Hey Fritz great guide. Looking forward to the post about Hong Kong.
In what scenarios would you choose a REIT over a listed company whose principle business are real estate holdings? What are the key metrics that are different vs REITSs? Ie trading yield less important?
What do you think about using REITs/real estate businesses as a proxy for playing a rebound in investor enthusiasm for a particular market (for example HK and SG)
Could you give more details about calculating replacement cost?
Honestly, I think you'd want an internal management team. Some REITs have that, though not in Singapore. If I had to invest in Singapore REITs, perhaps I'd go with a sponsor rather than the REITs themselves. I do think that CapitaLand India REIT has pretty attractive assets though. Tempted to buy that.
My own calculus is to think about the total return, which includes not just the dividend yield, but also DPU or DPS growth. For real estate holding companies, like those in Hong Kong, I'd also have to think about the payout ratio, which could of course rise in some instances.
I think the timing for real estate is almost perfect right now, as interest rates are likely to start dropping in a matter of days. Commercial real estate rents are still dropping in Hong Kong and in several other countries. But hospitality should be fine, as should retail. So in Hong Kong's case, I can imagine that the Price/Book multiple is going to go up for certain companies, too, including MTR Corporation and Tai Cheung. We'll see whether the interest rate cuts can help property prices bottom.
Replacement cost will be about looking at transaction values for land, and then adding on a typical construction cost per square foot. I think CBRE and such companies can provide estimates of that. Not sure if it's worth going through the effort, though.
Thanks! I didn't know the answer to your questions, so I asked AI chatbot Perplexity and got the following answer:
"No, Singapore S-REITs are not considered Passive Foreign Investment Companies (PFICs) for US tax purposes.... S-REITs are not considered unit trusts in the US, so the PFIC rules do not apply to them. The PFIC rules are targeted at certain foreign investment vehicles that are not publicly traded."
I'm not completely sure that the chatbot is correct in this instance, though, so it may be worth double checking with a tax specialist!
Excellent guide. A small nuance to the tax benefits. The 10% rate is for non-resident, non-
individuals unit holders such as foreign funds and investment companies. Individual unit holders do not pay any withholding tax, whether they reside in Singapore or abroad.
Hey Fritz great guide. Looking forward to the post about Hong Kong.
In what scenarios would you choose a REIT over a listed company whose principle business are real estate holdings? What are the key metrics that are different vs REITSs? Ie trading yield less important?
What do you think about using REITs/real estate businesses as a proxy for playing a rebound in investor enthusiasm for a particular market (for example HK and SG)
Could you give more details about calculating replacement cost?
Thanks !
Honestly, I think you'd want an internal management team. Some REITs have that, though not in Singapore. If I had to invest in Singapore REITs, perhaps I'd go with a sponsor rather than the REITs themselves. I do think that CapitaLand India REIT has pretty attractive assets though. Tempted to buy that.
My own calculus is to think about the total return, which includes not just the dividend yield, but also DPU or DPS growth. For real estate holding companies, like those in Hong Kong, I'd also have to think about the payout ratio, which could of course rise in some instances.
I think the timing for real estate is almost perfect right now, as interest rates are likely to start dropping in a matter of days. Commercial real estate rents are still dropping in Hong Kong and in several other countries. But hospitality should be fine, as should retail. So in Hong Kong's case, I can imagine that the Price/Book multiple is going to go up for certain companies, too, including MTR Corporation and Tai Cheung. We'll see whether the interest rate cuts can help property prices bottom.
Replacement cost will be about looking at transaction values for land, and then adding on a typical construction cost per square foot. I think CBRE and such companies can provide estimates of that. Not sure if it's worth going through the effort, though.
Fantastic guide. Big question for me, as a US tax payer are S-reits PFICS? I think they are which would make them challenging to own
Thanks! I didn't know the answer to your questions, so I asked AI chatbot Perplexity and got the following answer:
"No, Singapore S-REITs are not considered Passive Foreign Investment Companies (PFICs) for US tax purposes.... S-REITs are not considered unit trusts in the US, so the PFIC rules do not apply to them. The PFIC rules are targeted at certain foreign investment vehicles that are not publicly traded."
I'm not completely sure that the chatbot is correct in this instance, though, so it may be worth double checking with a tax specialist!
Excellent guide. A small nuance to the tax benefits. The 10% rate is for non-resident, non-
individuals unit holders such as foreign funds and investment companies. Individual unit holders do not pay any withholding tax, whether they reside in Singapore or abroad.
Thanks Jake
Outstanding work. A suggestion: use actual SGX listing tickers instead of BBG tickers, for those who despise Michael Bloomberg and his hypocrisy.
Thanks Trident. I've changed all tickers into the SGX format for an easier read.
good stuff
Excellent work ! well done, Michael !!