There’s an article about how REITs in Malaysia will face a tough time moving forward. The full article in TheStar here: Tough Times for REITs Some points within the article on why it’s becoming tougher is because there are many malls which will be struggling to sustain their tenants. The top tier malls would continue to do well but the secondary ones would suffer. The article also shared that 11 out of 18 REITs have showed a growth in terms of returns of 2% and 10%. Two Office REITs have been top gainers at 6.66 percent and 5.83 percent respectively. IGB REIT leads in the retail segment with a 7.62 percent gain. As per data from Bloomberg, yields remain within a decent range of between 5% and 7% for most retail and office oriented REITs. (To understand REITs before we buy, look at what are the properties that the REITs are holding. Then visit all its properties during the weekday for offices and during the weekends for retail. If what we saw is encouraging, it’s time to buy more of the same counter and then continue to wait for dividends…) Full article here: Tough Time for REITs
Since we now know that REITs are not likely to be exciting, what happens next? Well, my personal view is this. If we want to invest in something exciting, where the price can go up on a daily basis, there’s the Bursa Malaysia. Sometimes, we may just get lucky with the stock that we buy and it goes up especially when many people have the same idea as us. As usual, the stock price may also be dropping and that’s not a great news. There’s another option, less exciting but definitely more stable where the dividends are concerned. These are the Real Estate Investment Trusts. My friend, Leigh has a good write up about it. Read it here: DividendMagic.com.my They are designed in such a way that anyone who wants to own a mall for example can now buy a small piece of the mall’s potential. As long as the mall does well, the rental for the retailers can rise on a yearly basis and the dividends declared would become better over the years. If we prefer an office building instead, then buy a REIT which is focusing on office rentals. Buy REITs for the reasons why REITs came about. It’s definitely not going to suddenly rise up to reach the moon…….. 😛
Of course, during good times, there’s also the potential that from all the profits gained, the REIT fund manager may use it to buy another property and this would generate higher profits over a longer period of time. Note though that these take time and this is the reason why REITs will not be as exciting as the usual stock counters. Besides during good times, the availability of good new assets which are undervalued would also be lower too. Happy investing and waiting for dividends from REITs. Else, for exciting times, let’s rely on something else. In fact despite taking much more time, property investment may just yield more excitement where returns are concerned. Cheers.
written on 22 April 2017
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