4th July 2019
The first reit to list in Singapore was CapitaMall Trust on 17th July 2002.
Since then we have weathered through various cyclical downturns with the Sub-Prime crisis giving worst hit to the REITs.
An investor who has held since IPO would have received $1.37 dividend and enjoy $1.75 of capital gain. That's a 321% gain or 18.9% on a annual basis for the last 17 years. An investment of $1000 at IPO will worth $3210.
The story would be different for other REITs such as Sabana REIT. IPO at $1.05, after a collection of $0.5425 ( adjusted for rights ), Sabana is trading at $0.46. An investor would have suffered a losses of 4.7% for these 9 years. An investment of $1000 will worth $970, which is a far cry from $1700 ( CapitaMall's 9 years average returns )
So I will be sharing on my observations of REITs all these years.
1) Does interest rate really matters ?
Well, Analysts always call for Underweight when FED raised interest rates and vice versa.
However there are some REITs, that is still able to grow their Distribution Per Unit (DPU) every year. Eg Fraser Centrepoint Trust. So a well managed REIT should be able to beat the odds to deliver value for unit holders.
My take: Doesn't really matter in the long term. There will be volatile movement in the short term, but in the long run, long term investment is the winning odds.
2) Does a strong sponsor matters for investors ?
Yes. REIT with a strong sponsor will inject mature assets into the REIT which is yield accretive. This provide a pipeline of assets for future growth. However, we have witnessed REITs without sponsors or smaller sponsor suffering in the long run. Eg Allco Reit. Impending refinancing risk declined after Allco Reit was ‘de-linked’ from Allco Finance Group. Allco REIT was eventually bought over by Fraser Centrepoint. At an IPO of $1, Allco REIT was trading around 9 cents at its lowest point in 2009. With Fraser coming in, Allco Reit is now renamed as Fraser Commercial Trust trading at $1.69 at post-consolidation ratio of 5 into 1 or $0.338 pre-consolidated price. An investor will still see losses after all these years.
My take: A good sponsor is very important. It really make a difference during financial crisis.
3) Script dividend vs Cash
Of course it matters. Your "cash" in script will earn you future dividend whereas cash will be sitting in banks with lower returns unless you have use for the cash. Using the cash to buy more shares wont make sense as there will be transaction cost involved. Also REIT may give discount in the price during the issue of script dividend.
My take: Thou there will be odd lots, but being a long term investor , I will definitely choose script dividend over cash.
The first reit to list in Singapore was CapitaMall Trust on 17th July 2002.
Since then we have weathered through various cyclical downturns with the Sub-Prime crisis giving worst hit to the REITs.
An investor who has held since IPO would have received $1.37 dividend and enjoy $1.75 of capital gain. That's a 321% gain or 18.9% on a annual basis for the last 17 years. An investment of $1000 at IPO will worth $3210.
The story would be different for other REITs such as Sabana REIT. IPO at $1.05, after a collection of $0.5425 ( adjusted for rights ), Sabana is trading at $0.46. An investor would have suffered a losses of 4.7% for these 9 years. An investment of $1000 will worth $970, which is a far cry from $1700 ( CapitaMall's 9 years average returns )
So I will be sharing on my observations of REITs all these years.
1) Does interest rate really matters ?
Well, Analysts always call for Underweight when FED raised interest rates and vice versa.
However there are some REITs, that is still able to grow their Distribution Per Unit (DPU) every year. Eg Fraser Centrepoint Trust. So a well managed REIT should be able to beat the odds to deliver value for unit holders.
My take: Doesn't really matter in the long term. There will be volatile movement in the short term, but in the long run, long term investment is the winning odds.
2) Does a strong sponsor matters for investors ?
Yes. REIT with a strong sponsor will inject mature assets into the REIT which is yield accretive. This provide a pipeline of assets for future growth. However, we have witnessed REITs without sponsors or smaller sponsor suffering in the long run. Eg Allco Reit. Impending refinancing risk declined after Allco Reit was ‘de-linked’ from Allco Finance Group. Allco REIT was eventually bought over by Fraser Centrepoint. At an IPO of $1, Allco REIT was trading around 9 cents at its lowest point in 2009. With Fraser coming in, Allco Reit is now renamed as Fraser Commercial Trust trading at $1.69 at post-consolidation ratio of 5 into 1 or $0.338 pre-consolidated price. An investor will still see losses after all these years.
My take: A good sponsor is very important. It really make a difference during financial crisis.
3) Script dividend vs Cash
Of course it matters. Your "cash" in script will earn you future dividend whereas cash will be sitting in banks with lower returns unless you have use for the cash. Using the cash to buy more shares wont make sense as there will be transaction cost involved. Also REIT may give discount in the price during the issue of script dividend.
My take: Thou there will be odd lots, but being a long term investor , I will definitely choose script dividend over cash.
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