Real Estate Investment Trusts (REITs) Simplified.
A product that provides a fixed income that is better than FD +an upside like equity.
A Thread 🧵👇
In listed REITs, Most of the completed properties are pre-leased to big companies.
Why no residential? As yields of 1-3% make them unattractive to investors.
REITs have to distribute at least 90% of their taxable income to their shareholders.
All 3 listed REITs trade at 6-7% dividend yield (which is also tax-free)
What about debt then? There's a restriction there too.
Not more than 49% of the total equity.
REITs are traded on the exchange (like stocks). Yes, Instant liquidity in a very illiquid product (Bulky Commercial Real Estate)
An investor can take part by buying 200 units at a time (60-70k rupees)
Under the current structure, Dividends remain tax-free (6-7% yields vs pre-tax FD yield of 5%)
On capital gains, while selling your units:
STCG of 15% on gains (if sold in less than 3 years)
LTCG of 10% on gains (if sold after 3 years)
US REITs have 5 decades of history behind them & they have continued to outperform the broader equity markets
Interesting fact: the US has 194 listed REITs with a combined market cap of $1.3Trillion.
This leaves an upside potential once contracts expire.
Moreover, REITs have contractual escalations of 10-15% every 3-5 years.
Directly buying RE? Get ready for 👇
- Huge Ticket Size (vs limited capital)
- Hassle of managing operational cost
- No valid data source
- Illiquid investment with high transaction costs
- Committed Occupancy & collections efficiency (higher the better)
- Weighted Average Lease Expiry (WALE)
- Sector Concentration (lesser the better) & Quality of tenants
- Healthy Balance Sheet
- Upcoming portfolio
Let us know your insights in the comments section.
No (in the context of India)
- Rents are a fraction of global rents
- Indian Outsourcing is a big opportunity given the resilience & performance in COVID
- Young Population needs direction via physical interactions.
Commercial RE supply is hit, especially for Single Building Projects, Speculative construction, Strata Title assets
& Most are facing a cash crunch.
Great for future rent scenario, if demand increases.
- Slowdown in Commercial RE (follow vacancies)
- Oversupply: Renegotiation at lower rates
- Concentration risks (tenant & location wise)
- Difference b/w REIT yield & FD rate
- Broader stock market movements will have an impact on unit price
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"I guess it's impossible and I'll never break into the industry."
MAKE PRODUCTS.
Courtesy of @edbrisson's wonderful thread on breaking into comics – https://t.co/TgNblNSCBj – here is why the same applies to Product Management, too.
There is no better way of learning the craft of product, or proving your potential to employers, than just doing it.
You do not need anybody's permission. We don't have diplomas, nor doctorates. We can barely agree on a single standard of what a Product Manager is supposed to do.
But – there is at least one blindingly obvious industry consensus – a Product Manager makes Products.
And they don't need to be kept at the exact right temperature, given endless resource, or carefully protected in order to do this.
They find their own way.
make products.
"If only someone would tell me how I can get a startup to notice me."
Make Products.
"I guess it's impossible and I'll never break into the industry."
MAKE PRODUCTS.
Courtesy of @edbrisson's wonderful thread on breaking into comics – https://t.co/TgNblNSCBj – here is why the same applies to Product Management, too.
"I really want to break into comics"
— Ed Brisson (@edbrisson) December 4, 2018
make comics.
"If only someone would tell me how I can get an editor to notice me."
Make Comics.
"I guess it's impossible and I'll never break into the industry."
MAKE COMICS.
There is no better way of learning the craft of product, or proving your potential to employers, than just doing it.
You do not need anybody's permission. We don't have diplomas, nor doctorates. We can barely agree on a single standard of what a Product Manager is supposed to do.
But – there is at least one blindingly obvious industry consensus – a Product Manager makes Products.
And they don't need to be kept at the exact right temperature, given endless resource, or carefully protected in order to do this.
They find their own way.