REITS: \'Please weigh the risks!\'

US REITs might pay dividends in stock to save cash. Real Estate Investment trusts (REITs) in the US are looking this year to pay more of their dividends in stock to save around USD 10 billion (S$15.05 billion) in cash. Bloomberg reports that an estimated 70 companies out of 100 are likely to go down this route. REITs ballooned into a USD 465 billion industry by distributing profits to investors in cash. But debt is falling with little hope of credit for commercial propertu anytime soon.Analysts reckon REITs could save USD 10 billion this year by paying 90% of dividends with stock. New York-based Vornado Realty Trust -- the third largest US REIT by market value-- has said it would pay up to 60% of its next quarterly dividend with stock. Vornado aims to save USD 390 million cash this year. US REITs will pay out USD 11 billion in cash dividends this year and in 2010. This combined USD 22 billion is equal to more than 40% of debt due in the next two years. Paying dividends with stock would allow REITs to hold on to cash while meeting the government\'s requirements to pay out 90% of their taxable income to shareholders.

Cracks are beginning to show at the weaker REITS. No distribution from Saizen Reit for Q2 By UMA SHANKARI SAIZEN Real Estate Investment Trust (Saizen Reit) yesterday said that it will not be giving out any distribution for its FY2009 second quarter. \'In view of the current uncertain credit environment and the maturity schedule of Saizen Reit\'s loans, the board believes it will be prudent for Saizen Reit to conserve cash at this juncture. As a temporary measure, the board therefore does not propose to declare any distribution for Q2 2009,\' the Reit told the Singapore Exchange. Saizen Reit, listed on the Singapore Exchange in November 2007, invests in Japanese regional residential properties. The Reit reported that income attributable to its unitholders for the three months ended Dec 31, 2008 (Q2 2009) came to 214.7 million yen (S$3.5 million). In Q2 the previous year, Saizen Reit recorded income attributable to its unitholders of negative 565.2 million yen on the back of high IPO expenses. Due to an increase in the size of the Reit\'s property portfolio, gross revenue and net property income rose by 24.5 per cent and 24.7 per cent respectively in Q2 2009 compared to a year ago. Saizen Reit has a total of 5.28 billion yen of loans due in the first half of 2009. The Reit said that while it has sufficient cash resources on hand to fully repay that amount, it has a further 13.40 billion yen of loans due in November and December 2009. \'Discussions with various potential lenders on their refinancing is ongoing,\' it informed. To facilitate and improve the likelihood of refinancing, the Reit\'s manager in December 2008 announced a proposed rights-cum-warrants issue to strengthen the Reit\'s capital base. Documentation of the rights-cum-warrants issue is in progress and regulatory clearance is now being obtained, it said. The relevant EGM could be convened in or around end-March or early-April 2009. On Jan 13, the manager further proposed a scrip-only dividend scheme, subject to unitholders\' approval, \'to provide the flexibility for Saizen Reit to pay out part or whole of a dividend by way of new scrip dividend units (in the event that a dividend is announced) and allows cash to be conserved for loan repayments\'. Yesterday, the trust said that the payment of dividends in the form of units will be a \'temporary measure to conserve cash during this uncertain period\'. Saizen Reit will resume its dividend payment in the form of cash once the loan refinancing issues are resolved, it said. Looking ahead, the trust said that while deteriorating economic conditions have resulted in increased leasing competition in certain cities, the negative impact on portfolio\'s occupancies and operations have been relatively subdued as Saizen Reit\'s portfolio properties cater to the local mass market segment instead of the high-end or expatriate markets

UBS cuts DPU forecasts for retail Reits by 30% It sees retail sales here sliding 4-5%; rents falling due to space oversupply By UMA SHANKARI SINGAPORE) Retail sales here could slide 4-5 per cent this year, says UBS Investment Research, which has also cut its distribution forecasts for Singapore\'s retail trusts by up to 30 per cent. Too much premium space, for now: There is an unprecedented supply of new retail space coming up, especially in the Orchard Road area. UBS reckons overall retail space supply could rise 11 per cent in 2009-2011, with Orchard Road supply up 37 per cent After several downgrades, UBS economists now expect Singapore\'s GDP to shrink 3 per cent and inflation to fall to 0-1.5 per cent this year, saying that this will hit retail spending and rents. In the past, retail sales correlated with GDP growth, UBS says. In the 2001 recession, they weakened 2.2 per cent, in line with a GDP contraction of 2.3 per cent. And rents in the central area fell 19 and 14 per cent in the 1998 and 2001 recessions respectively. \'As a recession of minus-3 to minus-4 per cent is expected for 2009, we expect retail sales to fall around 4-5 per cent before recovering to 3 per cent a year in 2010-2012,\' UBS says in a report issued on Friday last week. Previously, when retail sales declined during recessions, the supply of new retail space was limited, providing support for rents, UBS says. But, as well as the current weak economic climate, there is an unprecedented supply of new retail space coming up, especially in the Orchard Road area. UBS reckons overall retail space supply could rise 11 per cent in 2009-2011, with Orchard Road supply up by 37 per cent. \'As a result, we now expect retail signing rents to fall 8 per cent in 2009-2010 in the suburban areas, and around 23 per cent in 2009-2010 in the Orchard Road area,\' it says. So far, Singapore-listed real estate investment trusts (S-Reits) have not seen a substantial drop in retail sales at their malls, UBS notes. But discretionary sales could deteriorate, it says. \'We expect the impact to be limited for the suburban portfolios but materially negative for central area malls, mainly due to high supply.\' Based on the current trade mix, UBS reckons suburban malls will be less affected by weakening retail sales. With this in mind, it has cut its distribution per unit (DPU) forecasts for Singapore retail Reits by up to 30 per cent this year and 40 per cent in 2012. UBS has \'buy\' calls on four retail S-Reits - CapitaMall Trust, Suntec Reit, Starhill Global Reit and Frasers Centrepoint Trust.

