I notice that generally REITs are highly leverage in nature. Hence, they have huge finance cost which is substantial as compared to net property income.
How do you see this as a risk to REITs?
In essence, REITs in Singapore are exempted from tax if the Trust distribute at least 90% of the distributable incomes to unit holders. The Trust also has a gearing limit up to 45% of total assets (without requirement for credit rating) and can only undertake property development activities up to 25% of its investment properties. You can read the initial guidelines at Monetary Authority of Singapore and changes to the REIT’s guidelines (last year) here.
The Investment Quadrant taught here is mainly for growth companies and may not be suitable to analyse REITs as the Trust is a very unique animal and we cover them greater depth at Dividend Machine.
Please login or Register to submit your answer