An article on REITs by Colin Tan.

A reader, Ray, brought to my attention an article in TODAY. This was in the comments section of a recent blog post. To read the comments, see:

REITs with pedigree are safer? - Comments.

A few lines from the article concerned:

... it must be said that REIT managers have mostly had to acquire their properties on the higher side of valuations if only because it is the only way they can get the owners to sell it to them.

A REIT can get a property on the cheap only when the owner is ignorant of its true market value or if it is a forced sale - many investors still do not realise this. At the same time, the REIT manager can only justify the acquisition to shareholders if it is yield-accretive. Otherwise, the REIT is better off not doing anything.

... As more properties in Singapore are acquired by the REITs, there will be fewer available on the market. As such, the asking price by the remaining landlords can only get higher. Given more time, it will become clear, if it is not so now, that the current model is not sustainable in the long run.

Read full article here.

S-REITs are getting more attention over time. That is a good thing, is it not?

REITs with pedigree are safer?

Many have told me that I am playing with fire investing in the REITs that I do and by now, regular readers would know how I would reply to them.

Some who do invest in REITs tell me that they only invest in "blue chip" REITs because these have strong "blue chip" sponsors and more likely to survive a downturn. They would still avoid the REITs I am invested in. I don't have a problem with that.

I just read this in The EDGE:

"Moody’s Investors Service said it has a stable outlook for Singapore Real-Estate Investment Trusts. However, stress tests show CapitaMall Trust, Suntec REIT, Mapletree Logistics Trust, and K-REIT run the most risk of exceeding Moody’s expected leverage parameters in the event of a downward revaluation of properties, the ratings company said in a statement, reported Bloomberg."

Some say just invest in all things blue chips and we should be safe. However, the blue chips card could be played so much that it could turn black. Blue could and some did become blue black.

Oh dear, I just remember that I have vested interest in Suntec REIT and K-REIT too!

Moody’s says stable outlook for Singapore REITs, notes risks
Wednesday, 23 November 2011

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