsing Yi comments by financial advisors

Similar to annual reports, the interests of substantial unitholders need to be declared.

In this case, none of the directors or substantial unitholders have an interest in the acquisition.

Tsing Yi declaration of interestTsing Yi declaration of interestTsing Yi further details

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

8 things to know about MLT’s Tsing Yi acquisition

0
MLT Tsing Yi acqu

Mapletree Logistics Trust’s acquisition of Tsing Yi in Hong Kong

MLT announced the acquisition of the Tsing Yi warehouse in Hong Kong yesterday. Here are a few things that investors should take note of MLT’s Tsing Yi acquisition.



Accretive Tsing Yi acquisition

The acquisition is expected to be accretive, with DPU rising from 1.887 SG cents to 1.919 SG cents.

MLT Tsing Yi acquisition DPU accretion
MLT Tsing Yi acquisition DPU accretion

The acquisition will be funded with a mix of debt and equity. MLT is combining the purchase with redemption of perpetual existing securities so the total amount of funds raised will be slightly higher.

 

Sources and uses of funds for Tsing Yi acquisition 

 Uses of funds Sources of funds
 S$838.4 million purchase consideration  Equity fundraising of S$640 million
 S$8.6 million transaction costs  Loan facilities of S$377.3 million
 S$4.2 million acquisition fee New perpetual securities of S$180 million
 S$350 million of existing perpetual securities redemption
MLT transaction financing
MLT transaction financing

Occupancy rises

Occupancy rate will increase to 95.7% from 95.5% and there will be a greater proportion of properties that are multi-tenanted in the portfolio.

This implies that future revenue growth could be higher as the leases are renewed at a hopefully higher unit rate.

MLT Enlarged portfolio
MLT Enlarged portfolio




Purchased at discount to valuation

MLT managed to get a good deal from Tsing Yi, buying the property at a roughly 2.7% discount to valuation.

MLT property valuation discount
MLT property valuation discount

Purchased higher than market yield

MLT also managed to buy Tsing Yi at a higher than market property yield.

Together with valuation being at around market, this indicates that the in place rents could be slightly higher than market.

Together with Tsing Yi committed occupancy being 100%, the REIT manager needs to ensure that when leases are expired, they will be able to re-let them at the same or higher rate to prevent NPI yield from falling.

Backing out the NPI of the property at 5.7% x 4,950 million HKD, it amounts to roughly 282 million HKD or S$48 million.

MLT NPI yield

Tsing Yi general info

Tsing Yi is presently 100% occupied, completed in 2016 and has a leasehold term of 50 years expiring in 2063. No major implications for unitholders on this front.

MLT Tsing Yi info
MLT Tsing Yi info

100 bps rise in leverage

Sharp eyed investors will notice that the leverage in the acquisition presentation slides are different from June 2017’s presentation figures. This is because the acquisition slides has adjusted for the divestment of Zama Centre and Shiroishi Centre in Japan.

Nevertheless, aggregate leverage will rise marginally to 38% from 37% post Tsing Yi’s acquisition.

Tsing Yi Leverage
Tsing Yi Leverage
Leverage at 30 June 2017
Leverage at 30 June 2017

Few tenants in Tsing Yi

Ever Gain is the biggest tenant by gross revenue, contributing 24.1% of gross rental revenue.

Tsing Yi’s occupancy is concentrated among few tenants, with 10 tenants contributing 95.5% of the gross revenue of the property.

Imply that if any one tenant leaves, especially the bigger ones like Ever Gain, Adidas or Angliss, there could be a ‘hole’ in the revenue stream unless a replacement is quickly found.

Alternatively, when one large tenant leaves, a few small replacements can be found, thereby raising the gross revenue. i.e. the total revenue from a few small tenants is more than  the revenue form the large tenant.

Tsing Yi top 10 tenants
Tsing Yi top 10 tenants

Ever Gain is a logistics service company that has been in business since 1978. There doesn’t appear to be any credit risk with this name.

Evergain background
Ever Gain background

 

Presentation slides found here





If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

3 slides you should know from CRCT’s second quarter results

0
Xizhimen CRCT
Xizhimen CRCT

Capitaland retail china trust released their quarterly results on 27 July 2017, and reception by analysts have been good. On most fronts, there has been an improvement in performance, on a portfolio aggregate basis and at the individual property.

Here are three main takeaways that investors should know from the result briefing.

Strong top line growth

Gross revenue, net property income and distributable income are all up both on a quarterly and half yearly basis.

Implies: Growth is on an uptrend since both quarterly and half yearly results have turned in well.

All properties in the portfolio except for Qibao and Wuhu registered growth in revenue, driven by strong rental reversion this quarter.

Going forward, expect revenue, net property income and distributable income to moderate slightly. This quarter’s figures at the high teens level is likely not sustainable, given it is much higher than China’s GDP growth and inflation rates.

Even if there is moderation, growth would come down to the low teens or high single digit levels.

