Anthony is rather reluctant to invest in REITs according to The Edge:
Interestingly, Hoe is reluctant to invest in REITs even though they are widely seen to be low risk instruments. The way he sees it, REITs are designed to deliver most of their returns through regular dividend payouts, but they still expose investors to the vagaries of the property sector.
“No matter what, whether a REIT does well depends on the outlook. REITs do well when the outlook for the property market does well. If the outlook turns weak, there will be pressure on REITs.”
Indeed, REITs came under tremendous pressure during the recent financial crisis.
“In 2008, I had a handful of REIT managers who visited me, and I could sense they were in pain, wondering how to service their debt,” Hoe says.
At the time, the REITs were facing difficulty refinancing their maturing debt, because credit markets had frozen. Nor could they sell their assets to raise cash, because nobody else could raise funds. In the end, some of Singapore leading REITs end up having to tap their shareholders with deeply discounted rights issues.
“So, I’m a bit more cautious about this business model. I will still put money in REITs at the right time. Whether it’s a REIT or any other share, it boils down to the outlook for property”
Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory firm Providend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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John
Sunday 23rd of September 2012
Apparently many REIT's are making their holders very happy by giving record yields. Think this is due to our property mkt has not yet faced any major or prolong setback. I missed the boat but believe it's too late now to pile in.
I also had wondered why sponsors wud want to sell their property into REIT and not enjoy the full benefits themselves. Tfore I conclude that if I want to be in property just simply buy into the property coy instead of its REIT.