Singapore Investments

For those interested about Singapore Investments in reits

if you are holding on to any highly leveraged reits at the start of a new recession cycle, it could prove fatal to your investment portfolio, forget about that juicy dividend they have been giving in the PAST.

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explanation below

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A Reit, is usually laden with Debt to pay for Pricey Assets purchased during the economic expansion the world enjoyed for the past few years. Any Net Income it gets from this pricey properties are mostly drained away to give their shareholders dividends

so the danger is obvious, There are many Reits that have sprouted up and aggressively expanded during the recent economic boom and like fair weather flowers, how will this highly leveraged Reits react if the value of their properties and their monthly income gets hit by a prolonged economic downturn, something which the world could be facing today.

1)High Debt

- High interest payments

- Debt accumulated by buying optimistically priced assets during a economic boom

- Value of Assets prone to write downs during a downturn

2)Asset value shrinks

-Value of Assets…falls -> Company worth less -> Share price falls in adjustment

-Value of Asset falls, Stipulated ‘Debt : Asset ratio’ becomes unbalanced, might trigger force selling of assets to stay listed.

- Value of Asset falls, may have to issue new shares and dilute the shareholdings of already suffering shareholders. or in the event of a sale, company is very likely to be selling off assets at a loss.

3)Income shrinks

-Dividends falls -> Yield falls -> Share price falls in adjustment

-Might have difficulty meeting interest payments while maintaining a good dividend

-Difficulty in rising new capital may pose problems to this capital intensive companies

This debt-laden, cash-drained entities will have to deal with falling income, falling asset values, steady or increasing interest rates and keeping within stipulated agreements. of course, this is assuming that we will experience a worsening in the current economic situation

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There is Hope in the sense that Merger & Acquisition may provide life to the Reit market but before anyone goes looking for reits trading below their nav, Bear in mind that their current estimated net asset value is a poor reflection of the future asset value in a prolonged downturn.

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Singapore Investments

In Singapore, many Reits have been popping out over the past 2 years. They are mainly in the prime retail, prime commercial, prime hospitality, industrial and healthcare sectors

so far we have only 1 reit that focuses on suburban retail properties, zero that focuses on the non-prime commercial sector and zero that focuses on the mid-range to budget hospitality sector.

Listed on the Singapore stock exchange, are also Several Reits that invest around Asia, such as India, Indonesia, Hong Kong, Malaysia, China and Japan

There are strict regulations in place to safeguard investors interest, we have the privilege of being a investor friendly hub, from which retail investors may safely invest in other countries