Strong rental reversion

CRCT’s rental reversion in the recent past have shown to be a little volatile, with pockets of negative reversions seen among positive. This is the first quarter in the recent past where rental reversion has all been positive.

This indicates that the despite the poor retail environment, CRCT’s malls were able to command a good showing. The landlord, having strong bargaining power, was able to ensure that strong tenants who can pay high rents remain, while those who are weaker have to be let go.

Going forward, expect portfolio rental reversion figures to remain in the high single digit range. This will be slightly above China’s GDP growth rate of 6.5%, meaning that growth of the CRCT portfolio is likely to come in stronger than the overall country average. 

Healthy shopper traffic growth

Shopper traffic has grown both on a quarterly and half yearly basis, registering high single digit growth and continuing the trend that has been playing out over the last few quarters.

Coinciding with the positive rental reversion figures earlier reported, shoppers in China do not appear to be moderating in their desire for visiting malls.

Overall, CRCT appears to be a good counter despite the general slowdown in China’s economy. Many people are claiming that the country is on the brink of a debt induced recession, but the sentiment among consumers and shoppers appear to be brighter.

How long this will last is anyone’s guess, but we think that the high savings rate should be able to delay the recession for a while longer. However, a moderation in the rate of debt growth should come sometime soon.

In the meantime, CRCT appears to be holding up well with strong top line growth, healthy rental reversion and a decent amount of foot traffic to their malls.

CRCT is reported to be trading at a yield of 6.4% based on 30 June 2017 closing price of S$1.64. This seems to be a decent yield to be entering, providing a spread of 4.55 over 10 year Singapore government bond yields and 3.3% over the STI.

Potential target entry would be S$1.5 (which was last hit in April), giving a dividend yield of 7% which is close to what other industrial yields are producing.


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

REITs that pay out dividends frequently

0

As REIT investors, we want to continually see income and dividends being credited into our accounts. Don’t wait 6 months when these REITS provide you with a quarterly pay check.

One advantage of getting a quarterly pay check (versus semi-annual), is the impetus to be invested in the market, regardless of capital gains or losses.

Analysts have done many studies on whether market timing works, and the conclusive evidence by Schwab, NYU, and Time Magazine, to name a few, is that it doesn’t. What actually provides investors with a net positive gain in the stock market is time in the market, as proclaimed by Fidelity, AXA and Betterment.

Essentially, the authors claim show that retail and even professional institutional investors are unable to beat the market by timing it, after transaction costs are accounted for.

This means that investors are better off putting a fixed amount of money into the market over a period of time at fixed intervals. This keeps investors invested in the market, with the opportunity to ride the up waves when they come.

You may say, “I know when the up-waves are coming and I will buy the stocks before they run up”. While this sounds good in theory, and many investors are deluded into thinking they can successfully time the market, the reality is not so.

If that is truly the case, a combination of staying invested in the market + receiving regular quarterly paychecks as impetus to stay invested, is a logical move for one to reap the greatest profit.

REITs that pay dividend every quarter

  • Frasers commercial trust
  • Keppel REIT
  • Suntec REIT
  • Capitamall trust
  • Frasers Centerpoint
  • Lippo
  • Mapletree Commercial Trust
  • SPH
  • Starhill
  • AIMSAMP
  • Cache
  • ESR
  • Mapletree industrial
  • Mapletree logistics
  • Sabana
  • SoilBuild
  • Viva
  • Far East hospitality
  • OUE hospitality
  • First REIT
  • Parkway life

Want to find out more about other REITs and whether you can profit from them? Check out these 4 stocks that give you the highest dividend among Singapore REITs!

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

4 best performing dividend yield REITs

1

High dividend yield REITs

REITs are undoubtedly one of the best type of stock to buy given their high dividend yields compared to other stocks and the general stock market.

In general, REITs give about 6 to 6.5% dividend yield on average compared to 2.5% for the Nikko AM STI ETF and 2 to 3% for general stocks.

The reason REITs can give such a good dividend yield is because the SGX requires REITs to give out at least 90% of their distributable income to shareholders. Furthermore, most properties owned by REITs are revenue generating, with high occupancy and a good income stream.

Here are 5 REITs that offer one of the highest dividend yields in the stock market.

Lippo Malls

Dividend yield is 8.6%, the highest in the Singapore REIT sector.

Lippo Mall Trust has 27 properties around Indonesia, in the cities of Sumatra, Java, Bali and Sulawesi. The total value of the portfolio assets is S$1.9 billion, with 3,429 tenants, 850,000 sqm of total lettable area and 94.3% occupancy.

A majority of their tenants re in the F&B sector, followed by Fashion and then supermarket/hypermarket.

AIMSAMP

Dividend yield is presently at 8.3%, presenting very strong income producing potential backed by well performing assets. Portfolio occupancy stood at 91%.

AIMS AMP Capital Industrial REIT is a REIT listed on the SGX. Their aim is to invest in high quality income producing industrial properties in Asia Pacific.

