Metrics to consider

General considerations when investing in a REIT
  • Like any other publicly listed stock, individual investors may buy units in a REIT, which are listed on a stock exchange. It is also possible to get REIT exposure via REIT mutual funds or REIT exchange traded funds (ETFs).
  • REIT shares are priced by the market throughout the trading day on the exchanges they are listed on.
  • Below are some key metrics relating to REITs (in no particular order). The list is not exhaustive and readers should do their own research and due diligence before investing.
Quality and Track Record of Management, Portfolio & Financials

A strong management team displays a good track record of creating value for unitholders. This is demonstrated by a growing DPU, a growing NAV or a combination of the two. For example, a good REIT manager can choose to embark on initiatives to spruce up their older assets in order to improve tenant quality, which in turn creates more value for investors.

Aggregate Leverage (Gearing ) Level

This is the REIT’s debt-to-total property value; leverage. On 16 April 2020, MAS raised the aggregate leverage limit of S-REITs from 45% to 50%.

Price to Net Asset Value (NAV)

A REIT’s NAV is associated with the value of its underlying real estate assets. This ratio gives an indication of whether the REIT is currently overvalued or undervalued with respect to its intrinsic value.

Tenant Mix

whether a REIT has a good mix of tenants from a diverse range of industries and sectors or whether its tenants are from largely similar sectors.

Occupancy Rate

In general, higher occupancy rates in a property would indicate there is rental demand for the property.

Weighted Average Lease Expiry (WALE)

REITs with longer WALEs face a lower risk of vacancy. However, it is possible that such REITs may not be able to negotiate for higher rents when market rents increase.

Lease Expiry Profile

A well staggered lease expiry profile will minimise the amount of leases that are slated to expire in any given year, thereby reducing vacancy risks.

Debt Expiry Profile

A well-staggered debt expiry profile allows for more time for a REIT to plan for refinancing its debts or to raise sufficient funds to gradually pay-off those debts.