General S-REITs Discussion Thread

[d5dude]

Just DCA into reits etf.

CFA hit a new low

Right now, banks are offering 2yr fixed mortgage rates at 3.2% which is very low and weird imo.
Even if mortgage rates stay high at 3.5-4%, there will be vy little impact as our stress test is already at 3.5% before rates shot up. We need to see mortgage rates go >5% for an extended period of time to see a meaningful correction of >10% imo OR unemployment rate >5%

*It is increasingly difficult to see a big crash of >10% especially in OCR region where most people buy for ownstay and after soooooo many rounds of CMs.

However, prices can stay stagnant for 5-10 years before another run up again.

Reits are not a good substitute for residential property (investment) because the vast majority of reits are commercial, the market dynamics are totally different. This is why there's been a massive divergence in performance (both rents and price) since covid.

 

[d5dude]

why it dosnt make sense?

interest rate goes up, dividend yield has to go up to maintain the same risk premium, so prices has to go down.

another way to look at it is the discounted value. higher interst rate = lower present value = lower stock price.

I think this is only part of the story, the other problem is reits tend to be highly levered, higher interest rates = higher funding cost = lower earnings.

 

[sohguanh]

Not sure what u mean by relatively OK when im seeing CLR etf (without Link reit) has been dropping since i started buying earlier this year LOL

REIT just like stock can do shorting and/or contra trading In such current situation players are out in play they have zero intention to keep the shares. Go check time and sales before 9am , 1pm , 5pm so many Auction type transaction. No monies pay up broker sell at whoever willing to pay and I am one of the beneficiary which I so surprised at first as I put in quite low limit price bid overnight.

 

[Mephist0pheLes]

I think this is only part of the story, the other problem is reits tend to be highly levered, higher interest rates = higher funding cost = lower earnings.

Yes, that too.

So from a risk perspective, present value perspective and debt cost perspective, they all point to lower reit price when interest rate increase.

 

[revhappy]

Reits are not a good substitute for residential property (investment) because the vast majority of reits are commercial, the market dynamics are totally different. This is why there's been a massive divergence in performance (both rents and price) since covid.

Have commercial rents not gone up inline with residential rents?

 

[d5dude]

Have commercial rents not gone up inline with residential rents?

No, retail rents are still quite depressed, office rents are higher but the increase is not in anyway comparable to residential rents. Residential rents are up 60-80% since Covid, office rents are up like 20%.

 

[DevilPlate]

Have commercial rents not gone up inline with residential rents?

Most reits suffered a drop in dpu.

 

[DevilPlate]

No, retail rents are still quite depressed, office rents are higher but the increase is not in anyway comparable to residential rents. Residential rents are up 60-80% since Covid, office rents are up like 20%.

Hmm i tot local retail mall rental reversions quite strong….better than offices.

Our S reits performances mainly drag down by their overseas properties and exchange rates on top of Interest rate hike. Also, 10y sgs yield 3%+, so need to compensate for that as well.

*what surprised me is those dividend stocks like Sheng siong, ST eng, sgx etc which is paying around 4% yield nia…..might as well buy 10y ssb/sgs at 3%+

 

[d5dude]

Hmm i tot local retail mall rental reversions quite strong….better than offices.

Our S reits performances mainly drag down by their overseas properties.

Not according to URA, retail is in a long term secular decline due to disruption from e-commerce.

 

[DevilPlate]

Not according to URA, retail is in a long term secular decline due to disruption from e-commerce.

https://fct.frasersproperty.com/newsroom/20230725_200334_J69U_FORLR93IFHYV1UFP.1.pdf

Tenant sales above pre covid level. So i believe our local suburban malls can coexists with ecommerce post covid.

 

[DevilPlate]

Btw, FLCT current price looks attractive.

Any potential red flag?

 

[revhappy]

No, retail rents are still quite depressed, office rents are higher but the increase is not in anyway comparable to residential rents. Residential rents are up 60-80% since Covid, office rents are up like 20%.

No wonder JCube mall is being demolished and will be replaced by JDen residences. Sad part is my daughter liked the Ice rink over there. It will be sorely missed.

 

[d5dude]

https://fct.frasersproperty.com/newsroom/20230725_200334_J69U_FORLR93IFHYV1UFP.1.pdf

Tenant sales above pre covid level. So i believe our local suburban malls can coexists with ecommerce post covid.