Their assets consist of cargo lift warehouses, ramp up warehouses, manufacturing properties, business parks, high tech factories and general industrial assets.

Properties are concentrated in the Eastern, Western and Northern parts of Singapore.

Cache

Cache logistics trust is giving 8% yield. The third highest in the Singapore REIT sector.

Cache Logistics Trust invests in quality income-producing industrial real estate used mainly for logistics. They however also have other types of real estate assets in Asia Pacific. The REIT holds 19 logistics warehouse properties in established logistics clusters in Singapore, Australia and China.

Most of the properties are in Singapore (11), followed by Australia (7) and China (1). Portfolio occupancy is healthy at 98.3%, presenting a strong and secure income profile.

IREIT

IREIT is the first non-industrial REIT that has a high dividend yield of 7.8%. The REIT’s assets are located in key German cities of Berlin, Bonn, Darmstat, Munster and Concor.

Occupancy is high at 98.7%, though the high leverage of 41.3% will be of some concern to shareholders in the even there is some financial distress if interest rates rise.

PropertyInvestSG provides a summary table of REITs and related information for your analysis.


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

Introduction to Fundplaces and drinks meetup

0

FundPlaces is one of Singapore’s newest real estate tech company. They offer investors the chance to invest in institutional grade real estate and in exchange receive something called “Tiles” which the company says is a digital token on a blockchain.

I met up with them during their drinks session and got to ask a few questions on how exactly it works.

My thoughts are that the idea is nothing new – pooling money from individual or corporate investors and buying a property. FundPlaces will then manage the property and maximize its revenue. FundPlaces then takes a certain percentage of the revenue produced by the property and distribute the rest to investors.

The innovative thing here is that investors are issued Tiles, and that the information about Tiles is kept on their private Blockchain. In other crowdfunding schemes, investors simply have a claim on the cash flow of the underlying asset, which may be loans, receivables or company profits. That claim essentially is a document that resides with the company doing the crowdfunding.

In FundPlace’s case, the data is all logged into the Blockchain which makes it tamper free and saves on a lot of time and cost with administrating for thousands of investors.

Fundplace’s explanation of Tiles

Once an investor gets a Tile, he or she can choose to sell it to someone else. This is the cool thing – that there is a secondary marketplace for Tiles. This has not been done anywhere else in Singapore, with respect to property ownership.

However, I still had some questions that remain unanswered.

  • What if I can’t find someone else to buy my Tile? FundPlaces didn’t answer this. They assumed there will always be someone willing to buy a Tile.
  • Where’s the platform to sell a Tile? There isn’t anywhere on their website for me to presently do so, though I understand it may not be built at such an early stage. Even then, the building of a platform to trade secondary Tiles won’t be easy.

The founding team was really helpful to answer my questions, and I found out they were still in talks with MAS on ironing out the details of what exactly a Tile is. Is it an equity or debt instrument, or is it something totally new altogether?

My gut feel is that it could actually fall into one of the two categories that are regulated by MAS, though that remains to be seen. I personally hope there will be some regulation in the sector, but that it should not be so overbearing. This will help enterprising individuals and corporations take advantage of what is happening at the technology front to improve the situation in other non-tech sectors and raise the level of efficiency and productivity.

If you’re an enterprising individual with connections, FundPlaces is also welcoming submission of projects. They will then market the project on their platform to their subscriber base.

 

Let us know your thoughts!

We hate spam as much as you do. Feel free to opt out anytime.

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

Choosing your first REIT to invest in

0

With S$10,000 to invest in the stock market, which REIT should you pick to get started with? How do you get started? How do you choose a REIT to invest in? What methods, details and things should you look out for?

This post will provide you with beginner, intermediate and advanced considerations before investing in any one of the 37 REITs listed on the SGX.

Let’s get started with the ‘beginner’ considerations

What do you know?

REITs are simply an instrument used to channel revenue from property into the hands of shareholders, you. These are the main classes of real estate assets

  • Office (in the CBD, suburban areas etc)
  • Retail (shopping malls)
  • Industrial (warehouses, tin sheds, logistics)
  • Residential (not so common in Singapore)
  • Hospitality (serviced apartments, hotels)
  • Healthcare (hospitals, aged homes)
  • Data centre

Ask yourself this question – which are you most familiar with?

Invest in the REIT that has properties in the category that you are most familiar with. You won’t have to do much reading up and google-fu to understand a new sector, and like Warren Buffet, you invest in what you understand.

How do you know what assets a REIT invests in? The name of the REIT usually tells you what they invest in.

REIT sector
REIT sector

If you can’t tell from the name – a quick Google search of the REIT will show it to you.

You will usually be able to tell from the name.

Dividend yields

REITs are well known to be dividend cash machines. Their average yield is about 6 to 6.5%. What does this mean?

If you had invested S$10,000 in a REIT that gives you a 6% dividend yield, you get an allowance of $600 a year (S$10,000 times 6%). This translates into about S$50 a month. Seems measly? You would have gotten only S$25 a month if you had invested in the STI ETF.

