What are factors to look out for when investing in reits?

From my somehow contrarian perspective I would like to consider not

buying single REITs, given the difficulty of retail investors (and even experts?)

to predict single REIT performances, but instead to consider investing

into REIT ETFs (globally, U.S. and Singapore).

For Singpore there a 3 different REIT ETFs.

Singapore REIT distributions are relatively high on a global view.

Hi Rasyad

I attended the REITs Symposium organised by Shareinvestor over the weekend which featured 20 over REITs companies setting up booths with their Investor Relations and higher management there to answer questions of investors. The link below contains metrics in considering REITs which is also printed in one of the collaterals handed out.

https://einvesthub.btinvest.com.sg/investing-tr...

So a couple of other metrics which I overheard others asking were

Loans

When are the loans due? If they are due in coming years, REITs sometimes would conduct rights issue (issue more shares at a discount to the share price) to raise money to repay their debt - this will in turn dillute the shares in the market (more shares = less dividend / share) which will push down the share price

Future acquisitions / Sponsors

Sponsors are the main companies that own this REIT i.e. Capitaland Commercial Trust's sponsor = Capitaland. Frasers Centrepoint Trust sponsor = Frasers Property

So what does this tell you? The strength of sponsors is also crucial because it can help to boost up REIT portfolios. The soon-to-be opened Funan which has had quite huge hypes is under Capitaland Mall Trust. The recently Jewel is owned by Capitaland but has yet to be included into CMT yet so in the future there could be possibility of it being included in CMT's portfolio if the performance of the properties in the portfolio aren't very charming (Hence this is also why CMT is on my watchlist)

Cyclical Sectors

Interestingly enough, REITs also have cycles and this can be more clearly seen in Hospitality REITs because the hospitality industry tend to fair better on even years (2016, 2018) due to events such as Air Show etc. So this year being an odd year, would Singapore still have enough to shine.

Occupancy Rates

An empty space is revenue not gained. Therefore this is also another metric that you may wish to seek when you evaluate a REIT. Funan has 98% of it's office space sold and with the inclusion of the Retail segment, the entire property is set to open with 90% occupancy and with the new concept shops, it does offer a different experience. I can't wait to see how will this affect the share price.

WALE - Weighted Average Lease Expiry

This shows how long their average tenants tease is going to expire. The sooner it is, means that they would have to find new tenants.

And aside from all these, you have your:

Gearing Ratio (how much of the company is funded by debt - interest rates rising environment = cash flow goes to repaying interest = lesser payouts to shareholders)

Net Asset Value (how much is the entire asset of the company being worth right now. Usually high NAV companies have a higher chance of selling of their properties due to the undervalueness)

Geographical Location (Currency fluctuations, loss in FX conversions, prone to natural disasters, initiatives / regulations by government)

This is a couple that I can think of right now. If there's anymore, I'll just add on accordingly :) Hope you're clearer about REITs now! And echoing Thaddeus, do tune in to SeedlyTV live and you can post your questions too, the guest speaker is a real expert on REITs

Hi Rasyad, Seedly will be having EP05 of SeedlyTV tmrw and it will be on REITs! You can tune in tmrw to find out more! You can find out more here!

There are few important factors to consider before investing in REITS. These are:

1. Type of Industry

2. Dividend Yield

3. Property Yield

4. Gearing Ratio

5. P/B Ratio