Real Estate Investment Trust or REIT, is known in the stock market to be a dividend generator for investors in Singapore. This is because, the REITs that are listed on the Singapore Stock Exchange, or SGX, are required by law to give out 90% of their taxable income as distribution to their unitholders.
However, in the recent months, analysts reported a bleak outlook for S-REITs as they question the sustainability of these REITs and whether they can be at it for the long haul.
Our team recently had a conversation with Attlee Hue, master trainer for the REITs Program in 8I Education.
Attlee was a practising lawyer for more than 15 years, and had successfully listed at least 10 companies. He currently sits on the board of directors of 2 listed companies in Singapore as an independent director and audit committee chairman. He is a qualified solicitor in England & Wales and a qualified advocate & solicitor in Singapore & Malaya.
Retired when he was 41, he now spends a lot of his time travelling around the world.
Here is what Attlee has to share about the current S-REITs market outlook and whether it is really a bad time to invest in REITs.
Do you think Singapore is a good place to invest in REITs, and why?
I think Singapore is one of the best places in the world to invest in REITs.
Due to the limited land size, buildings will often be renewed and maintained, so the REIT will stay. Singapore also has a stable government, currency and political system so REITs investors need not worry about political unrest that affects their investment.
The population in Singapore has been growing in the past and is likely to continue. This will contribute to the REIT’s growth in the country as demand for real estate remains healthy.
Also importantly, Singapore does not have natural disasters that can impact damage to buildings. No taxes are payable for individual REIT investors.
Which type of REIT do you personally prefer?
The preference depends on the needs of each individual. Are you interested in capital gain or just dividends. However I believe one should focus on diversification..
This diversification should be across different sectors and properties so that you are insulated against any market situation that affects any particular industry.
You can also diversify your real estate portfolio across different geographical locations just by buying REITs.
We came across an article recently that wrote about 2 S-REITs that has a high distribution yield of 8%. Do you think that the distribution yield is the determining factor to buy into a REIT?
High distribution comes with high risk.
I personally think that REITs with lower yields are likely to be more robust and can deliver consistent results for the smaller risk taken.
Mall REITs are greatly affected these days by occupancy issues. How do you view this issue?
The general outlook now is that mall REITs will suffer due to the e-commerce boom. However, many people don’t realize that malls will stay relevant because Singaporeans would still frequent shopping malls to spend time with their family or friends, watch movies at the cinemas or have their meals there.
Business owners will also find ways to boost their own business and differentiate themselves from the online shopping websites.
In any case, if a mall is managed by a REIT, we can be assured that they have the best managers and that it is in good hands.
This is actually an additional perk for investing in REITs.
Unlike bonds, where you get a fixed return after a certain period of time, REIT managers will work as hard as they can to bring in as much as they can. So, even during bad times, we know that REITs managers will always find ways to recover from the situation.
Bloomberg recently reported a gloomy outlook for S-REITs as they are deemed not sustainable. What is your outlook on this matter?
I can say that there are a lot of bad REITs out there and there are a lot of articles lately that focus on the sustainability of these REITs. However, like I said, my focus is as an investor to make money and I aim to concentrate on those that will deliver consistent good results over the long term.
Retail investors have recently been advised to stay away from REITs. As value investors, do you think we should be going zig when everyone is going zag?
REITs are quite a big part of the Singapore market. The sentiments of the people who are asking others to stay away, is bound to be captured or reflected in the REIT prices. We just have to bear in mind that this is only the unit price that we are talking about. The performance of a good REIT would still be unchanged.
The market may look bleak now, but does it then present a good opportunity to acquire REITs at a discounted price?
When you build up your life savings portfolio, you should always consider REITs, because it is an excellent cash generator. It is also a tool that enables you to have passive income when you can no longer work.
I retired at the age of 41 and as a retiree, REITs provides me with a stable and reliable income.
While not everyone is a retiree, I feel that everyone should start building up their market position in order to retire comfortably
Attlee conducts the REITs Program each quarter, to discuss the best REITs and also to teach participants the know-how in valuating a REIT. To find out more about Attlee’s REITs Program, you may drop an email to firstname.lastname@example.org