A safe rule of thumb is to invest in REITs that provide you a dividend yield of 6%.

Now where do you get this information?

Investor education tools and blogs

SGX Stockfacts is your friend

There are also plenty of blogs and courses that provide good information and armchair commentary on REITs.

Historical price trend

One of the most objective measures of how a REIT performs is seen in their stock price.

Some may argue that historical trends don’t tell much about the future. I partly agree.

Would you invest in a stock that displays this historical trend?

Highly unlikely, unless one reads more about the stock. FYI, the stock is Sabana REIT.

If you believe that the market is right, historical stock prices can show how well or not the REIT has been managed.

In the case above, Sabana REIT was indeed not well managed and it was shown in the share price.

You would save yourself a lot of headache if you first took a look at the price movement.

What does the REIT own?

This information can be found in the home page of REITs, usually under the”Portfolio” section.

Like below.

This tells you the name of the properties, and usually the type of asset (office, retail mall, industrial building etc.)

Be careful with overseas properties

As a beginner investor, stay away from REITs that hold overseas properties. Why?

With overseas properties, a REIT has to have much more intensive management because of foreign exchange risk. A mall in China receives revenue in RMB, but this has to be converted to SGD to be paid to unitholders. There is a risk a shareholder in Singapore receives less SGD because the SGD has depreciated relative to RMB.

While the REIT manager can hedge their foreign currency exposure, it is not so straightforward and the REIT manager needs to have the capability and skill to carry out the function.

With overseas properties, the REIT manager who is always based in Singapore (SGX requires the CEO and majority of the team to be based in Singapore) need to travel to the country. This will incur airfares, travel and accommodation cost which will eat into the amount of money that can be distributed to shareholders. REITs that hold Singapore properties incur less of such costs, because the properties are well, located in the country.

Examples of REITs with overseas properties include BHG Retail REIT (China), EC World REIT (China), Frasers Logistics and Industrial Trust (Australia), Starhill Global REIT (Malaysia, China), Capitaland Retail China Trust (China).

As an investor, you also are not able to easily see overseas properties physically, unless you want to visit them while on holiday.

Which brings me to the last point for the beginner section…

Take a walk, literally

Real estate investing is a very local game. This means that location plays a very big role in the success of failure of a building.

As an investor, you certainly want to know what type of location the properties are in, whether they be in the city centre or a suburban/neighbourhood location.

If the assets are located in Singapore, one should be able to understand the location much easier because it is in the country. However, if the properties are overseas, it will take at least 2-3 trips before one becomes familiar with the ‘lay of the land’.

With the above, you should be able to narrow down from a list of 37 REITs to a few on what you’re comfortable investing in. No performance can be guaranteed, but the above will provide you a good framework to make sound investments.

On to considerations for a more intermediate investor.

Investor relations section

For the more adventurous investor, the investor relations section of REITs provide one of the best source of information for a REIT.

SGX mandates every REIT to clearly show the investor relations link on their website’s home page.

You can see the following for two examples.

Information in the Investor Relations section are usually

  • Quarterly results presentations
  • Financial statements
  • Research coverage
  • Annual reports
  • Newsroom announcements and press releases

With time, one can go through these material because they are an objective source of information on how the REIT is performing.

What exactly to look for in these reports and presentations is an entirely blog post for itself. Suffice to say, this is where one can get ‘primary’ data, as opposed to ‘secondary’ research by analysts and researchers.

Who’s who on the Board of Directors

The composition of the Board of Directors (BOD) is important because it shows how experienced the company is.

Information can always be found in “The Manager” section of most REIT websites.

What you want to look for are Boards that have directors with varied experience.

Past experience and companies worked for are a good indication of how much the directors know.

However, directors that have many seats on other boards do not necessarily translate to better performance compared with directors who have less representation on other boards. Everyone has 24 hours, and more board representations means the director has to allocate his time and energy to more directorship demands.

Companies with strong sponsors (e.g. Mapletree, Ascendas, Capitaland) usually have Board of Directors that are very reputable and deep in terms of experience, education and work exposure.

Who’s managing the REIT

Another level of consideration on how the REIT is managed is in the staff strength of the immediate team.

Similar to the Board of Directors, the capability of the REIT management team is crucial to the success of the REIT.

Staff strength can be determined by educational experience, past careers, number of staff managing the REIT and staff turnover etc.

Compared to the Board of Directors, the REIT managers have a greater impact on how well the REIT performs because this team is the one that is directly involved in the day to day operations of the REIT.

Day to day operations include leasing, marketing, engineering, deal sourcing/business development, accounting, tax, finance, investor relations, compliance etc.

REITs are usually quite lean in terms of staff strength, so REITs that have a strong sponsor usually benefit most, as the REIT management team can tap on the Group/Parent’s expertise.

Equity research reports

In addition to, SGX stockfacts which provides factual information regarding REITs, investors can go to sginvestor.io for a collection of equity research reports.

