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Property vs Leveraged REIT?

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Old 19-03-2019, 02:28 PM   #16
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Those are not BBG tickers. I tried Googling them, never even heard of those indices, some of whom have zero volume. Whos their issuer and/or manager?

Why not pick a more recognized name like S&P Singapore REIT Index or FTSE ST Real Estate Investment Trusts Index?

Hi SB, a few indices that you can compare with STI Total Return:

S REIT 20 Index :
REIT2.SI
RE2TR.SI (Total Return)

REIT Index :
REIT.SI
REITR.SI (Total Return)

I performed a very rudimentary comparison using SGX web site :
https://www2.sgx.com/indices

I compared STI and the commonly used SREIT 20 index for the past 5 years, WITHOUT considering dividend.

S REIT 20 : 23.77%
STI : 2.78 %


Thanks !
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Old 19-03-2019, 08:32 PM   #17
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Hi SB, a few indices that you can compare with STI Total Return:
[...]

I compared STI and the commonly used SREIT 20 index for the past 5 years, WITHOUT considering dividend.

S REIT 20 : 23.77%
STI : 2.78 %
Cheers mate, this is stuff I can use. (Don't worry SB, he's not trying to pull a fast one; those are Reuters tickers, I can grab them off Eikon.)

Anyway, slightly annoyingly I can only get total-return data back to about 2016, but here's what I have. I think the upshot is you're right, but most of the outperformance was driven by a 10% spike in REITs over the last six months that wasn't matched by the broad equity market. I don't think that's enough to hang a thesis on.

Update: no, I still don't get it. The top 10 holdings for the SREIT and the Reuters index are the same, in slightly different orders: CapCom, CapMall, Ascendas, Mapletree, Suntec REIT... and if I look at them using the TRTR tool (Reuters equivalent of TRA) they seem about the same.

I still think that you can't hang an investment thesis on the recent outperformance of REITs over the last six months, but I will give you that the total returns of REITs aren't as bad as my original chart made them look.

Anyway, here's the chart that I have; you can see the big spike in REITs (the orange line) starting in October.


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Old 19-03-2019, 09:34 PM   #18
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Cheers mate, this is stuff I can use. (Don't worry SB, he's not trying to pull a fast one; those are Reuters tickers, I can grab them off Eikon.)

Anyway, slightly annoyingly I can only get total-return data back to about 2016, but here's what I have. I think the upshot is you're right, but most of the outperformance was driven by a 10% spike in REITs over the last six months that wasn't matched by the broad equity market. I don't think that's enough to hang a thesis on.

Update: no, I still don't get it. The top 10 holdings for the SREIT and the Reuters index are the same, in slightly different orders: CapCom, CapMall, Ascendas, Mapletree, Suntec REIT... and if I look at them using the TRTR tool (Reuters equivalent of TRA) they seem about the same.

I still think that you can't hang an investment thesis on the recent outperformance of REITs over the last six months, but I will give you that the total returns of REITs aren't as bad as my original chart made them look.

Anyway, here's the chart that I have; you can see the big spike in REITs (the orange line) starting in October.

Got it. Different analyst is using different benchmark, there don't seems to be a de facto REIT index, example : Top 20 REIT performance is much more better than REIT index.

Anyway, the point I am trying to say is contrary to what you and BBCWatcher thought, REIT - especially S REIT - can form a cornerstone of your retirement portfolio, complimenting the Global Index.
The safeguarding feature of REIT structure (segregation of trustee and REIT manager), regulation of gearing ratio (max 45%), reputable government linked manager (Mapletree, Capitaland, Ascendas) their low cost of fund (Temasek is the major shareholder) and compounding dividend re-investment over the long term, is very attractive.
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Old 20-03-2019, 12:46 AM   #19
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The safeguarding feature of REIT structure (segregation of trustee and REIT manager), regulation of gearing ratio (max 45%), reputable government linked manager (Mapletree, Capitaland, Ascendas) their low cost of fund (Temasek is the major shareholder) and compounding dividend re-investment over the long term, is very attractive.
The things you're pointing out are independent of "real estate as an asset class", though. The things you're mentioning are all to do with the vehicle you invest through, and they don't make much difference to the actual returns.

