Replies to Unanswered Questions for REITs Symposium Panel

This article appears on Inside Invest.

https://www.insideinvest.com.sg/investing-trading/2019/05/27/replies-to-unanswered-questions-for-reits-symposium-panel/

Both of the panel discussions at REITs Symposium 2019 were so well-received that many of the good questions sent in by the audience had to be sacrificed due to time constraints.

In appreciation of your overwhelming support, however, we picked up some of your unanswered questions and reached out to Kenny Loh, one of our invited panellists of the day to share his views with us. Enjoy!

 

What drives a REIT’s long-term price appreciation? Increased capital inflows (investor interests) or appreciation of its underlying assets?

The share price of a REIT is driven by both the increase in DPU and also the appreciation of the NAV. The value of the property and rental income will go up in the long term because REIT investment is inflation hedged, as long as the REIT is well managed.

 

Properties for older REITs are ageing. Moving forward, will more money be required to upkeep properties, thus reducing distributions to unit holders?

It is true that REITs need to spend more maintenance costs to upkeep the aging properties. However, a good REIT manager has the options to do AEI to revitalise the building or sell the older building away and replace it with a newer one. All these actions may help the REIT to enhance its DPU.

 

Should we avoid REIT ETF because of the tax issues it attracts, in contrast to holding pure REITs?

Tax concessions have been extended to REIT ETFs, ensuring parity in tax treatments between investing in individual S-REITs and REIT ETFs. https://www.businesstimes.com.sg/stocks/singapore-budget-2018/singapore-budget-2018-reit-etfs-to-enjoy-tax-transparency

 

What are the key risks of investing in a REIT?

REIT is sensitive to economic cycles and interest cycle as the underlying asset is real estate. Real estate has its own investment cycle. Investors should not put 100% investment in real estate sectors or REITs. It is advisable for investors to diversify their investments into different asset classes with minimal correlation.

 

How to avoid value traps in REITs?

Investors should not make investment decisions purely by looking at the numbers. Qualitative analysis, Macro Economy Analysis and Risk Assessment are important analytical steps to avoid value traps.

 

What are some of the red flags that we, as retail investors should look out for when we do our homework/analysis on the suitable REITs to buy/hold?

Retail investors are always dependent on the free information available on the internet for research. Those data or news are lagging or old news. Investors need to do more qualitative analysis instead of focusing too much on the financial numbers which can be subjected to financial engineering. Most retail investors cannot differentiate between fact, opinion, noise or rumours in their analysis. The more they read, the more they are confused.

 

Given that REITs do have many restrictions, e.g.: 90% pay-out, 45% gearing and are relatively secured, do you advise using leverage through margin financing to enhance yield?

Leverage if used correctly can enhance the return. Vice versa, investors will face huge financial burden due to margin call when used wrongly. It is very important for investors to seek qualified and unbiased professional advice which is free from conflict of interest before doing any margin financing.

 

Kenny Loh is a Senior Consultant and REITs Specialist of a Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER. He has won multiple awards in financial planning and investment planning.

REITs Symposium 2019

A strongly recommended annual events if you are:

  • Real Estate or Property Investors
  • Beginners or Newbies who want to learn about investing
  • Season REITs Investors who want to get insights from the REIT Managers
  • Investors who want to look for alternative ways to diversify your portfolio
  • Investors who have ZERO knowledge in REITs.
  • Fund Managers, Private Bankers, Relationship Managers, Financial Advisors, Investment Advisors, Insurance Agents, Property Agents who want to expand your investment knowledge into REITs (an alternative ways to property investing) for more holistic investment portfolio advisory to your clients. 

 

  • Guest of Honor will be Mr Loh Boon Chye, CEO of SGX
  • More than 75% SREITs will be present
  • Face time with the REITs managers
  • 2 way communication during panel discussions – attendees can post their questions online
  • Aside from a main stage, this year we will feature a “side stage” focused on REITs 101 – educating beginner investors to kick start investing in this asset class such as how to evaluate the metrics of a REIT

  • Click the video to have a sneak preview of last year REITs Symposium.

 

 

 

REITs Symposium Registration

 

 

See you at REITs Symposium 2019 on May 18, 2019!