Finding Wealth Through REITs

Bobby Jayaraman

In Asia, many still view real estate/properties as a ‘safe’ investment. Today, not only has this trend continued, it has also extended to the area of property-linked equities. And if you haven’t been under a rock or high up in the mountains for the past 15 years, you would have heard of this thing called a Real Estate Investment Trust, or a REIT.

Since 2002, when the first REIT – CapitaLand Mall Trust was listed on the Singapore Exchange (“SGX”), things have exploded. From Finding Wealth Through REITs, there were already 27 REITs listed on SGX with over a market capitalisation of over $40 billion (that’s with a B) back in 2011, and things have only gotten larger! In 2017, there were a total of 32 Singapore REITs (S-REITs), and together with 6 other stapled trusts (not the main point here), they totaled up to whopping $80 billion.

Now, if you are interested to find out more on REITs and not sure where to start, Bobby Jayaraman’s Finding Wealth Through REITs is a pretty good introduction to the world of S-REITs.

For those new to this REIT stuff, this book is definitely for you. And even if you already have a certain degree of REIT and/or investment knowledge, there is a high chance that there is something in there that would interest you; plus, the over 60 pages of S-REIT CEOs is gold.

In short, Finding Wealth Through REITs is good for both investors just starting out in their journey, as well as investors that have already been around the block a couple of times.

The best part (in my opinion), was the section with the S-REIT Chief Executive Officers (“CEO”) interviews. It’s not every day you get to tap into the minds of the management, and not just 1, but 6 of them. Where better to learn about REITs than straight from the horse’s mouth!

What Can I Learn From This Book?

A big plus on our books is that Finding Wealth Through REITs is written in plain, non-fluffy layman terms, meaning to say no talk of standard deviation, beta, efficient frontier, enhanced indexing to ruin your morning.

This book cuts to the chase to give you the lowdown on:

-What a REIT is

-How a REIT differs from other stuff like properties, bonds, perps, etc.

-Misconceptions about REITs (and boy will this set you straight, for example, Perception #1 goes straight to the point of answering one of the top burning REIT questions “Sponsors dump only their weak assets into REITs. Why would they otherwise sell them?” – For instance, why did a savvy developer like CapitaLand sell its assets to a REIT? Get the answer on page 53 (Hint: Win-win situation).

-The different types of REIT out there, i.e. retail, office, industrial, healthcare, etc.

-What to look out for, the stuff that really matters (more below)

-How to value a REIT

So What Are The Stuff To Look Out For?

Here’s a teaser on Chapter 5 – The health of a REIT, in here, Bobby Jayaraman details what is the stuff to look out for, the stuff that really matters.

Some of these key stuff include Gross Revenue, Net property income (“NPI”), Occupancy rate, Rental per square foot, Management fees, Property yield, Dividend yield, Dividend per unit, Financing cost, Debt to equity ratio, Debt to asset ratio, Interest cost, Interest cover, Type of financing, Maturity of financing, Net Asset Value (“NAV”), Track record of rights issue, and many more.

Most of the above is a pretty closely-knit group, coming together to tell us a story. For example (and oversimplifying), the revenue of a mall is simply the occupancy rate x average rental per square foot.

Who is Bobby Jayaraman?

When reading anything, to avoid falling victim to ‘fake news’, we should always look at the source first – to get an idea if it’s legit. And for a book, the background of the author should be a good way to start.

Bobby Jayaraman is the founder of Frunze Investment, a private investment firm. Currently, he is listed as an Investment Director at Falcon Investment Advisors, an independent asset management and advisory firm in Singapore, a registered fund management company with the Monetary Authority of Singapore. Investment experience, check ✓.

Furthermore, Bobby Jayaraman used to sit on the Board of SGX listed Second Chance Properties Limited, a men’s tailoring business that ventured into ready-to-wear clothes (hint: First Lady) which led to property investments. Presently, rental income is the top contributor to Second Chance Properties Limited’s profits. Industry experience, check ✓.

Seems legit enough to me.

What Makes This Book Stand Out?

Like we said, where better to learn than straight from the horse’s mouth.

And with over 60 pages or about 25% of the book dedicated to interviews with the CEOs of top Singapore REITs, Finding Wealth Through REITs is by far my go-to recommendation if any of my friends ask me for an easy-to-read book to learn more about actual operational situations faced by REITs.

Here are some interesting Q&A snippets!

To a question on offices trading at lower cap rate than retail malls: “The risk of operating a mall is actually much higher than operating an office as it requires active involvement in running the mall…

-Lynette Leong (CEO) of CapitaCommercial Trust Management Limited, the Manager of CapitaCommercial Trust, & Ho Mei Peng (Head-Investor Relations)

To a question on the replacement cost of a four-star hotel: “The construction alone would be S$450-S$500 psf for a four-star hotel. If we include everything, the replacement cost should be around S$650,000 per key (per room)…”

-Vincent Yeo (CEO), & Ho Siang Twang, Head (Investments and Investor Relations) of CDL Hospitality Trusts

To a question on the dynamics of healthcare assets, in general, being more stable: “…Hospitals and nursing homes are assets with long-term leases. They are not easily bought and sold and move to other premises…

-Dr. Ronnie Tan (CEO), & Victor Tan (CFO) of First REIT

The 3 other S-REIT CEOs featured are Vivien G. Sitiabudi (CEO) of Lippo Malls Indonesia Retail Trust, Chang Sean Pey (Co-CEO) of Saizen REIT, and Simon Ho (CEO) of CapitaMall Trust Management Limited.

Where Can I Get My Hands On It?

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2 COMMENTS

  1. This is a good Reference Book. If any reader is buying this book, please look out for the “EXPANDED EDITION with a new chapter on REITs and Interest Rates” heading at the top of the book cover. This is the 2014 publication (first published 2012 and reprinted 2013) and, I believe, the latest edition. Given that Interest Rates are normalizing now, this new chapter is timely, relevant and necessary.

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