The REIT Myth Busted
The big news recently revolves around KREIT’s handling of the OFC purchase. The ramification of that is a lot of the blogging community starts talking that its about time MAS took notice of it.
My take? About time. I first got to know about this when my friend passed me this damning analysis from an independent analysis on the REIT scene in Singapore. Back then (3 years ago), the analyst raised the same thing about Singapore REITs
- Trustee Fees, Management Fees and Sales Fees means that it doesn’t matter how much cash flow the REIT produce for investors, they still make money.
- The sponsors have a great incentive to dump assets in their REITs. It’s a win win for them.
Ms Teh Hooi Leng had an article today in Business Times that took a look at all cash calls of the REITs listed in Singapore. For the full article you can read them for free at night at the Business Times [Article here >>]
Here’s the table in the article
Related posts:
- The REIT Myth Busted 2
- ARA Asset Management reveals fees are all REIT managers care about
- Global REIT Boom Ends here?
- National Health Investors’ REIT draws comparison to First REIT in Singapore
- First REIT gets land lease extension for MRCCC
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Comments
Hi Francis, there are those older REITs that did well.
What Ms Teh want to say is that cash calls show bad money management for REITs but in my opinion the REITs have only 2 ways of gaining more avenue for cash: debts and cash calls.
Non-REITs can choose not to pay out such a high dividend payout and use the cash to pay down debts or do asset enhancement, REITs cannot.
This situation should have been better regulated by MAS. It is like the insurance industry taking advantage of policy holders. They can say you earn reasonable bonus but in effect we are peeved because that is not how to align the interests of policy holders. Same in this situation.
Thanks for the reply.. in that case, which 3-4 Reits in your portfolio tracker would you consider best the the newbie investor and which 3-4 reits would you advise to avoid.. going forward from the present economic environment? Don’t worry, I won’t blame you for anything.. just wanted your thoughts on this! Thanks..
Its an interesting article – and it is quite clear that a simple buy-and-hold strategy for passive income for REITs isn’t going to work.
And I do agree with Drizzt’s point on the avenues available for REITs to raise cash – but there is a third option – that is to sell existing assets to buy other assets in a DPU-accretive manner. Existing assets can also be enhanced to improve property yield hence increasing its valuation.
I wonder if the same analysis can be repeated, but all adjusted for nett zero cash flow. And how would the capital gains for each REIT would be like.
An example would be that the investor sells its nil-paid rights awarded to him/her and uses the capital to re-invest into the mother shares. Same goes for the dividends.
Or another method would be to assume a “return OF capital” on all rights issues and do a cash flow analysis on that instead…
Wonder how the results would turn out…
hi Francis, that is difficult to provide since i do not know how much risk u can stomach. the better reits would be plife and first reit due to the nature of assets being defensive. frasers centerpoint, ascendas reit, MLT and MIT are not bad as well.
[...] The fall out from the K-REIT’s handling of the OFC purchase continues. There are a lot of debates on the blogosphere regarding the article published by Ms Teh previously. [Article here >>] [...]
[...] actual article that was published in last Saturday’s Business Times comes with a table that gave the breakdown of all the dividends that were paid out by Singapore REITs, as well as the [...]
But all in all, wouldn’t high yield reits help mitigate any price fall in it’s stock price and also benefit from potential rises of it’s stock prices compared to another without dividend yield? As can be seen from the table, nearly 3/4 did result in net gains.. What is your opinion? Thanks.