Anybody read the speech by Lim Hwee Hua? She is telling the REIT managers to shut up and don\'t act like a crybaby. It\'s time they played by the rules of the game. Shiok Man!!

Published February 21, 2009 It\'s status quo for Reits on payout ratio Government\'s stand is to preserve the stable, high-payout characteristics of the trusts, says minister By KALPANA RASHIWALA IT\'S official. The authorities will not be lowering the minimum payout ratio that real estate investment trusts (Reits) must meet to qualify for tax transparency treatment. MRS LIM \'It is unrealistic for S-Reits to expect to have continued access to cheap and easy credit during this recession.\' Spelling out the government\'s stand, Senior Minister of State for Finance and Transport Lim Hwee Hua said at a Reits seminar yesterday: \'The key characteristics of Reits as a stable, high-payout, pass-through vehicle are important considerations for investors, and hence, must be preserved.\' \'Ministry of Finance and Monetary Authority of Singapore have deliberated this issue and have decided that the minimum payout ratio would not be changed,\' she added. Yesterday\'s official pronouncement on the topic confirms earlier BT reports. Under current guidelines, Reits have to distribute to unitholders at least 90 per cent of their distributable income, in order to enjoy tax transparency, which means exemption from paying corporate tax at the Reit/vehicle, on the portion of income they distribute. \'While we appreciate the refinancing difficulties faced by Reits, there are, at present, no strong grounds to justify a special tax treatment for Reits that is not made available to other entities,\' Mrs Lim said at a seminar organised by the Asian Public Real Estate Association (Aprea). She noted that a few Singapore Reits have already managed to secure refinancing either through bank loans, loans from sponsors or recapitalisation, albeit at a higher cost. \'It is unrealistic for S-Reits to expect to have continued access to cheap and easy credit during this recession,\' Mrs Lim commented. BT reported last month that some Reit managers had urged the government to trim the minimum payout to unitholders to as low as 50 per cent of distributable income, while still allowing Reits to enjoy tax transparency. The proposals were meant to help Reits - especially smaller ones - conserve cash. But they sparked concerns that Reit investors, especially institutional players like funds who count on the certainty of a regulated minimum distribution from their investments in the S-Reit sector, may pull out from this market if this rudimentary attraction of S-Reits disappears. The issue of fairness also surfaced. It was asked why Reits enjoy special treatment when many other listed companies also return a chunk of their profits to shareholders but still have to pay corporate taxes. Mapletree Logistics Trust\'s deputy CEO Richard Lai welcomed yesterday\'s official pronouncement. \'We have never agreed with any move to reduce the distribution payout ratio because it will destroy investors\' confidence and consequently tarnish the S-Reit market. S-Reit is a special play for investors and reducing the payout ratio would definitely bring into question the very existence of Reits. Why do we need Reits if they don\'t have the discipline to maintain high payout ratios?\' However, Securities Investors Association of Singapore president and CEO David Gerald said: \'The 90 per cent rule means that a Reit is always geared. If there is a reserve, the Reit can face economic downturn or financial crisis confidently as banks may not be willing to lend. For this reason, I am not in favour of the authorities insisting that the 90 per cent level be maintained as that may affect the liquidity of a Reit, especially in these bad times.\' Mapletree\'s Mr Lai suggests that to conserve cash, Reits could give investors the option to receive their distributions in the form of new units issued, instead of cash. \'That could be dilutive but unitholders who support you would understand, whereas if you seek to reduce the payout ratio, you\'d be destroying the very nature of having Reits,\' he added. In her speech, Mrs Lim said: \'With the credit crunch, many businesses across various sectors are faced with similar refinancing difficulties that S-Reits are facing.\' She noted that the government has introduced measures in last month\'s Budget to stimulate businesses, including $5.8 billion of measures to stimulate bank lending such as the Special Risk-Sharing Initiative. In addition, S-Reits can also tap measures announced recently by Singapore Exchange to facilitate listed issuers\' secondary fund-raising efforts. \'SGX will continue to explore other initiatives to facilitate secondary fund raising, including the Australian accelerated rights issue structure, which requires a more detailed study,\' Mrs Lim added.

CDL seems to be very cheap...not vested nor on my radar but I remember back in \'06 or \'07 there was so much euphoria that it manage to raise new capital at 3.50 of thereof!! After that the price continue to soar above 4+...now $$0.5...huh! How much lower...shit if this gets cut in half or even 30% from this level it gonna get really incredibly cheap and then all of us can become hotel owners!!