General S-REITs Discussion Thread

[limster]

banks up REITs chui

buy high sell low?

dyodd

FLCT $1.02, looking good..... not buying more, just hoping to breakeven

My average is $1.0163. almost break even liao.

congrats breakeven!

 

[elvintay07]

The perceived risks of RTS and SEZ are looming

Haha! Bird talk la this one,

 

[Iyarash11]

FLCT $1.02, looking good..... not buying more, just hoping to breakeven


congrats breakeven!

hold till cloud open see moon bright

 

[limster]

FLCT steady at $1.03 today.

The most interesting is Capitaland 9CI and CICT C38U. I have been adding a bit of both the last few weeks but price has shot up since then.

There are rumours of merger/consolidation with Mapletree, maybe some people have got more info than others.....

 

[Euqorab]

FLCT steady at $1.03 today.

The most interesting is Capitaland 9CI and CICT C38U. I have been adding a bit of both the last few weeks but price has shot up since then.

There are rumours of merger/consolidation with Mapletree, maybe some people have got more info than others.....

The merger is the main parents and not the REITs?

I hold both CLI and CICT, thinking how it will affect me, like do I need to top up money to for merger of CLI and Mapletree main company?

 

[Lao_Tiko]

FLCT steady at $1.03 today.

The most interesting is Capitaland 9CI and CICT C38U. I have been adding a bit of both the last few weeks but price has shot up since then.

There are rumours of merger/consolidation with Mapletree, maybe some people have got more info than others.....

Hope that it is true

 

[elvintay07]

The perceived risks of RTS and SEZ are looming

All the bird talk about Singapore malls no business when RTS is ready really makes me laugh.

https://www.straitstimes.com/asia/s...strand-thousands-at-land-checkpoints-in-johor

 

[Euqorab]

Haha! Bird talk la this one,

That why I say perceived

 

[Euqorab]

All the bird talk about Singapore malls no business when RTS is ready really makes me laugh.

https://www.straitstimes.com/asia/s...strand-thousands-at-land-checkpoints-in-johor

Actually when rts open, the Johor terminal side also not well connected and the traffic will be disastrous that people might just only revert to BSI

 

[elvintay07]

That is why I buy REITs at their low first. Buffett says be greedy when people are fearful.

 

[Nipponho]

I got a question about time decay of leasehold of commercial assets. None of the analysts or experts or influenzers talked about this.

Owning reits is similar to owning a portion of diversified portfolio. The fund pays 60% of properties in cash while the other 40% is on loan. Each year, after they pay instalment (principal + interest), they will distribute 5% in the form of DPU. If we hold the reits for 20 years, we expect to recover our costs, and we should still own the reit. But the reit has 20 years of time decay and the valuation of the properties they hold will drop significantly. While we are collecting dividends each year, the value of the holding properties gradually drops and this could be reflected in the NAV and share price.

Same logic. If we buy 99 year leasehold condo on loan, we collect rent and use it to pay instalments. In the end, we get to keep the accumulated rents that we collected over the years and decades, but our condo will be returned to government.

So the returns that people talked about eg. 5%, has it already taken into account time decay of lease?

 

[DevilPlate]

I got a question about time decay of leasehold of commercial assets. None of the analysts or experts or influenzers talked about this.

Owning reits is similar to owning a portion of diversified portfolio. The fund pays 60% of properties in cash while the other 40% is on loan. Each year, after they pay instalment (principal + interest), they will distribute 5% in the form of DPU. If we hold the reits for 20 years, we expect to recover our costs, and we should still own the reit. But the reit has 20 years of time decay and the valuation of the properties they hold will drop significantly. While we are collecting dividends each year, the value of the holding properties gradually drops and this could be reflected in the NAV and share price.

Same logic. If we buy 99 year leasehold condo on loan, we collect rent and use it to pay instalments. In the end, we get to keep the accumulated rents that we collected over the years and decades, but our condo will be returned to government.

So the returns that people talked about eg. 5%, has it already taken into account time decay of lease?

industrial reits (with short lease properties) will sometimes divest old properties and then buy newer ones.

Another way is simply buy Reits etf.
Still worried? Then buy bonds/ssb etc

 

[thretiredDad]

I got a question about time decay of leasehold of commercial assets. None of the analysts or experts or influenzers talked about this.

Owning reits is similar to owning a portion of diversified portfolio. The fund pays 60% of properties in cash while the other 40% is on loan. Each year, after they pay instalment (principal + interest), they will distribute 5% in the form of DPU. If we hold the reits for 20 years, we expect to recover our costs, and we should still own the reit. But the reit has 20 years of time decay and the valuation of the properties they hold will drop significantly. While we are collecting dividends each year, the value of the holding properties gradually drops and this could be reflected in the NAV and share price.

Same logic. If we buy 99 year leasehold condo on loan, we collect rent and use it to pay instalments. In the end, we get to keep the accumulated rents that we collected over the years and decades, but our condo will be returned to government.

So the returns that people talked about eg. 5%, has it already taken into account time decay of lease?

You’re mixing up dividend yield with return of capital.

A REIT paying 5% today does not mean you “get your money back in 20 years and then own it for free”. A REIT is not a bond or a fixed-maturity asset.

