I have a question about REITs. Why do they all manage office / retail / industrial space only? Why not manage residences that are rented out, i.e. condos and apartments?

I'm thinking of putting money in a REIT for the first time, so I took some time today to read up some stuff on them. Since I was curious about their leverage and the total size of the various funds, I went ahead and calculated them. Leverage I calculated as Borrowings / Total Assets while sizes I calculated as Units in Circulation x Unit Price. I got Unit Price and Yield from http://mreit.blogspot.com/

Here are my results:



My biggest surprise was that Atrium is really tiny! Plus some of these funds have really low leverage. I believe that the maximum leverage they're allowed is 50%.

Finally, I don't understand why they are all trading at a discount to their NAV. Is it because investors don't believe in the valuations of their properties?

This post has been edited by wankongyew: Jun 11 2009, 01:10 PM

Any particular reason why you're not interested in them? Do you mean the low-geared REITs or REITs in general?

Mind letting us know what percentage of your net worth that constitutes? I could match that if I wanted to, but it would be like 95% of my net worth and the risk would scare me so much I wouldn't be able to sleep at night.

Also, with your huge stake in the REITs, I'm sure everyone here would appreciate it if you gave a warning if you ever decide to unload it.

Yeah, but you need to actually be in a position to be able to buy them when the price goes down. It would be nice to have a couple of days warning for example so that I could move some money from a unit trust fund or something to free up money to buy REITs. On the other hand, if there are other people already planning to unload their stakes for whatever reason, I''m sure they wouldn't appreciate Neo dumping a whole load of them onto the market at the same time.

Ouch, two-thirds is too much for me to risk in a single asset class. Personally, I think I'll only dare to put at most one-third of my net worth in REITs, with the rest in unit trust funds, bonds, actual property of my own etc. But more power to you for your bravery!

REIT prices have been appreciating bit by bit these past couple of weeks, even while the rest of the market has been mostly motionless. I'm quite annoyed because I've been wanting to build up my stake in them. I suppose all of the news analysis that the recent rules changes will benefit REITs the most hasn't helped.

Ok, the way things are going, there's no point in dumping more money in REITs. I should probably wait until after dividend time. But I'm wondering, what do you guys do with your ready cash while you're waiting for opportunities to open up? I have, like, nearly 50k at the moment in reserve. What is a good short term, high liquidity thing to put them in for one or two months? Just keep them in ordinary savings accounts?

Uh, what does that mean? That you'd buy more REITs even if the price goes up?

What's up with the heavy selling pressure on QCT? Especially since they're scheduled to announce results on 23/07. Is the market expecting them to announce bad results?

Didn't see anyone post this for UOA. What, nobody buys this one?

UOA REAL ESTATE INVESTMENT TRUST
Date Announced : 15/07/2009
EX-date: 30/07/2009
Entitlement date: 03/08/2009
Entitlement subject: Income Distribution
Entitlement description: INTERIM INCOME DISTRIBUTION OF 5.82 SEN COMPRISING 4.88 SEN TAXABLE INCOME AND 0.94 SEN TAX EXEMPT INCOME FOR THE PERIOD ENDED 30 JUNE 2009.

I doubt that it's possible to achieve the yields that would be attractive to investors without some amount of leverage. Repaying loans in full would indeed cushion REITs from interest rates increases, but more importantly, in my opinion, it would eliminate the risk of being unable to refinance loans when they come due, which is the major risk of REITs going under. Without being burdened with loans, even if the properties of a REIT could not find a tenant, it could stay on the market indefinitely. But again, the cost would be permanently lower overall yields, not just in the short term.

Even if the price of a property increases, it may not necessarily lead to higher rents due to the lengthy terms of leasing contracts, so you might not realize the gained value for a while because you're not selling the property. But if you're prepared to borrow more money against the increased valuation to buy more property or make renovations, you're tapping into the gains and boosting your yield.

It's also not a case of the managers refusing to pay back the mortgage on any given property. It's that it's more attractive to the managers to expand their stable of rentable properties whenever they can raise the money to do so, whether through loans or outright expansion of the trust fund. The managers after all are in it for the money and would like to earn more.

This post has been edited by wankongyew: Jul 25 2009, 10:05 PM

Well, it's after dividend ex-date now right? Prices still aren't coming down. Darn.

Some REIT prices dropping a bit today. Will it continue dropping do you think?

How would you prove that you're a unitholder and how many units you hold if you just show up?

Just sold my Atrium shares. I thought I might as well realize my gains of 15.5% rather than wait for the measly dividend or for it to drop further. My original buying price was 0.65. If it drops back to that level, I might buy it again.

I'd like to buy AXIS as well but it seems that there are few sellers at the moment.

And yeah, while selling ATRIUM might seem seem like a panicky reaction, I would say that the declared dividend of 0.008 ringgit seems rather shocking as well. The dividend yield might get better later, but it might not. In the meantime, if we're hard-headed and primarily interested in buying REITs for the dividends, we should make our decisions based purely on current yield, and based on a dividend of 0.008 per quarter, the yield sucks even if your buying price is 0.65.

Eh? But that's not right. It's so confusing when the companies release their dividend information in cents instead of ringgits which is more intuitive for most people. My buying price is RM0.65 or 65 cents. The declared dividend is RM0.008 or 0.80 cents. Assuming that this holds true, how could you possibly end up with a yield of 12.3%?

My only regret is being hesitant to buy something with the now freed up cash that offers a more attractive yield. After all, little yield is better than no yield with idle cash. I'm currently debating holding on to the cash to wait for better opportunities or jumping on something else right now. This is compounded by the fact that I'm already holding on to substantial cash while waiting to buy stuff even before selling ATRIUM. Any suggestions?

This post has been edited by wankongyew: Aug 7 2009, 11:45 AM

AXREIT down to 1.73 today. Looks like this particular prediction didn't hold true. Too bad, I actually bought more at 1.75 but didn't think it'd go down even further than that.

This post has been edited by wankongyew: Aug 21 2009, 01:55 PM

Um, dropped back down to 1.75 again. Heh.