What’s the difference?

Sginvestor.io collates the research reports by analysts and publishes them. If you’re not on the mailing list of these analysts, you aren’t able to get them. The website must have some way of obtaining these reports on a timely basis so it saves investors the hassle of subscribing to each analyst.

Reports are usually a 2-3min read and provide investors with a buy, hold or sell recommendation.

I don’t recommend anyone act upon the recommendations at face value without further understanding of the stock, but this is a good place to start.

Navigate to the S-REITs section at SGinvestors.io homepage
REITs sorted in alphabetical order

Trends in the sector

As part of the effort to understand the REIT, one cannot forget the broader picture.

For example, if you buy a retail REIT with malls in Singapore, do you know how shopping malls in Singapore are doing generally? Are you aware that consumer shopping preferences may be changing?

If you buy a healthcare REIT, are you aware that there is an ageing population (good for the REIT in general)?

If you buy a data centre REIT, do you know if the data storage, cloud computing trend is going to continue? Will there be a major technological breakthrough that may impact the REIT (in both good and bad ways?)

While developments in the broader environment don’t always trickle down to impact the REIT performance, i.e. a REIT can still thrive in a lacklustre and challenging environment, it makes it all the much harder.

Just take a look at how industrial REITs like Sabana, AIMS AMP, Cache Logistics with many warehouses and ‘tin-shed’l like assets have been impacted since 2013 when the Singapore government decided to move lower-value added industrial activity to Malaysia. On the other hand, Ascendas REIT has held fairly well because their assets composed of business parks, which house higher-value added industrial activity like research and tech manufacturing.

Poor performing AIMS AMP REIT
Poor performing cache logistics trust

Ascendas REIT share price holding up decently

Price to book values

Similar to distribution yield, the price to book value is a financial metric that tells investors how much they are paying for a dollar of the company

P/B values below 1 indicate potential undervalue, while those above 1 indicate potential overvalue.

However, for the advanced reader, it is not so straightforward. A value above 1 may mean the market is anticipating book value (the denominator) to increase in future, that’s why they are willing to pay a higher share price now, in anticipation that the book value will rise.

Book value rises for a few reasons such as less debt in the balance sheet, increase in valuation of properties, acquisitions of good performing assets at a notable discount to valuation etc.

One example of a stock with a high P/B value is Keppel DC REIT. I suspect the market is putting faith in the manager in its ability to increase the book value of the company. Add to that, the data centre is sector is in a growth phase.

Cornerstone investors

Presence of large institutional investors in a REIT signal confidence to the market by their mere being around.

The impact extends to being a ‘big brother’ who usually can be counted to be there in times of need and network effects that can assist the REIT manager in their day to day operations.

How to identify the presence of large investors?

Simply google “Temasek” + “REIT”.

Why Temasek? Unlike GIC, Temasek can invest in Singapore listed stocks. While some may question the ability of Temasek to provide returns, it can’t be doubted that they are a strong institutional investor with large amounts of cash to spare. Corporate governance of the company can be considered very strong.

Quick search shows that Temasek has significant stakes in Keppel, Capitaland, Ascendas Singbridge and Mapletree.

Temasek’s stake in Ascendas-Singbridge and Mapletree
Temasek’s stake in Capitaland, and their REITs
Teamsek’s stake in Mapletree

Attend AGMs

There’s no better way to get information (and free food) than to attend publicly listed companies’ AGM.

Unfortunately, free food is a thing of the past as companies become smarter and know that shareholders are there just for the free food. You’ll be happy if you get free drinks at AGMs these days.

Singapore Association of the Institute of Chartered Secretaries and Administrators (SAICSA) provides a calendar showing when companies are holding their AGM. It’s not the prettiest nor most advanced, with it being held in Google Calendar, but it works.

AGMs gives investors the chance to quiz, no wait, question, no wait, dialogue with the REIT managers and Board of Directors. At the same time, there are other investors who are present who can raise interesting viewpoints and questions for you to consider.

Overall, it is likely to be a good learning experience.

If you don’t want to wait till AGMs before asking questions, you can try a hack by emailing the Investor Relations manager of the REITs with your questions. They are usually responsive as this involves unitholder/public money. SGX and MAS are very protective of investors, so the REIT manager are usually on their toes.

Quality of sponsor

Sponsor quality is important because sponsors are a source of expertise, staff, provide a pipeline property and provide brand name backing to the REIT.

Choose REITs with sponsors that are well-known, reputable, and have a track record of building and managing their own properties.

For example, when SPH set up their REIT, I heard from industry insiders that they tapped people in teams such as corporate development, finance, marketing from SPH’s parent group. These newly tapped staff simply needed to learn the rules and regulations of managing REITs and were armed with knowledge of the properties that were already being managed by SPH.

Reputable sponsors like Capitaland and Mapletree already have a track record of building, managing, acquiring and disposing of assets, so it is not difficult for them to set up a REIT with staff who have background knowledge.

