Metrics to consider
- 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.
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.
This is the REIT’s debt-to-total property value; leverage. S-REITs have a regulated gearing limit of 45%.
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.
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.
In general, higher occupancy rates in a property would indicate there is rental demand for the property.
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.
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.
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.