While investors are hunting for yield, what many do not realise is that our local REITs are not strong choices to earn income, what's more many of these Singapore properties are valued at very high and optimistic rates that if something bad occurs, many of these REITs will breach MAS regulations and are unable to borrow further. Let's use an example of Suntec REIT to explain. Concept of Capitilisation Rates ("Cap Rate") Cap Rate is an important concept when it comes to understanding a REIT. It is used as the discount rate to present value the expected future income received of a building to today. Roughly Building A which is valued at 4% as cap rate will be double the value of building B which is valued at 8% cap rate, even though both Buildings A and B have the same amount of rental income earned. Hence, the higher the cap rate, the lower the value of the building. It is similar to...