Important facts regarding Singapore REITs

| June 22, 2013 | 0 Comments

singapore reit investment Within the last two years, the Singapore REIT industry has performed quite well as compared to other similar financial products. There are many reasons as to why this has happened. Two of the most pertinent factors related to the popularity of Singapore REITs are that they provide significantly stable yield as well as liquidity, which is more favorable than what an investor would hope to typically gain by investing directly into real estate.

Understanding the nature of REITs

In essence, REITs provide benefits as well as the risks that an investor would face after placing his or her money in a combination of real estate and equities instruments. Within the short term time period, REITs will provide a performance similar to that of equities while in the long term, they are seen to match the benefits and risks associated with investing directly within the real estate market.

However, Singapore REITs have not always been as popular as they now appear to be. During the global financial crisis in 2008-09, most REITs were unable to properly re-finance and improve their balance sheets. The inability to remove large capital expenditures from its balance sheet prevents them from keeping their debt and leverage ratio low. For REITs, it is important to maintain a stable debt-to-assets ratio. As a result of this inability to re-finance and get a lower debt-to-assets ratio, during the global financial crisis, REITs around the world suffered, as can be seen from the FTSE REIT Index, which recorded a 75 percent drop.

Investing in Singapore REITs

Since the market is doing quite well, investments in Singapore REITs continue to grow. There are some considerations that investors have to take in order to ensure that their investment grows significantly.

First of all, it is a good idea to check out the REIT portfolio itself. This includes taking a look at quality as well as the location of the property assets. Investors also need to consider the trade mix in addition to tenant quality and occupancy rates. In terms of investment, it is always wise to analyze as deeply as possible.

Secondly, the quality of the REIT manager also comes into question, for the manager should be capable enough to grow the distributable income per unit (DPU) at a consistent rate. An REIT’s DPU is impacted by acquisitions as well as the selling of assets within the portfolio. When considering the performance of an REIT manager, it is a good idea to consider any and all asset enhancement initiatives that a manager may be using to increase the value of the REIT portfolio.

Category: REITs

About the Author ()

John Tan has been Vice President of BlueTrust Investments Corporation for 6 years since the mid-90’s. He has since moved on, to be a professional full-time trader.

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