High yield reit come from high leveraged reit.

In 2008, there are a lot of overseas reit went under main because of leverage issue, which in severe recession, and credit freezing time, those high leveraged reit cannot refinance the loan commitment, so need to fire-sale their properties during that time which is the main reason those reit went under.

If solely properties valuation depreciation, those reit won't suffer as what 2008 happened.

Recession is always associated with credit freezing because generally banks reluctantly to lend in recession due to credit risk.
Banks are always like that, promote/give their umbrella during sunshine days, but keep those umbrella during rainy days.

There is an old saying that Long term asset is supposedly to be supported with long term borrowings, that preached in most accounting textbooks.

The last Asia Financial Crisis spoke for itself. Many Malaysian companies at that time depended a lot on cheap short term borrowings were in troubles. Even Telekom Malaysia needed to be bailed out ( injected with fresh funds ) by British Telekom .

The high yields of REITS, or rather the high current expectations of small investors would continue to drive REITS to look for short term/cheap borrowings from daily surplus funds in money markets, to lower their costs of operations. There are good and bad, if you look at both sides of the coins.

Once the economy is facing some credit crunches , some less well managed REITS are likely to face similar problems. And the present trade cycle would not last for usual ten years, perhaps less than 5 years. The moment you see a small boom, more people would start to talk about recessions again.

But not easy to change the mindsets of small investors until they really face the real problems. Meanwhile, they would continue to look for the highest yields in the markets. Not saying it is a wrong way also, just the preferences of most individuals .

Just my view only.

And Happy Investing to all.

This post has been edited by SKY 1809: Jul 17 2010, 11:26 AM

Yes I agree that leverage can depress the share prices of the REIT. But in 2008, although the local REIT did not face margin calls, they too drop in tandem with the market. A lot REIT and also those in Malaysia, reports property revaluation as 'income', when the property prices do come down, you will have negative income, so the net income of these REIT will also suffer (although on paper basis only). As long as their tenant does not default, then they can still continue to pay dividends, but if the economic problem is prolonged, then some of their tenants might default or forced to close shop.

Anyway I am highly uncomfortable with the leverage of our local REIT, although the dividends are nice, I have not step foot in it.

all in all, REIT performance is directly linked to property industry. it can be seen as a small (or cheaper) exposure to property investment. but the recent listing of the REITs such as the suncity did not speak well for the market expectations. any comments?

It is not a small exposure, but a 100% exposure.

We cannot take reit pricing in the stock market as a 100% accurate indicator how the situation property market is.

Reit price in stock market is directly affected by short term demand and supply in the market.
We can also say, there are a handful of cornerstone investors like insurance fund, pension fund that willing to take up large chunck of the IPO at higher instituitional, some can interpret they have confidence as well.
So we cannot conclude anything from it.

As reit portfolio is only a few properties, some properties may have lower valuation, lower yield than the other due to location wise, and specific issue.

Sunreit price lower than its IPO mainly because the yield is not attractive and lower than average reit out there. So does CMMT.
Aka the valuation of the reit on IPO is on fully value basic. It doesn't offer discount/bargain to investors, while other existing reit does.

Yep.. A bank will only lend you money if you can prove that you don't need it.

Sad... i still didnt get any news about my Sunway Reit whether its successful or not. But glad its retail offering price is 88 sen. If 97 sen be 88 sen in less than one week. TT for me ^^

i think that the REITs are really meant for market play. i wont touch it. CIMB throws out 4 REITs. wow, what a timing for the trading volume. Property? not my cup of tea. just my humble opinion.

Sorry, I don't quite understand this statement.

Kind to elaborate on this.

This post has been edited by cherroy: Jul 18 2010, 12:26 AM

CIMB issued 4 callable bull for trading of callable bull/bear contracts (CBBC). Msia becomes the 1st nation in Asia in such trading. Airasia,
gamuda, Genting and cheating Bjcorp. market appeared to be interested at these for day 1 on friday.

it was claimed that the Gamuda BB contract attracted much intereset for its potential exposure to the NEP particularly at the 'malaysia non-affordable' MRT and LCCT projects. oh ....

Those are not REIT's la

REITS are not gambling tools.

Some info/introductions here :-

http://realestate.financialplanningmalaysi...in-malaysia.php

Better if You can find more about REITS by reading more in V1 plus V2 , and to make a final decision on which ones suit you. These are valuable and practical experiences shared by others .

Somehow, there are no short cuts in Investing, even by obtaining the best education in university would not ensure the success of a person. However, to certain extents it might help.

Just my view only.

P/S > Sori, no intention to divert the attention of forumers to other blogs.

This post has been edited by SKY 1809: Jul 18 2010, 12:35 PM

that's true Sky...
At current price levels, Arreit yields the best , around 8.4%, next is Amfirst and Hektar , around 8.2+%.
As long as their price maintain at current levels, not up nor down, they are so much better than fixed deposits.

oooppps, i think i am in the wrong blog section.

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Added on July 18, 2010, 12:52 pm[quote=SKY 1809,Jul 18 2010, 12:00 PM]


REITS are not gambling tools.

agree agree. i guess they are for 'loaded' people with sapre money, for those that have patience and those whom are prudent or rational in investment. good job to remind us here.

seriously and frankly, i am not in these groups.

any short term investment ideas besides the REITs (or unit trusts)?

This post has been edited by mikehwy: Jul 18 2010, 12:52 PM

any short term investment ideas besides the REITs (or unit trusts)?


Frankly, One still has to sharpen one's knowledge and skill before you move out to the short term battle fields.

Basically it is still the same world as before, big fish is waiting to eat the small fish.



This post has been edited by SKY 1809: Jul 18 2010, 02:48 PM

SKY,

No prob. i made and i saw big money in mid 80s and 90s. still have little to spare on speculation. i am the type who lives by speculating. lol ....

i get your point about lack of value for sunreit
but since when it is below its IPO ?
IPO was 0.88¢ now it is still around there, it dipped below only for few hours i think.

Got my refund back on SUNREIT today.

Lowest only 0.87.
yes, you are right, happened on intraday basic.

Just my comment is because a lot of people subscribe the IPO hoping when it listed time, price will register premium which they can make money from the IPO.
So a lot of people presume it is a bad/weak IPO.

people, what's your take on capitamall, especially those who were very passionate about it earlier last week.
you feel the dip is there to stay or just a stabilization and will bounce back?
i think i am gonna queue now....