Thanks to Real Estate Investment Trusts ETF and Straits Trading, investors will be able to track REITS outside of Australia, Japan and New Zealand. Therefore, investors will be able to get greater exposure to these REITS in Asia. In addition, they’ll have another option on the Singapore Exchange.
This particular ETF is benchmarked to the FTSE Russell Epra/Nareit Asia ex-Japan Net Total Return REIT Index; which forms part the benchmark which is used for ETFs. It has approximately US$10 billion (S$14 billion) in funds tracking it. The underlying portfolio of the ETF, according to Phillip Yeo, head of International Product at Nikko AM, is to deliver a gross yield of approximately 6 percent. this is based on Bloomberg’s forward yield weighted average calculation for the 23 REITs. He further believes that the fund should be able to “deliver at least a 5 per cent yield fairly regularly, in line with Epra/Nareit Index’s historical range of 5 to 6 per cent.”
Meanwhile the status of REITs in Singapore is changing from when they used to be incredibly popular due to their reputation for high yields, property and steady income. Now though, trust holders are not faring as well since the industry does not look all that good. Even though indicated dividend yields remain untouched as return on assets dip. Still, if the REITs can pay out the large dividends that the investors are hoping for, this is only because of leverage.
Ultimately though, Christopher Langner concluded: “The outcome may not be so bad, simply because there are stronger REITs and potential buyers of those very assets, in spite of their dwindling returns. It’s almost a rule of thumb among Singapore bankers that once a REIT’s shares trade below 70 percent of net asset value, it’s just a matter of time before a buyer comes in.” It is that which investors have to hang on to.