On 26 July, I blogged about a 16.4% increase in First REIT’s DPU. That was due primarily to contributions from 4 newly acquired properties. So, a continuation of the higher DPU through the quarter that ended 30 September should not come as a surprise.

Sometimes, in REITs, we see increases in net property income and distributable income but a lower or stagnant DPU. Of course, if the gearing level should be significantly reduced, it could be acceptable. Otherwise, all else being equal, it just means that we had an incompetent management.

When I initially invested in First REIT years ago, it had a relatively low gearing ratio. It was a bit more than 10%. Now, it is above 30%. So, the higher DPU has been achieved by leveraging up. Now, I am not saying that this is a bad thing.

However, to continue growing through acquisitions is going to be more …