As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Wednesday, 24 November 2010

REITs. Simply explained! (6)

Read? Why REITs and Business Trust are not always good investments

Reproduced part of it here:

"Investors should not harbour any delusions that REITs are created primarily for their benefit. REITs are created first and foremost to help owners dispose of unwanted assets.


As a general rule, the best assets do not get sold into a REIT, they are held forever by the original owner. From a purely rational perspective, REITs are simply a convenient dumping ground to offload undesirable assets to a gullible public. An outright sale would be difficult since the buyer would likely do due diligence and negotiate a discount for lousy assets. But the public can be convinced to buy anything in a bull market. In fact very little convincing is needed – the public is happy to convince itself, especially in today’s low-interest rate environment.


Sponsored trusts are created to help owners divest unwanted assets. The management fees are just a bonus.


Non-sponsored trusts are created primarily for the management fees."


Read? REITs. Simply explained! (5)

Capitaland and its six REITs

At CPL Celebrating 10 Years Investors Day, someone asked the Horse: "Should I buy CPL or its REITs?"
 
The Horse replied: "Depending what you want. You want growth with some income buy CPL. If you want income only then buy REITs."
 
More understanding from the Horse's Mouth
 
"CPL is actively re-cycling its capital to maximize returns to its shareholders. When a piece of its properties has become MATURED it will then offload it into one of its REITS to recover its capital and to look for better investment yield by taking higher risks"
 
Why not simply ask any experienced private property investors, will they invest in matured properties just for their rental yield? What can you expect from their answers, good or bad?

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