Look at the chart by CBRE...only suburban retail rents are marginally higher (3-4%) and thats compared to the covid trough, Orchard rd is still down (!!!) from covid trough.

Retail is in a long term secular decline everywhere, malls are increasingly turning into giant food courts, dining used to be a sideshow for shoppers but its the only interesting thing in malls these days, its going to be tough to grow such a business.

 

[d5dude]

No wonder JCube mall is being demolished and will be replaced by JDen residences. Sad part is my daughter liked the Ice rink over there. It will be sorely missed.

Yea Bedok point has also been demolished to make way for a new condo, I suspect many more are coming. There's just a lot more demand for residential real estate compared to commercial RE right now.

 

[revhappy]

Yea Bedok point has also been demolished to make way for a new condo, I suspect many more are coming. There's just a lot more demand for residential real estate compared to commercial RE right now.

I remember working in CBP in 2009 and I lived in Tampines. I used to make fun of my colleagues living in Bedok, because there was no mall in Bedok at that time, while Tampines had 3 malls. Now I guess Bedok has 2 malls, but one of them is like further away from the MRT so there is no footfall there.

 

[elvintay07]

I think this is only part of the story, the other problem is reits tend to be highly levered, higher interest rates = higher funding cost = lower earnings.

That is the wrong concept la. If interest high, REITs owners will transfer the cost to tenants or ownself absorb? If today u r a landlord and interest is 5%, u won’t transfer the 5% to your tenant? Sure or not? I think likely you transfer 10% to tenant lo.

Just like sell Hokkien mee. A plate of Hokkien mee is $4. GST up 1%, by right is up $0.04/ or electricity up 1%, rent up 5%. Hawker usually up $0.50 or $1 lei. Blame it on price transfer or hawker mathematics no good. With this price up, suddenly everyone don’t eat Hokkien mee?

 

[sohguanh]

this price up, suddenly everyone don’t eat Hokkien mee?

A previous high rank woman in Spore say if chicken expensive buy fish. So to reply to above Hokkien mee expensive buy/eat char kway teow lor.

 

[d5dude]

That is the wrong concept la. If interest high, REITs owners will transfer the cost to tenants or ownself absorb? If today u r a landlord and interest is 5%, u won’t transfer the 5% to your tenant? Sure or not? I think likely you transfer 10% to tenant lo.

Just like sell Hokkien mee. A plate of Hokkien mee is $4. GST up 1%, by right is up $0.04/ or electricity up 1%, rent up 5%. Hawker usually up $0.50 or $1 lei. Blame it on price transfer or hawker mathematics no good. With this price up, suddenly everyone don’t eat Hokkien mee?

Rents are driven by demand and supply, not interest rates. If so easy to transfer then 1997 AFC wouldn’t have happened. At the time rents were plunging even as interest rates skyrocketed, there was simply no demand for real estate (commercial or residential) because expats were leaving SG and the economy was very poor.

Also rents can go up even with rates near zero, 2009 - 2013 is a very good example, more recently it’s 2020 - 2022.

 

[elvintay07]

Rents are driven by demand and supply, not interest rates. If so easy to transfer then 1997 AFC wouldn’t have happened. At the time rents were plunging even as interest rates skyrocketed, there was simply no demand for real estate (commercial or residential) because expats were leaving SG and the economy was very poor.

Also rents can go up even with rates near zero, 2009 - 2013 is a very good example, more recently it’s 2020 - 2022.

What I am trying to say is we assume demand is there. Not sure why people are comparing 1997 to 2023. We aren’t even at 1997 yet. Everyone has so much money including the Chinese all trying to bring money out of China. Is any of the currency crashing and becoming like banana notes in 1997? Also many are talking cock about the lack of supply. Just google the companies in Marina Bay financial centre and many of those companies are not even in the Forbes top 10.

Let’s see lo. Next few years whether demand will totally be gone

 

[DevilPlate]

Yea Bedok point has also been demolished to make way for a new condo, I suspect many more are coming. There's just a lot more demand for residential real estate compared to commercial RE right now.

Malls needs to be right beside MRT in order to flourish.

Btw, resi rents was quite depressed between 2013-2020…..stagnate and even drop by 20-30% depending on developments. Some condo older projects the recent rental hike basically recovered back to 2010-2012 peak.