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First REIT

It feels like some time since I talked about this stock of mine that takes up a large portion of the portfolio. REIT are as such, when there are no capital events, they do ok. Last year we learnt what rising interest rates can do to investors confidence on REITs.

Given the choice now that I am more matured, I would steer clear from them. I would still like them when they are beaten down to an irrational levels.

First REIT was the most exposed REIT last year when I did a review of which reits have the highest exposure to floating rates. Since then they have taken steps to push more to fixed income. Always nice to be prudent.

One of the main reasons to like this REIT was the long lease tenure, and another is that they used to be so conservatively geared. Its nice to see that they are aiming for not exceeding 30%. Though I think, to achieve this, what they are banking on are asset values to go up to make it seem “conservative”

The interesting part is an expansion of existing facilities. This will improve yield and perhaps more optimized versus acquisition. The question is where will financing come from. Perhaps they will leverage up, perhaps it will be internally funded. Perhaps it doesn’t cost as much.

First REIT is one of the yield stock found on my Dividend Stock Tracker. Check out the rest of the yield stocks here.

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Friday 18th of July 2014

It's HOW short end rates are raised, and whether there is sufficient time for the market to price it in. Yield sensitive instrument already took a battering. The rate hike should be priced in already. If anything, the belly of the fixed income curve should get hit the hardest. The long end, where REITs sit, unlikely to get hammered too badly.

In addition, rising discount rates usually signal a decent economy, which should be decent for REITs which have good economic exposure.


Saturday 19th of July 2014

Hi LP, you raise some good counter points. But to counter that, the growth have been based on easy credit, and in that absence, or rather when that is more expensive, acquisition will have to come from other sources.

When discount rates rises, the hurdle increases and there is just so much rental the hospitals will yield Lippo will not want to pay through the roof for that in their expenses.

I wonder what is priced in. suspect the fear is priced in but it does proof a tough envrionment.

even at high rates in the 1970s the US REITs did rather well as well.


Wednesday 16th of July 2014

erm.... for some reason the image is not shown recently. seems source issue?

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