Correction day 3. I leave you all with an insightful take on REITs from D.O.G at WallStraits forum:
That depends on who the REIT manager is. For REITs where the managers were originally the asset owners i.e. virtually all the S-REITs, the owners have basically already divested their real estate at a good price in the REIT IPO. Any remaining stake is a call option, and it continues to pay out cash. So these ex-owners are having their cake and eating it – they sold most of their stake, and now they are slowly clawing it back via payment in units.
One analogy might be – I sell you a house for cash, and I manage the tenants for you. Instead of sharing in the rental, I am paid in shares of the house. So each quarter I own a few more bricks in the house. Given enough time, ownership of the house will revert to me. All this while, I get more and more cash from my increasing ownership of the house. So the net effect is that I get cash upfront from selling you the house, then I get paid to wait while the house reverts back to me. Nice deal for me, not so nice for you.
For REIT managers who were not the original owners of the REIT assets, payment in units does increase alignment of interest. However, if they then sell the units for cash (see: ARA Asset Management), alignment of interest is eroded.
Here are today’s figures. Do follow my Dividend Stock Tracker which is updated nightly here.
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