Contrast this with overseas sponsors such as EC World, BHG and IREIT. These sponsors are based overseas and while their staff are familiar with the properties, they aren’t necessarily willing to relocate to Singapore. Furthermore, SGX requires that the CEO’s of REITs must be based in Singapore for corporate governance reasons.

In the case of BHG REIT, the sponsor is a retailer, much like Robinsons or Isetan and not a developer. While there are advantages conferred to being an expert retailer, they may not have such strong developer experience compared to Capitaland.

Leverage or gearing ratio

Leverage or gearing ratio is defined as the amount of debt over the total value of properties in the REIT’s portfolio. This number is easily obtainable in quarterly results briefings as disclosure is mandated by SGX.

The terms leverage or gearing are used interchangeably and mean the same thing.

Gearing ratios are approximately 35 to 36% on average across all REITs in Singapore.

Higher gearing ratios are not good for the REITs because it means they have more debt, which means more interest payment.

Lower gearing ratios are good because there is room for the REIT manager to use debt or loans in future acquisitions. Furthermore, if interest rates rise, there will be a smaller impact of higher interest payments compared with another REIT that has a high gearing ratio.

SPH REIT has the lowest gearing ratio of all Singapore REITs at about 25%.

First REIT’s gearing ratio

Suntec REIT’s gearing or leverage ratio

Cost of debt

Cost of debt refers to the average interest rate the REIT is paying to parties lending it money. These parties can be banks or those who bought the bonds sold by the REIT.

This information can be easily found in quarterly reports because it is mandated to be released by SGX.

Keppel, as a company with good credit quality, can achieve low interest rates in the low 2% range.

Keppel REIT’s cost of debt, alternatively called all-in interest rate

 Keppel DC REIT’s cost of debt

REITs with riskier credit profiles such as those with overseas assets naturally attract a higher cost of debt.

EC World REIT is one example where the average cost of debt is 5.4%. This is to compensate the lenders for the risk of assets being in China, foreign exchange risk, and lower credit quality of the borrower (EC World REIT) etc.

Why did the sponsor set up the REIT?

This may be a little difficult to find out but the reasons and motive behind setting up a REIT could impact the REIT’s performance.

Is the sponsor seeking to go asset light and using the REIT as a vehicle to dispose of assets at a high price so the parent can recognize big gains on its balance sheet? Is the sponsor genuinely interested to grow the REIT to a big size and is willing to help it during the gestation period?

One case that comes to mind is Keppel Corps. sale of Ocean Financial Centre to Keppel REIT at a high price with income support.

In essence, Keppel REIT paid a lofty amount of money for an asset that was worth less than what they paid. On the flip side, Keppel REIT was assured a certain amount of money/rental revenue for a period of time, guaranteed by Keppel Corp.

Is the deal fair? Ethical? Difficult to say as it’s not illegal in the eyes of SGX or MAS. It however raises some ethical and conflict-of-interest questions on the relationship between the sponsor and REIT.

Rental reversion

Rental reversion is a forward looking metric that provides investors with a clue to how the top line revenue will grow or decline in future.

There is no industry standard on how to calculate rental reversion, but the general idea is to find out how much more or less new tenants are paying compared to those who have vacated the space.

Positive and higher rental reversions are good while negative figures signal future impact on the portfolio’s revenue.

Accretive or dilutive investments

REITs generally should do accretive investments, though there is no stipulation by SGX to say so.

Accretive investments mean that, after the acquisition is completed, the distribution per unit rises. A dilutive investment, when completed, causes distribution per unit to fall.

Let’s see an example of an accretive, dilutive and questionable investment.

CRCT’s acquisiton of Galleria in Chengdu is an accretive investment because the DPU after acquisition is higher than before.

There aren’t a lot of dilutive investments done because for fear of shareholder backlash, but Sabana REIT’s acquisition of 47 Changi South is one example.

DPU dropped to 6.67 or 6.79 cents per unit after the acquisition. Ignore scenario 1 & 2 which are just internal calculations for the REIT manager.

Another example is the acquisition of 107 Eunos Ave 3.

Ascott serviced residence REIT’s acquisition of Ascott Orchard Singapore and two serviced residence properties in Germany is also highly dilutive.

Fraser Logistics and Industrial Trust’s acquisition of 7 properties (4 completed and 3 under development) is a little trickier because they are packaged together.

As a package, the acquisitions are accretive to DPU.

But, if only the completed properties were bought, the acquisition would be dilutive to DPU.

Heavy emphasis on “if only the completed properties were bought”.

Think about t.

7 properties are injected into FLT’s portfolio. By itself, the completed properties aren’t DPU accretive. The development properties are not contributing to revenue, as they aren’t completed and there are no paying tenants yet.

This means that revenue is going to take a hit in the time between the acquisition to when the development properties are completed.

Remember that the forecast is based on the rents that can be commanded by the development properties. If say, 1 or 2 years down the road the developments are completed but FLT either can’t get tenants, or they can’t get high paying tenants, the REIT’s revenue, and you the shareholder is going to suffer.

