Elite Commercial REIT has all the right metrics you would look for in a worthy Reit to invest in. Great looking yield, long wale, low debt to asset, freehold property and a tenant that looks like someone who you expect to be the last to default on their rent.
This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.
Sometimes it is either I overthink things or that I am absolutely right to be a little more skeptical.
Private equity firm Elite Partners is looking to IPO Elite Commercial Reit. A lot of the context for how to look at this REIT is shaped by the people associated with supporting this REIT.
My mode is wary for two reasons:
- The guys working on these deals try to sense the market and priced it accordingly. At this point (23 Jan), we don’t even have a sensing what is the range of yield we will get. It feels to me they are trying to gauge interest from the larger investors to see how to price this. If this REIT has high-quality assets yet the IPO prices the REIT at a high yield, either the banks advising and the people themselves have a lack of confidence or that there is something we don’t know about this portfolio
- The people behind it
That said, it doesn’t mean I am always right in the short term. …
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The US Federal Reserve just announced the second Interest Rate Hike in 2018. And it hints at least another 2 more hikes for the later part of the year.
With the increase of interest rates by 25 basis points from the FOMC meeting yesterday, the current federal funds rate is now at 2%.
The Federal Reserve signaled it will raise rates to 2.5 percent in 2018, 3.0 percent in 2019, and 3.5 percent in 2020.
Singapore manages an exchange rate based monetary policy, pegging the Singapore Dollar to a basket of currencies, which the US Dollar is a primary component. This explains why US interest rates have a strong positive correlation with Singapore’s interest rates as seen in the chart below:
What does this mean for Real Estate Investment Trusts? (REITs)
As REITs require borrowing to develop properties, a rise in interest rates would essentially mean a rise in the cost of borrowing. A higher cost of borrowing would mean that REITs are taking a higher risk of default.
The FTSE S-REIT Index has also began to show a sell down since the beginning of the year, when there was the first Fed rate hike of 2018. The FTSE S-REIT consists of 31 SGX-listed REITs. …
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