The Reit Myth Busted

Reits are good income-yielding instruments is but a myth; The thing is, whatever they pay out in dividends, they will take back - all and more - a few years later in the form of rights issues

By Teh Hooi Ling, Senior Correspondent

Monday, Nov 28, 2011
The Business Times

	Myth busted
	Cash distributions versus cash calls of Reits and business trusts
	Reits	IPO Date	Initial Capital Outlay ($)	Subsequent Cash Calls ($)	Total Capital Outlay ($)	Dividends Received ($)	Market Value of Holdings ($)	Return on Capital (%)
	CapitaCommercial Trust	May 11, 2004	0	-8,155	-8,155	6,687	23,100	265.3
	CapitaMall Trust	Jul 17, 2002	-960	-1,549	-2,509	1,264	4,437	127.2
	Frasers Centrepoint Trust	Jul 5, 2006	-1,030	0	-1,030	322	1,450	72.0
	Ascendas Reit	Nov 19, 2002	-880	-589	-1,469	1,150	1,352	70.3
	Suntec Reit	Dec 9, 2004	-1,000	0	-1,000	518	1,130	64.8
	First Reit	Dec 11, 2006	-710	-625	-1,335	410	1,755	62.2
	ParkwayLife Reit	Aug 23, 2007	-1,280	0	-1,280	281	1,795	62.2
	Ascott Residence Trust	Mar 31, 2006	-6,800	-3,888	-10,688	4,063	12,870	58.4
	Frasers Commercial Trust	Mar 30, 2006	0	-815	-815	398	846	52.6
	Mapletree Logistics Trust	Jul 28, 2005	-680	-662	-1,342	484	1,550	51.6
	Fortune Reit (HK$)	Aug 12, 2003	-4,750	-3,142	-7,892	3,265	7,744	39.5
	CapitaRetail China Trust	Dec 8, 2006	-1,130	0	-1,130	351	1,150	32.8
	Cache Logistics Trust	Apr 12, 2010	-880	0	-880	97	950	19.0
	Mapletree Industrial Trust	Oct 21, 2010	-930	0	-930	8	1,060	14.8
	Starhill Global Reit	Sep 20, 2005	-980	-350	-1,330	369	1,150	14.2
	K-Reit Asia	Apr 28, 2006	0	-8,399	-8,399	1,110	8,369	12.9
	Cambridge Industrial Trust	Jul 25, 2006	-680	-82	-762	205	587	3.9
	Mapletree Commercial Trust	Apr 27, 2011	-880	0	-880	19	845	-1.8
	Sabana Reit	Nov 26, 2010	-1,050	0	-1,050	61	870	-11.3
	LippoMalls Indo Retail Trust	Nov 19, 2007	-800	-310	-1,110	173	730	-18.6
	AIMS AMP Cap Ind Reit	na	0	-481	-481	301	0	-37.4
	Saizen Reit	Nov 9, 2007	-1,000	-82	-1,082	71	267	-68.8
	Notes: Assume 1,000 units were purchased at IPO, except for Ascott and CapitaCommercial where 10,000 units were purchased.

(Attribution: Table reconstructed by Investor Lightyear, data source from BT.)

Key article highlights:

• Reits are not the perfect income-yielding investment. They took back more from investors through rights issues than its dividends paid.
• 17 Reits with listing history ≥ four years on the Singapore Exchange (shaded in grey) were reviewed.
• Frasers Centrepoint Trust, Parkway Life Reit and CapitaRetail China made no cash calls.
• Suntec Reit, instead of rights issues, did private placements of discounted new units that diluted existing unitholders' stake.
• The remaining 13 had rights issues, and some made several cash calls.
• Reit managers and unitholders' interests may be misaligned as the former is motivated to earn more management fees by expanding the portfolio size.
• Nonetheless, most Reits achieved positive total returns for investors through dividends paid and capital appreciation.

My take? Reits should not be cast aside. I believe buying the right Reit at the right price and time could be one rewarding strategy for investors.