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On REITs and their assets (in Portfolio strategy: Undervalued high yield counters, 22 Feb 10):
"REITs are Real Estate Investment Trusts. Their assets are real estate. Real estate don't depreciate per se.
"Real estate's values would go through ups and downs with the forces of supply and demand which could be linked to the business cycle as well. So, the value of a REIT's assets would be affected similarly.
"I would treat REITs just like any other investment in the stock market. If a REIT becomes over-valued, it might be time to let go."
AND
"Yes, real estate have different tenures and could be leasehold or freehold. A 30 years lease is usually associated with industrial properties in Singapore. Some leases are 30 + 30. There are freehold industrial properties in Singapore as well. Most other types of real estate in Singapore have at least a 99 years lease.
"To say "depreciation of assets is the risk faced by REITs" is not correct per se as it discounts the possibility of REITs owning freehold property. So, if this statement bothers you sufficiently, you want to make sure that the REITs you invest in own only freehold properties. :)
"So, am I bothered? For me, what matter most are value and returns.
"If I buy a property at a price lower than the market value and with returns higher than what is the norm in the market, I have a bargain. it does not matter to me if the property has a 30 years tenure or a 99 years tenure.
"Since I treat REITs like a piece of real estate, I look for value and high returns too. Also, like a piece of real estate, if it becomes overvalued, I would sell for capital gains. It matters little to me what are the tenures of the properties, therefore." Read more...
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On REITs and their assets (in Portfolio strategy: Undervalued high yield counters, 22 Feb 10):
"REITs are Real Estate Investment Trusts. Their assets are real estate. Real estate don't depreciate per se.
"Real estate's values would go through ups and downs with the forces of supply and demand which could be linked to the business cycle as well. So, the value of a REIT's assets would be affected similarly.
"I would treat REITs just like any other investment in the stock market. If a REIT becomes over-valued, it might be time to let go."
AND
"Yes, real estate have different tenures and could be leasehold or freehold. A 30 years lease is usually associated with industrial properties in Singapore. Some leases are 30 + 30. There are freehold industrial properties in Singapore as well. Most other types of real estate in Singapore have at least a 99 years lease.
"To say "depreciation of assets is the risk faced by REITs" is not correct per se as it discounts the possibility of REITs owning freehold property. So, if this statement bothers you sufficiently, you want to make sure that the REITs you invest in own only freehold properties. :)
"So, am I bothered? For me, what matter most are value and returns.
"If I buy a property at a price lower than the market value and with returns higher than what is the norm in the market, I have a bargain. it does not matter to me if the property has a 30 years tenure or a 99 years tenure.
"Since I treat REITs like a piece of real estate, I look for value and high returns too. Also, like a piece of real estate, if it becomes overvalued, I would sell for capital gains. It matters little to me what are the tenures of the properties, therefore." Read more...
[/caption]
On REITs and their assets (in Portfolio strategy: Undervalued high yield counters, 22 Feb 10):
"REITs are Real Estate Investment Trusts. Their assets are real estate. Real estate don't depreciate per se.
"Real estate's values would go through ups and downs with the forces of supply and demand which could be linked to the business cycle as well. So, the value of a REIT's assets would be affected similarly.
"I would treat REITs just like any other investment in the stock market. If a REIT becomes over-valued, it might be time to let go."
AND
"Yes, real estate have different tenures and could be leasehold or freehold. A 30 years lease is usually associated with industrial properties in Singapore. Some leases are 30 + 30. There are freehold industrial properties in Singapore as well. Most other types of real estate in Singapore have at least a 99 years lease.
"To say "depreciation of assets is the risk faced by REITs" is not correct per se as it discounts the possibility of REITs owning freehold property. So, if this statement bothers you sufficiently, you want to make sure that the REITs you invest in own only freehold properties. :)
"So, am I bothered? For me, what matter most are value and returns.
"If I buy a property at a price lower than the market value and with returns higher than what is the norm in the market, I have a bargain. it does not matter to me if the property has a 30 years tenure or a 99 years tenure.
"Since I treat REITs like a piece of real estate, I look for value and high returns too. Also, like a piece of real estate, if it becomes overvalued, I would sell for capital gains. It matters little to me what are the tenures of the properties, therefore." Read more...
