REITs Part 1 – Retail REITs

Hi friends,

Would you like to own multiple properties and collect rental? Well REITs (Real Estate Investment Trust) is one way that we can do it. Just imagine putting aside some money every month to purchase a portion of some properties. Given time, you would have open up a pretty decent stream of rental income.

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As investor, we need to understand that there are different types of REITs holding onto different types of properties. In this post, I will focus on probably the simplest to understand – Retail Reits.

I find it the simplest to understand as most of us have some form of interaction with these properties as we need to shop for our daily neccessities or would visit a shopping mall during weekends for entertainment and to relax.

Now, in my opinion, the advantage of investing in Retail Reits is,

1. Simple to Understand: As mentioned, it is pretty simple to understand. Hold a mall and rent it to businesses.

2. Potential of Increase in Dividends (DPU) due to scarcity of land.

3. Transparent: We can easily visit a mall that the REIT is managing and see if there are tenants there.

But what are the things we need to take note of? (These can be applied to other types of REITs as well)

1. Gearing Ratio: This is how much the REIT is borrowing. Just as if we are investing in a property, we like to have some form of leverage, but not too much.

2. Land Lease: Personally, I will keep an eye on the time left on the lease as the land is not freehold. This will mean that when the lease is up, the REIT will have to pay a fee to extend the land lease and investors will need to prepare for that in terms of loan by REIT or share issues.

3. Tourism Data: This applies more Urban REITs.

4. Local Economy: This applies to Suburban REITs.

Well, all in all, if the confidence in this data is there, and the price of the REIT is attractive (based on dividend yield and NAV), i will love to own a piece of Retail REIT.

Specifically, these are the Retail REIT we can look into:

REIT Name Description
Lippo Malls Tr Retail (Indonesia)
OUE Htrust Hotel (69%) + Retail (31%)
Mapletree GCC Tr Retail + Office (China + HK)
OUE COMMERCIAL REIT Retail + Office
Frasers Com Tr Office + Retail (5)
Frasers Cpt Tr Retail (5) + 31.17% of Hektar (MREIT)
CapitaR China Tr Retail (China) – 10
StarhillGbl Reit Retail (87.2%) + Office (12.8%) by Revenue
Suntec Reit Retail + Office
Mapletree Com Tr Retail + Office

 

Fortune Reit HKD

 

Retail (HK)

 

CapitaMall Trust

 

Retail (16) + Office

 

CapitaCom Trust Office (65%) + Retail (21%) + Hotel (14%)
SPHREIT Retail (2)

Source: reitdata.com

We will discuss more on other REIT type and other things to look out for.

In the meantime, do check out this research from OCBC done in 2012 for an detailed understanding of Retail REITs.

http://www.ocbcresearch.com/pdf_reports/strategy/Retail%20REITs-121114-OIR.pdf

Cheers

 

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