Every reit won't grow until rental revision become higher.
It is same across.

We see Axreit (or any other reit) distribution grow mainly because of properties portfolio expansion, not because the properties rental become higher (although some did due to rental revision, or new lease) or through higher gearing than previously.

Atrium portfolio staying the same since its first day of listing, so you don't see the distribution grow.

Same with Stareit (before the rationalisation proposal).

Let analyse why sell :

1. Higher interest rate, lead to higher lending/gearing cost of the reit, dragging down the distribution.
2. Difficult of getting tenant after old lease expired, distribution going down. Atrium once lose the tenant on one of its properties, lead to severe distribution going down, whereby drag down the price to 60~70 cents.
3. Properties sector is going to be in bad shape across.
4. Have better opportunities with others by utilising the money proceeded from the sold reit, which yield better than 6-7% yield.
5. Higher FD rate. Reit doesn't provide significant different in yield with FD.

Reit is never the same with ordinary stock whereby profit and dividend can go higher and higher depended how much the company bring in the business, while reit cannot, you have 1 property, the most you can have 1 tenant for the whole property.

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Added on April 30, 2011, 1:13 amUntil or if the interest rate increase affect the refinancing cost or borrowing cost which is not with fixed rate.

Most borrowing under reit is secured with fixed rate for short medium tenure. So until new refinancing cycle take place, we don't see much impact on the EPS eventually DPU.

But interest rate increase mean higher FD rate, which in turn closing the gap between reit yield and FD rate, which make reit less as attractive as before.
But I don't see FD rate is going to increase >3.5-4% for near future even 2-3 years down the road. Just my view though, I could be wrong.

This post has been edited by cherroy: Apr 30 2011, 01:13 AM

Point no.3 that property going to be in bad shape is anybody's guess. Point no. 4 may i know which other vehicle yield better than 6 to 7% yield? FD rate still very low compared to REITs, double the yield.

Point about REITs dividend can't go higher works both way. On the downside, it usually not as risky as stocks cos stocks can go to losses. REITs can too if too highly geared and economy turns real bad but barring that, it gives stability. In return, it gives up some rewards.

I'm curious how people evaluate their yields. Does everyone use their historical purchase price like this? Shouldn't it make more sense to calculate the yield using the current price and put in the gain in price as a paper gain? That way, if you see an opportunity for a higher yield elsewhere, it would make more sense to sell, lock in the paper gain and put everything into the higher yielding alternative? The question of course is whether or not you see further price appreciation in that stock, which would affect that decision.

My personal dilemma is more related to physical property than REITs, but I think the same reasoning applies to everything. In my case, for a condo that I own, my rental yield was a respectable 6%, but now the condo value has gone up while my rental has not, so the yield has dropped to something like 4%. If I don't think the condo price will go up further, shouldn't it make more sense to sell the condo and put all the money into some REITs that can yield 7 to 8 percent?

Own properties
Pro
- has own control, sell, buy, rent.
- Once sold the property, pocket all the realised gain.

Cons
- troublesome, collect rent may not as simple, all depended on luck on tenant
- Generally lower yield, residential is lower yield than reit (commercial property)
-
Reit
Pro
- Easy, simple, don't need to deal with troublesome tenant
- Can buy in block, has 5k, invest 5k, has 10k invest 10k, can liquidate whenever your like, while own properties cannot have this luxury. C

Cons
- has no control on the property
- subjected to market risk.

Personally, I preferred reit over own properties because :
1. Don't need to deal with hassle tenant, property issue
2. Liquidity issue.

But reit has one distinct disadvantage, ie. unit reit price can way below the real worth of the NAV.

Mind share the latest NAV of Axreit. Thank

http://www.klse.com.my/website/bm/market_i...rices/index.jsp

board > main market > sector (reit) > sort by counter..

or you can just type axreit into the stock code

Yeah, but my question isn't about the relative advantages and disadvantages between REITs and property. It is between calculating yields using the historical purchase price or the current market price. It seems to me that we should always use the current market price to get the true yield. Historical pricing flatters the yield too much, whereas if we cash it in to realize the gain and reinvest everything in something higher yielding compared using current market prices, we should earn more overall.

wankongyew,

The yield is always calculated based on the price we purchased at using this formula:

DPU / purchase price x 100

That said, we can still factor in our paper gain as it is.

I don't base my decisions on yield, I base it on the INCOME generated. Meaning if I can find a stock which returns (ringgit to ringgit) more than what I'm holding now, I can switch.

If you intend to sell and compared the yield, use the existing price or current yield for comparison.
Purchase price yield is irrelevant now.

The yield is based on purchase price, but once intended to sell at existing price, we need to use existing price/sold price yield for comparison.

Eg. you bought A reit at 1.00, DPU is 15cents, yield is 15%.
But now A reit is 3.00, the yield now is only 5%.

If FD rate now is 6%. Your 3.00 sold price will get 6%.
FD rate win in this scenario and being preferred.

Paper gain or not is irrelevant now, as you want the money to chase for yield or working as hard as possible.

cherroy,

That is exactly what I said. I only compare the income in ringgit terms. I will choose whichever gives me the higher income.

thanks
but in sunwayreit web page shows
Payment Date 14 Mar 2011 for 1 Oct 2010 - 31 Dec 2010
Payment Date 30 Dec 2010 for 20 May 20101 - 30 Sept 2010

and future financial result announcement
3rd Quarter ending 31 March 2011: 03 May 2011 after 1700
Notes:
Payment of distributions will be made within 2 months from the release of the financial results.

seems like Sunway REIT is distributing dividend quarterly?

Sorry, I no update on Sunway, based on what you posted, then it is quarterly basic already.

Reit can change distribution period from time to time. But semi-annual is a min requirement, (if not mistaken).

Yes it is Quarterly basis for SUNREIT
1.70 cents this time around.

thanks
seems not high as per current price of RM1.09
1.7/109*4=6.24% (annualised) only

but in general those who distribute dividend semi-anually should have higher % (annualised) ? as we can use the quarterly dividend to re-invest, thus compounding our intereset.

No, it is the same whether semi-annually or quaterly for yield calculation on reit front.

The compounding effect from quarterly distribution, which let us to reinvest is very minimal, and trivia.

If the amount of distribution received is substantial, then receiving the money earlier, and immediately reinvesting back into the market certainly creates a very strong effect towards doubling our wealth. But to do this, the DPU must be quite a lot, and the investor must know beforehand and be prepared to invest the money the moment he/she gets the money in his/her account.

I practise this personally.

Which is the reason why I like certain Canadian insruments - they give out MONTHLY dividends...

This time around, I sold it for capital gains.. It yield more than the dividend.
After dividend payment, prices will start to drop again to around 1.03 range..

hw to count reit div? sunreit 0.017. if im holding 2000 units. i get rm34?

Yes.. rm34 for this quarter.

lower den holding normal stock?