REITs distribute what they earn. That 5% yield is based on rental income, financing cost, property values, interest rates, asset quality, manager decisions, dilution and rights issues — all of which change over time. There is no promise that it will keep paying 5% on your original purchase price forever.

Even if a REIT pays you 5% for 20 years, it does not mean your capital is preserved.

Example:
Buy $10,000 of a REIT at 5% yield.

Over 20 years you collect $10,000 in dividends.

But if the unit price falls to $2,000, your total wealth is $12,000, not $20,000. You did not “get your money back and then get the REIT for free”.

The market already prices in lease decay, refinancing risk and asset quality through the unit price and yield. That’s why some REITs trade at 4% and others at 9%.

So the real issue is not whether lease decay exists — it does — but whether the REIT can maintain earnings and asset value over time through asset recycling, acquisitions and management.

Unless you are talking about a bond.

Bonds have a fixed maturity and return of principal.

REITs do not. A REIT is an equity in a property business, not a loan with a redemption date.

 

[limster]

for retail/hospitality REITs, you also have the 'problem' of needing to renew the premises. if you are a small REIT, one property out of action/partially out of action for 1 year can leave a gap in earnings, and not easy for market to 'predict' when this will occur. For the REITs I own, the one I remember was causeway point when it was renovated.

 

[Nipponho]

@retiredDad, thanks for your reply. No I did not mix up return of capital with dividends. I fully understand your example. The capital portion is not guaranteed. I was depicting a scenario with assumption that unit price remains constant. Based on market info, those big big blue chip reits not only unit price did not drop, but increased instead over 20 years period. That is how some people who subscribed to maple IPO, logically will eventually get their units for free because of the dividends they collected over the years. But if based on your numerical example where unit price dropped, total wealth at end of 20 years is only 12000, then annual ROI is very bad only 1%.

I was puzzled how the unit price can increase over ten years. Even though they will divest and acquire along the way, but from the moment a property is being acquired, time decay will start. So the only possible explanation is their aggregate divestment gains and appreciation far exceeds time decay. If without divestment gains and appreciation, the unit price logically should slowly drop till zero.

If market already priced in lease decay into yields and unit price, then we can totally ignore this matter. Question is was it already priced in like what you said? If u look at condo market in the 90s, the market totally ignores time decay and participants assume everything as freehold. Market did not price in lease decay. It is only in recent years that people start to become more aware of leasehold time decay because of the reminder from Lawrence wong. So nowadays we see price difference between older condo and newer and freeholds as markets start to price in remaining lease length.

 

[Nipponho]

for retail/hospitality REITs, you also have the 'problem' of needing to renew the premises. if you are a small REIT, one property out of action/partially out of action for 1 year can leave a gap in earnings, and not easy for market to 'predict' when this will occur. For the REITs I own, the one I remember was causeway point when it was renovated.

not only small ones. They say capitaland india and china cannot rent out, affect earnings and dpu. Mapletree pan asia also. These are not small ones.

 

[Nipponho]

industrial reits (with short lease properties) will sometimes divest old properties and then buy newer ones.

Another way is simply buy Reits etf.
Still worried? Then buy bonds/ssb etc

It seems like all reits do so, not only industrial ones. Even reits with foreign freehold properties like Elite also got capital recycle.

ETF price is also derived from the aggregate prices of the basket. Whatever affects individual reits like dilution or accretive or vacancy will also affect ETF, no escape.

 

[thretiredDad]

It seems like all reits do so, not only industrial ones. Even reits with foreign freehold properties like Elite also got capital recycle.

ETF price is also derived from the aggregate prices of the basket. Whatever affects individual reits like dilution or accretive or vacancy will also affect ETF, no escape.

Buy REITs etf, no need worry about placement or right issue

 

[thretiredDad]

It seems like all reits do so, not only industrial ones. Even reits with foreign freehold properties like Elite also got capital recycle.

ETF price is also derived from the aggregate prices of the basket. Whatever affects individual reits like dilution or accretive or vacancy will also affect ETF, no escape.

even the pioneer grand master REITs dividend investor has to diverisfy away from REITs to maintain his portfolio return

if he has strictly stick to reits and trust since 2019, what will be his return

 

[limster]

even the pioneer grand master REITs dividend investor has to diverisfy away from REITs to maintain his portfolio return

if he has strictly stick to reits and trust since 2019, what will be his return

Too many local investors make the mistake thinking that dividend investing equals REIT investing and got burned.

There are so many other good dividend stocks on SGX that are not REITs. Some I am currently vested in are:

DBS/OCBC/UOB
Comfort Delgro
Sembcorp
St Engr
Capland Invest
etc

Another lesson to learn is the DWs last portfolio of only 6 stocks is way too concentrated and exposed to non-systemic risk. DW's previous portoflio where he overconcentrated on REITs was also risky but fortunately did not blow up and he exited profitably.

At best, individual stocks should be part of your 'satellite' portfolio while the core is ETFs. I also need to learn this lesson as I also like to buy individual stocks in addition to ETF.

https://forums.hardwarezone.com.sg/...chit-chat-thread-part-2.5285485/post-99399354

My post from Jan 2016. He reduced his concentration on REITs long ago.....