For example:
  • All ETFs have (or at least should have) that segregation of trustee and fund manager. It's not just a REIT thing.
  • A "government-linked asset manager" doesn't mean they'll be any good. Real estate isn't magically worth more just because the government owns it, and buying something just because you think it has the government's stamp of approval... not a great idea.
  • Having Temasek on your shareholder register doesn't mean anything. Ask circa-2007 Merrill Lynch how that went for them;
  • Compounding dividend reinvestment is something you can do yourself.

If you're going to put something into your portfolio, the things you need to ask yourself are "does this thing deliver better returns, have low volatility, and/or have low correlation to the things I already have in my portfolio"?

S-REIT returns seem pretty highly correlated to the returns of Singaporean equities at large. Buying a lump of S-REITs is basically like buying a lump of Singaporean equities.
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Old 20-03-2019, 08:19 AM   #20
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S-REIT returns seem pretty highly correlated to the returns of Singaporean equities at large. Buying a lump of S-REITs is basically like buying a lump of Singaporean equities.
There’s a reason for that: the Straits Times Index of 30 Singapore listed stocks is very real estate heavy compared to other stock markets. When you’re buying ES3 or G3B (or the U.S. listed EWS for U.S. persons who want to overweight Singapore listed stocks — all 3 of you ), you’re already investing in real estate in a major dollop.

I don’t think there’s any reason whatsoever to overweight real estate when investing, except for your own personal medium-term (or longer) occupancy. And there’s absolutely no danger in Singapore that you’ll be underweighted in real estate. Sometimes I wonder if there’s any business activity at all in Singapore that isn’t real estate or closely real estate-linked.
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Old 20-03-2019, 10:45 AM   #21
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There’s a reason for that: the Straits Times Index of 30 Singapore listed stocks is very real estate heavy compared to other stock markets. When you’re buying ES3 or G3B (or the U.S. listed EWS for U.S. persons who want to overweight Singapore listed stocks — all 3 of you ), you’re already investing in real estate in a major dollop.

I don’t think there’s any reason whatsoever to overweight real estate when investing, except for your own personal medium-term (or longer) occupancy. And there’s absolutely no danger in Singapore that you’ll be underweighted in real estate. Sometimes I wonder if there’s any business activity at all in Singapore that isn’t real estate or closely real estate-linked.
Singapore is a real estate country. Market force.
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Old 20-03-2019, 11:14 AM   #22
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There’s a reason for that: the Straits Times Index of 30 Singapore listed stocks is very real estate heavy compared to other stock markets. When you’re buying ES3 or G3B (or the U.S. listed EWS for U.S. persons who want to overweight Singapore listed stocks — all 3 of you ), you’re already investing in real estate in a major dollop.

I don’t think there’s any reason whatsoever to overweight real estate when investing, except for your own personal medium-term (or longer) occupancy. And there’s absolutely no danger in Singapore that you’ll be underweighted in real estate. Sometimes I wonder if there’s any business activity at all in Singapore that isn’t real estate or closely real estate-linked.
BBCWatcher, ST, please take a look at S REIT performance :

https://fifthperson.com/top-10-singa...rom-their-ipo/

Those blue-chip reits are able to give you close to 10% CAGR.
Ascendas and Capitamall IPO in 2002 (17 years in running now), I don't have Bloomberg or Reuters at hand, but I am betting they performed better than STI since 2002.

