REIT Symposium 2017 was held last Saturday and saw hundreds of participants at the event. Besides presentations from key management of various REITs, booths set up gave current and potential investors the opportunity to have their questions answered by representatives of the REITs.
Throughout the day, participants at the event paid close attention to the information presented by the speakers. Besides showing data and facts from the REITs performance, speakers also shared their outlook on the industry landscape as well as what investors can expect going forward.
The REIT Symposium 2017 gave insights into the various industry REITs were in, including retail, hospitality, industrial and more. Here are the 7 key questions you as an investor should ask yourself before purchasing a REIT.
#1 Is this property something you want to own?
REITs are a great way for any Singaporean to invest in properties. Owning a share of the REIT can be seen as owning a portion of the property the REIT has. Similar to how you might like a house for its size and facilities, do you like the property? Are you a current patron of the mall or office building? If you are, would the property be something you want to own?
#2 Do you like the property’s location?
When we look at a property’s location, we need to consider both domestic and international location. Do you like the REIT’s location in Singapore? If the REIT has properties overseas, do you like that country/city? Some REITs are distributed across countries. REITs like Ascendas REIT, Frasers Commercial Trust, Frasers Hospitality Trust and Cache Logistics Trust are examples of REITs listed in Singapore with global exposure in countries such as Australia and China.
BHG Retail REIT is an example of a REIT that does not have a single property in Singapore. Focused solely on China, its 5 properties are located in Beijing, Chengdu, Dalian, Hefei and Xinjing. Indeed China is fast growing and many other REITs are also looking to China for growth. Are you confident of the properties doing well in these Chinese cities?
#3 What is the REIT doing to increase its yield?
Are you satisfied with the REIT’s current yield? What are the company’s plans to increase its yield?
Companies can increase their yield organically or inorganically. Organic growth involves ways such as increasing rental rate, maximizing its current space and Asset Enhancement Initiatives (AEI). AEI was constantly addressed by management during the REITs Symposium, showing the management’s efforts to improve the REIT’s performance. Inorganic ways of growth usually involves acquisitions.
#4 Is the management active?
A proactive management is always a positive sign. This shows the management’s interest and motivation in driving the REIT forward.
How open are they to questions and feedback? Listening to the management’s analysis and views on the outlook of the REIT and the industry gives investors an idea of what to expect in the near future.
Events such as the REIT Symposium allow investors to directly interact with key management. This can boost investor confidence when they feel that the management is capable and working towards improving the REIT’s performance.
#5 How do you see this property’s performance in 10 years?
Can you imagine the property in 10 years? What will it look like then?
This gives you a better understanding of your confidence in holding the REIT long term. REIT’s performance will be different across the various industries. Retail faces strong competition from e-commerce. However, management that attended REITs Symposium had an optimistic outlook and assured investors that they are staying relevant by constantly improving their assets to cater to the changing needs with a focus on experience and lifestyle in malls. Can you imagine how Vivocity will be like in 10 years?
#6 What are your requirements?
A higher yield also represents a higher risk. What is your own risk appetite?
Everyone is at a different stage in life. How much risk you can take depends on what you require now. Generally, younger adults have a can take more risks without having to consider their retirement or dependents urgently. This affects the type of REIT you invest in and how much you are willing to put into a REIT as compared to other asset classes.
#7 Are you confident of choosing a REIT yourself?
REITs are a popular investment vehicle in Singapore. However, with the many trusts listed on the Singapore exchange, many do not know which REIT to choose. Where do you begin? Which industry should you choose?
If you are unsure of choosing a REIT on your own, the newest addition to the market is the REIT ETF. The REIT ETF has been launched by 2 providers – Nikko AM (NikkoAM-StraitsTrading Asia ex Japan REIT ETF) and Phillip Capital (Phillip SGX APAC Dividend Leaders REIT ETF). A REIT ETF is essentially a basket of REITs that is well-diversified but gives you a generally lower yield than picking a single REIT.
Your answers to these 7 questions will tell you more about your interest in that REIT, the confidence you have in its performance and how much you want to invest in that REIT. Besides having a personal liking in the REIT, you also need to make sure some level of analysis is done to further understand why you would like to invest in that REIT.