Nothing is really wrong here, since SGX did not say REITs must do accretive investments. But it appears that FLT is using the development properties to paper over the dilutiveness of the acquisition of the completed properties.

Remember also, the rents being commanded by the development properties are only a forecast. It may or may not materialize.

If you see the margin of improvement in DPU uplift for the whole package, it is only 5.38 – 5.33 = 0.05 cents or S$0.0005. It’s not very big and if things go wrong, the package acquisition will be dilutive.

We’ll wait and see what rents the development properties really command when they are completed.

This is why it’s important to dig into the announcements to see what really happens in acquisitions. This is especially so for multi-property deals.

Generally, information on acquisitions are usually found in the “Announcement” section under investor relations heading. The documents are usually lengthy and technical because the information contained is required by SGX.

 

Conclusion

So there you have it, the whole lot of considerations that I hope is helpful before you invest in a REIT.

Let us know in the comments box if you have specific questions

 

In the next edition, the following considerations will be added on. Look out for them!

Who are the tenants

Distribution waivers

RNAV or DCF valuation

Unencumbered assets

Income support lines in the financial statement

Myth: payment of management fees in units vs cash

Remuneration structure

Credit ratings

NPI margin

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

10 REITs that give you a fantastic yearly return

0
REITs listed over past 5 years
REITs listed over past 5 years

According to SGX’s market summary report, these are the 10 REITs that would have given you a great return since the beginning of 2017.

  • Ascendas Hospitality trust (23.1)
  • Far East Hospitality Trust (15.5)
  • Mapletree GCT (22.1)
  • SPH REIT (8.6)
  • OUE Hospitality trust (19.1)
  • Soilbuild (19.4)
  • Viva (29.6)
  • OUE Commercial REIT (10.2)
  • Frasers hospitality (17.2)
  • IREIT (15.8)

Accordingly SGX has also listed out the REITs and Stapled Trusts that listed over the past 5 years.

REITs listed over past 5 years
REITs listed over past 5 years

REITs were first listed in Singapore in 2002 and now make up about 10% of the STI constituent stocks and three of the five STI reserve stocks.

For those who prefer ‘passive’ investing in ETFs, SGX has two REIT ETFs listed on it. They are the Philip SGX APAC Dividend Leaders REIT ETF and NikkoAM-StraitsTrading Asia ex Japan REIT ETF which listed on Oct 2016 and Mar 2017 respectively.

One great thing about investing in REITs is that the distribution or dividend yield of about 6% is twice as much as that of the STI ETF, or the average of all stocks in the STI index. This is why investors like the REIT asset class so much – for it’s passive income nature, and the fact that returns are backed by an income producing physical asset. This is unlike other stocks where the cashflow is produced by assets that are intangible.

The SGX report provides a great guide on how to calculate distribution and distribution yield for those new to investing in REITs.

Essentially, distributions are shown on an annual basis and the calculation as follows.

For example, OUE hospitality trust report 12 months of distribution

2QFY17 0.0121 cents per unit
1QFY17 0.0130 cents per unit
4QFY16 0.0136 cents per unit
3QFY16 0.0123 cents per unit
Total 0.0510 cents per unit
Distribution yield 0.0510 cents per unit divided by unit price of 0.745 cents = 6.8%

Overall

Singapore’s REIT market has come a long way since 2002, with institutional investment activity in the sector increasing. SGX reports that between April and July 2017, there was a net positive inflow of $134 million for those months.

Greater activity by institutions is likely to benefit retail investors due to better price discovery, lower bid-ask spreads, better corporate governance (as institutional investors pressure REITs to ‘behave’ themselves) and attractiveness of other companies to list their REITs on the SGX.

Check out some other articles that list 21 REITs that provide yields of between 6 to 8%, and an update of the REIT sector as of 21 August 2017.

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

OUE C-REIT’s S$150m of 3.03% notes

0

OUE C-REIT Successfully Prices Inaugural S$150 million 3.03% Fixed Rate Notes Due 2020

Key Highlights

  • Final order book in excess of S$400 million, supported primarily by institutional
    investors
  • Diversification of funding sources towards unsecured borrowings in line with
    proactive capital management strategy

On 24 Aug 2017, OUE Commercial REIT announced that they successfully priced S$150 million 3.03% fixed rate notes due 2020 under its S$1.5 billion Multicurrency Debt Issuance Programme.
The Notes, which bear interest at a fixed rate of 3.03% payable semi-annually in arrear, are expected to be issued on 5 September 2017 and mature on 5 September 2020.

Ms Tan Shu Lin, Chief Executive Officer of the Manager, said, “We are pleased to see such robust demand for OUE C-REIT’s maiden Singapore dollar notes issuance, supported by high quality institutional investors. The net proceeds will be largely used to refinance existing borrowings, as well as fund any capital expenditure or working capital requirements. The strong interest garnered is testament to the confidence investors have in the quality of OUE C-REIT’s portfolio, as well as the solid operational performance the Manager has demonstrated since listing.