UPDATE: ES3 happens to IPO at 2002 too, and their annualized return is 6.92% since inception
Source :
https://www.spdrs.com.sg/etf/fund/sp...x-etf-ES3.html

Last edited by pmstudent; 20-03-2019 at 11:22 AM..
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Old 20-03-2019, 12:28 PM   #23
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Ok this is very interesting so I couldn't help myself. This is a comparison between (from top):

1. STI Index
2. FTSE Straits Times All-Shares Index
3. FTSE Singapore REIT Index

Time Period is from Jan 2005 - today.

The REIT index completely outshone the other two, double the returns (prolly due to dividends). Interesting it started outperforming via price too starting in 2012.

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Old 20-03-2019, 12:58 PM   #24
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Ok this is very interesting so I couldn't help myself. This is a comparison between (from top):

1. STI Index
2. FTSE Straits Times All-Shares Index
3. FTSE Singapore REIT Index

Time Period is from Jan 2005 - today.

The REIT index completely outshone the other two, double the returns (prolly due to dividends). Interesting it started outperforming via price too starting in 2012.

SB, thanks for proving my point with data.
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Old 20-03-2019, 02:01 PM   #25
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I can do more extensive studies, just lemme know data point and time period.
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Old 20-03-2019, 02:25 PM   #26
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I adopt a balanced view but personally I prefer REITs.

1. Property - Not always good. E.g. For HDB, got to bear in mind the owner might not be able to get permission from HDB to rent out the flat at all, due to restrictions and quota. Currently there is a block quota and neighbourhood quota - once either of the limit is hit, rental will not be possible at all. This typically happens in estates such as Sengkang and Punggol where a lot of couples have upgraded to condo in other areas and want to rent out their HDB.

2. REITs - Not always good. Like buying a physical property, we need to choose the correct REITs as well. E.g. of Good REIT. Suntec...during IPO (in 2002?) was S$1, fall to around 50c during GFC and now back to around S$1.90. Along the way collected appx 8 to 10c a year so technically this is already free.
E.g. of Bad REIT - Allco, MacArthur (Long ago)....to recent times Sabana, LippoMalls, ....

Leveraged REITs basically just amplifies the "pros" and "cons" of the underlying REIT.
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Old 20-03-2019, 03:55 PM   #27
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BBCWatcher, ST, please take a look at S REIT performance :

https://fifthperson.com/top-10-singa...rom-their-ipo/

Those blue-chip reits are able to give you close to 10% CAGR.
Ascendas and Capitamall IPO in 2002 (17 years in running now), I don't have Bloomberg or Reuters at hand, but I am betting they performed better than STI since 2002.

UPDATE: ES3 happens to IPO at 2002 too, and their annualized return is 6.92% since inception
Source :
https://www.spdrs.com.sg/etf/fund/sp...x-etf-ES3.html
U expect SREIT will deliver the same result in the next 15 years?
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Old 20-03-2019, 04:09 PM   #28
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U expect SREIT will deliver the same result in the next 15 years?
Look, as SpeedingBullet showed in Bloomberg chart, from the beginning until now, SREIT return is almost 2X of STI.

On what basis we think STI will outperform SREIT for the next 15 years ?

We can only rely on data, and 15-17 is the maximum timeline we can get.
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Old 20-03-2019, 04:39 PM   #29
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U expect SREIT will deliver the same result in the next 15 years?
Past performance is not indicative of future results.

Look, as SpeedingBullet showed in Bloomberg chart, from the beginning until now, SREIT return is almost 2X of STI.

On what basis we think STI will outperform SREIT for the next 15 years ?

We can only rely on data, and 15-17 is the maximum timeline we can get.
Let me rerun my data to see if my STI's TRA is fully captured vis-a-vis FTSE ST REIT Index. Can't be too sure but I'm confident the results speak for itself.
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Old 20-03-2019, 08:01 PM   #30
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Unless you have good reason to believe otherwise, people would expect the trend to continue.
So you have any good reason to believe otherwise that SREIT will not deliver same result in next 15 years vs STI?
Percisely, the only available data (15 years) pointing shows that Sreit is more superior than STI, there is nothing suggesting otherwise.
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