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Higher rents to benefit industrial properties S-REITs.

Thursday, April 7, 2011

In the last one month, I bought more units in industrial properties S-REITs.

1. I became an investor in Cambridge Industrial Trust again. Read blog post here.

2. I bought more units of AIMS AMP Capital Industrial REIT. See latest blog post here.

3. I became an investor in Cache Logistics Trust. Read blog post here.

4. I became an investor in Sabana REIT too. Read blog post here.

I believe that all these REITs are fundamentally strong and if we are investing for income, these could be very rewarding in the next two years. Distribution yields range from 8.15% for Cache Logistics Trust to 9.76% for AIMS AMP Capital Industrial REIT at current prices. Attractive? Quite.

DTZ Research said that rents for industrial space in Singapore are rising. Although average rent grew 3% quarter on quarter, current average rent is still 17.1% below the peak of 2008.


"DTZ added that industrial rents are anticipated to continue to increase. That is because the annual average potential supply of 7.5 million square feet between 2011 and 2013 is significantly lower than the historical 10-year average demand of 9.3 million square feet." CNA, 07 April 2011.


If we are trying to beat inflation and protect our wealth from shrinking, industrial properties S-REITs are definitely worth considering. I have felt this way for more than a year and I continue to believe in their fundamentals.

8 comments:

WK said...

dun u think gearing of over 30% is consider high?

AK71 said...

Hi WK,

I don't think so. As long as the cost of debt is low and the credit environment is benign, 30 to 35% gearing for REITs is manageable.

If it bothers you sufficiently, then, you might want to look at Cache Logistics Trust and Sabana REIT, both of which have gearing at less than 30%.

It might interest you to know the gearing levels for Mapletree Industrial REIT and Mapletree Logistics Trust are both closer to 40% than 35%. I am not vested in these. ;)

Createwealth8888 said...

The ability of re-financing is the key to survival during financial crisis. Ah Gong has deep pocket.

AK71 said...

Hi CW,

Yes, REITs with blue chip sponsors have that advantage. :)

JW said...

AK,

do take note that industrial reits and properties generally have higher yields because of a much shorter leasehold, as compared to commercial or residential.

The higher yield is to compensate for this shorter leasehold.

AK71 said...

Hi JW,

Yes, I am aware of this and have made the same point in various other blog posts and in replies to readers' comments. :)

sanmuzi said...

Hi,AK71,

It seems that you did not mention Ascendas India Trust which is also an industrial REIT? Can you share your view on this counter please? I am a newbie and i have learned alot from your blog. Thank you very much for your kindness and generosity!

AK71 said...

Hi sanmuzi,

I did not mention Ascendas India Trust because I don't know anything about it. ;)

Also, this blog post is more on industrial properties in Singapore.

I am glad you have found my blog helpful and I look forward to hearing from you again. :)

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