REITs – Lim and Tan

• A BT columnist’s piece on Saturday The Reit Myth Busted is interesting, especially amid the K-Reit controversy.

• The CapitamallTrust (CMT) illustration shows a unit holder having to fork out $1549 taking up all of his rights entitlements since the 2002 listing, vs distributions received of $1264, for a net outflow of $285.

• What is however interesting is that total shareholders return since 2002, a far more important metric in our opinion, is 127.2%.

• There is as such no need to consider what if he / she chose not to take up all rights entitlements, by selling their nil-paid rights.

• The weekend piece serves one useful purpose: drawing attention to the need for some tweaking of rules governing the sector, before more damage should be inflicted on the carefully nurtured sector.

• For a start, it is high time the regulators re-looked at how reit managers are compensated, for sure not based on the size of portfolio.

• So have they to re-look at Income Support, which was seen in K-Reit’s latest purchase of Ocean Financial Centre /, and before it (as did Suntec Reit), 1/3 stake of One Raffles Quay, and Marina Bay Financial Centre Towers 1&2 / Marina Bay Mall Link; CapitaCommercial Trust buying One George Street.

• We believe selected S-Reits are attractive, eg Fraser Centrepoint Trust (FCT), Mapletree Commercial Trust (MCT, albeit showing negative 1.8% total return since listing late 2010), Parkway Life. (We also favor City Spring, an infrastructure business trust, probably the worst performer in the sub-sector.).