ValuePickr Forum

Real Estate Investment Trusts

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Have not gone through in detail on embassy reit documents though I plan to in the coming days. However, I do concur that the yield of 8.5% is quite low when compared to the risk free rate. I believe the 8.5% yield is contributed not only through the underlying rental income but also through some money parked in some investments by the reit and I think it is this investment that is keeping the overall yield low.

Any reasons as to why money is parked in some investments? Is this due the hitherto low demand seen in commercial real estate? Is this money likely to be deployed in future as the commercial real estate market improves?

Any comparisons done with real estate reits listed in Singapore or hongkong?

Few more offers lined up now .

  • Brookfield assets
  • Blaskstone Mind-space - already subscribed 59%.

Disc: own Embassy REIT in yield part of PF

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Nice overview of Mindspace REIT

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May be you could brush up your knowledge of capital market subject covered in 1st year MBA or level 1 CFA exam since the reasons of listing are the same for a company or REIT. Stocks provide capital appreciation and dividends and REITs too offer the same i.e. capital growth through valuation and distribution (div, rent or interest). If you are really interested in the instrument, you could go through the Embassy IPO offer doc. Well, Blackstone would like to have an option to liquidate their holding since their end investors are not native of this place and listing provides price discovery. And, this is not a FD but you become proportionate owner as an unit holder.

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Have a question for the REIT experts

The REIT distribution to unit holders is in three buckets (1) Interest (2) Dividends (3) Ammortization of Debt.

My question is how does the REIT decide how to proportion proceeds from the SPV’s to these three buckets. I’m unable to find the formula.

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You can refer to this link. https://s2.q4cdn.com/482484005/files/doc_downloads/2020/05/Embassy-REIT_FAQ’s_May-19-2020.pdf

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Two very informative articles…

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https://www.livemint.com/money/personal-finance/kotak-mf-s-international-fund-is-a-targeted-play-on-real-estate-in-east-asia-oz-11607335473782.html

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I think you have mentioned some very great points significant for long term investments in REITs. As a matter of fact the sponsors (which can be akin to Promoters) can have very low holdings in REITs.
Also, I went through a video of one leading PMS on REIT and the person when questioned on the corporate governance of REITs mentioned that it is not that significant as REITs are like Mutual Funds.

On deeper thinking, I see them as very different than MF. Some reasons you have rightly pointed out. Also, some points that I can think of -

  1. An HDFC MF would not invest in their own schemes. Moreover, as a MF investor, I pay expense ratio to the AMC to manage my money. The managers of the AMC work for me as they are paid by my expense ratio…In case of REITs - the managers work for whom?
  2. Also, these REITs are mostly sponsored by real estate builders. Can we really trust the corporate governance and the management for long term?
  3. MF NAV is calculated based on the share prices of shares they own. This individual share price is market discovered and tickers 24*7 on the business channel screen and can be followed on daily basis. What is authenticity of NAV for REITs? How accurate are those people/institutions who value REITs? Who are those institutions and what process they follow and how can we be sure that those are correct processes and as per global standards. In past, monthly NAV (i.e. if published monthly) has how much volatility?
  4. I read somewhere that REITs can be valued based rental yields but I feel that this is not a good/ful-prrof way of valuing the Real Estate asset. Rental yields/occupancy can be affected by multiple factors, the value of real estate asset should reflect the true market value which we would get if we were to sell it today. With Real estate deal values so opaque and variable, it is surprising how someone can accurately value and publish NAV of an REIT?

Views invited

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One more REIT going public next week any views or comparison wit the existing players ?

Brookfield REIT

I would have given views but after I got no answers to by queries on REITs, I feel there are better opportunities than to invest in an instrument I am not able to understand and neither do see good understanding with leading Fund’s analysts. Therefore, for time being I have stopped looking at REITs. I maybe wrong in my assessments. Thanks

The Emerging REIT Opportunity in India:

Could someone help me understand the individual taxation structure on dividend yields from REITS in India ?

I would like to understand if the dividend income is treated purely as short term gains or like in the US is it broken up into 3 parts ie dividend, capital gains and return of capital when being taxed on an individual level ?

It is divided into buckets

Faqs on Taxation, should help get detailed view

Full file here
https://www.google.com/url?sa=t&source=web&rct=j&url=https://s2.q4cdn.com/482484005/files/doc_downloads/2020/05/Embassy-REIT_FAQ's_May-19-2020.pdf&ved=2ahUKEwjPvPSy_4fvAhWIfn0KHdX7AAYQFjAXegQIJhAC&usg=AOvVaw0fdS305UO5r1rMnBA7bh_i

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Thanks for this. Which means Embassy’s current dividend yield of c.7% on CMP is equivalent to c.10% yield for regular stocks (30% tax bracket) on a pre-tax like for like basis. I do understand this is not a direct comparison as growth in regular equity might be very different from that of REITs.

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Hi, how can I get access to the TDS documents for the REITs distributions.
Apologies if this is too basic a question.

My rental income has been given to ky account but with TDS . Where can I get documents for the same.

Hi the TDS Certificates are sent out to the registered email address, you can also cross check this tax credit in the 26AS form.

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REITs as they stand as of today:

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