Asked by Anonymous
Asked on 07 May 2019
Should I be picking on some of the REITS like FIRST , CapitaLand Trusts, Mapletree trust or I should just go for the Lion-Philips S-REITs ETF ? As I’m someone who don’t have a lot of capital and someone starting the investment journey. What are the recommended REITs I should go for if I’m picking my own ?
08 May 2019
Both Jonathon and Vineeta has listed down a long list of REITS, pretty sure you're slightly overwhelmed.
Perhaps instead of advising you what REIT to choose, here are various considerations when choosing one and perhaps armed with this knowledge, you are able to better make your own decision on which REIT to select!
When one purchases a REIT, in fact any stock/share, one wants 2 things.
The former is achieved through finding an asset that would constantly appreciate as well whereas the latter is through having a consistent + stable + growing Cashflow.
The points mentioned below are not exhaustive to each category and may affect the other category to a certain extent. But all in all, these are what a REIT should practise.
Retail | Hospitality REITs: Location with high traffic flows -- Demand brings about Supply etc.
Commercial REITs: Location that is easily accessible, CBD area / near wide range of amenities
2) Land tenure
Having a freehold land would allow one to hold the asset indefinitely until a buyer comes along with the right price.
What's most important is the ability of REITs that are able to take the above 2 factors into account and purchase / dispose a property at an attractive price.
1) Occupancy Rates
Given how REITs stands for Real Estate Investment Trusts, which means its revolving around Real Estate (which derives from the term Realty), take-up rate of the real estate is one of the major deciding factor in investing in REITs. What does take-up rate give you? It gives you the stability of Cash-flow.
2) Weighted Average Lease Expiry (WALE)
Aside from the Occupancy Rates, WALE is important as it shows how long does tenants have before their lease expires. This gives a rough indication to REIT holders on the stability of cashflow as well.
Did up an infographic on the various forms of REITs available in Singapore and how they rank on the Stability of Cashflows and their rental agreement terms.
Hope that now you're armed with this knowledge, you would be able to identify REITs that are the "cream of the crop" within each sector!
I'll suggest avoiding the reit etfs. Doesn't make sense to pay management fees and get a lower dividend yield.
For me I'll look to any of the mapletree reits, capitaland issued reits, Frasers logistics and industrial, AIMS APAC. SPH reit as well as they seem to be finally looking to expand their portfolio. Unfortunately, these are currently trading above their nav now and not really a good time to enter. If you are not currently vested, look to hold cash while waiting for an opportunity. Or consider doing a small monthly dca to start getting vested. I'm currently doing this with Mapletree Logistics as I think they still have a small upside to get to. But please do your own due diligence first
08 May 2019
08 May 2019