The financial reporting period for REITs has almost come to a close. One of my biggest worries in the COVID-19 fallout is the devaluation of assets held by REITs, which could lead to their aggregate leverage ratios rising above the regulatory limit and needing to carry out massive rights issues. So far, this worry has not materialised. The 2 REITs that had to carry out massive rights issues are Lippo Malls and First Reit, both of which are related to financial difficulties at their sponsors, Lippo Karawaci.

Among the various REIT asset classes, hospitality trusts (HTs) are at most risks because international tourism has largely been decimated by border closures to control the spread of COVID-19. Both occupancy and room rates took a dive, resulting in significantly reduced revenue. Ancilliary facilities like restaurants, banquet halls and convention rooms, etc. did no better as governments imposed lockdowns and stringent safe distancing measures.