With the successful fund-raising, the Manager has diversified OUE C-REIT’s sources of funding and improved its financial flexibility with the move towards unsecured borrowings, in line with its proactive capital management strategy.”

Capitaland + Alibaba + Lazada

0

Very interesting tie up between Singapore + China i.e. Capitaland + Alibaba + Lazada.

This marks the start of a journey between these top players as they try to navigate the challenging world of e-commerce and retail.

Key points

  • E-commerce is being embraced as an enabler rather than a disruptor to retail business. Capitaland is at the forefront of such thinking.
  • Capitaland will manager part of Alibaba’s HQ in Shanghai. The retail podium will represent the future of modern retail offering a seamless O2O experience.
  • An online mall will be set up on Lazada to offer CAPL’s retailers an online avenue to grow. Collection points will be at Plaza Singapura and Bugis_
  • Successful implementation will mean a new source of revenue for Capitaland.

What happened?

  • CAPL has advanced into the omni-channel retail strategy with two strategic alliances with Alibaba and Lazada.
  • Alibaba’s new Shanghai HQ comprises 4 office towers and a retail podium. CAPL will manage one office tower and the retail podium
  • In Singapore, CAPL will offer their retailers an avenue to sell their products on Lazada. Click-and-collect points will be available for consumers to collect or return their products at Plaza Singapura and Bugis+.

CAPL is the first developer to be this forward thinking, trumping the efforts of others in the market and region.

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

The co-working juggernaut marches on

0

Fresh from a $500 million funding round, WeWork was just reported to have received a generous $4.4 billion investment from SoftBank Group’s Vision Fund.

In Singapore, WeWork doesn’t have any presence yet, but they are coming. The Republic of Singapore and Japan are reportedly in their sights, and are trying to fight off competitors JustCo and UrWork.

The co working operator has more than 150,000 members across 160 locations in 16 countries. With this fresh round of funding, SoftBank Group’s Ronald D. Fisher and Mark Schwartz will be part of the Board of Directors.

Part of the $4.4 billion cash pile will go to shareholders who want to cash out, and some will go to previously announced projects in China and Japan. WeWork is aggressively expanding to grab a major pie in the sharing economy for white collar workers. If office trends are anything to go by, the co-working phenomenon is set to grow, with law firms and banks, traditionally the bastion of rigid and uptight work practices, beginning to adopt the practice of letting some of their workers from home or a shared office space.

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.

 

Hot property coming up in District 9 (Orchard)

0
New futura

New Futura – Upcoming hot property in District 9

District 9 is no longer the frozen district. Analysts are saying the Singapore property market has reached a cyclical bottom and buyers are returning to the market, going by the sales that have occurred in the rest of the island.

A notable new development is New Futura built by City Developments (CDL) and designed by ADDP. Located in the Leonie Hill district, New Futura is a condominium that caters to investors who want their investment to have both rental and capital gains potential.

Prices in D9 have hovered on average at the $2,000 psf mark for the last few years, but a buying revival is seeing that figure slowly inch upward.

What’s so special about district 9 that makes New Futura a notable investment?

District 9 is located in the southern part of Singapore (pink portion in the map) which is the central part of Singapore. In this area, there are numerous shopping malls and entertainment venues. This is where the Orchard road belt of Singapore is and where tourists from all over the world, and notably the Chinese, have been coming to.

Some say the shopping belt is losing its luster to other locations such as Shanghai, Paris and Italy, but it continues to hold its own in this part of South East Asia, trumping other locations like Thailand, Malaysia, Indonesia and Vietnam.

Propertyguru notes that New Futura is launching to improved market sentiment, and the development will contain 2 towers with a total of 124 units.

The site was previously bought by CDL together with El-Ad Group for SGD 287 million (or SGD 1,179 per sq ft), but the partner subsequently sold its stake to CDL.

Wong Xian Yang, Head of Research & Consultancy at OrangeTee, said not much information is currently available about New Futura, but estimates average selling prices to be upwards of $2,700 psf.

The supply of new developments in the central part of Singapore are limited, considering that most new condominiums completed in the last few years have been in the suburan parts of Singapore. This tight supply lends itself to a good investment as landlords will have power in terms of dictating the rents they command from expatriates who view the area as a prime location to stay.

If you want to find out more about the development, contact us here.

 


If you find the above interesting and would like to get started on investing in REITs, we would love to be with you on the journey. One place you can get started on finding out more is our REIT data tracker and list of property and REIT events.

We would love to assist if you are on the lookout to buy or sell property. If you know of anyone who is interested to do so, please refer them to us. We have an attractive referral program where you share in the fees or profits of the transaction.

PropertyInvestSG is on the lookout for successful individuals who have experience in property or REIT investments to interview. If you are one or know of someone like this, speak with us today.

Be nice and say hi, or simply drop us a message at the message box in the bottom right corner of this page.