Here are some reasons why REITS and a rising interest rate environment have the chemistry of a divorced couple. Reduced Dividends.  The main reason why people buy REITS is their relatively high dividend yield since REITS are obliged to distribute at least 90% of income to enjoy tax transparency under the Income Tax act. Interest expense naturally rises along with interest rates, impacting the bottom line and hence the amount of dividends paid as well. Ultimately, the volatility of interest expenses depends on the nature of the debt whether it is based on floating or fixed interest rates. Higher Gearing Ratio. For a REIT, gearing ratio is the total borrows divided by total assets. In Singapore, REITS without a credit rating from rating agencies have to cap their gearing ratio to below 35%, otherwise they will be able to exceed 35% up to a maximum of 60%. In a ......