A product which provides a fixed income which is better than FD & an upside like equity.
Should you invest in Real Estate Investment Trusts (REITs)?
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.
Both 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: 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
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
More from JST Investments
Key insights from Hikal
🧪 Lowered interest rates
🧪 Pharma: Growth in generics as well as CDMO
🧪 Crop Protection: Scaleup of a fungicide for a Japanese CDMO client
🧪 Healthy pipeline of new products: Supported by new capacities; Investing in Animal Health & Biocides verticals https://t.co/D70j9oriCa
🧪 Lowered interest rates
🧪 Pharma: Growth in generics as well as CDMO
🧪 Crop Protection: Scaleup of a fungicide for a Japanese CDMO client
🧪 Healthy pipeline of new products: Supported by new capacities; Investing in Animal Health & Biocides verticals https://t.co/D70j9oriCa
Hikal: Strong
— JST Investments (@JstInvestments) August 5, 2021
\U0001f9ea Rev up 27% YoY
\U0001f9ea 22% EBITDA margin
\U0001f9ea Pat of 50crs
\U0001f9ea Growth across both pharmaceuticals & crop protection.#Q1withJST #Pharma pic.twitter.com/8lFo68KzPe
A Thread of our threads on the Business Analysis of specific companies 🧵👇
RT if this adds value to your investing journey.
1/ Chemcon: A specialty chemical company that is a globally dominant player in its molecules, most of which go into the Pharmaceutical industry & have a high criticality attached to
2/ Aegis Logistics: An oil & gas logistics company, with a stronghold on the LPG supply chain & riding the tailwinds of increased exports owning to weak domestic production. Their fight to grow much larger is on, short-term demand problems
3/ Varroc Engineering: An auto ancillary company that has propelled down under its own enterprising projects fueled by a ton of debt. Will the fortunes ever illuminate for this significant participant of the global automobile
4/ Jubilant Ingrevia: A specialty chemical company that has redefined backward integration as it begins from the basic chemicals to achieving complex vitamins & many more. Their fight to outgrow commoditized parts of the business goes
RT if this adds value to your investing journey.
1/ Chemcon: A specialty chemical company that is a globally dominant player in its molecules, most of which go into the Pharmaceutical industry & have a high criticality attached to
Chemcon Speciality Chemicals: Business Analysis \U0001f9ec
— JST Investments (@JstInvestments) March 15, 2022
A Thread on this Import substitution play \U0001f9f5\U0001f447(RT if beneficial) pic.twitter.com/YU7aoQ8ibC
2/ Aegis Logistics: An oil & gas logistics company, with a stronghold on the LPG supply chain & riding the tailwinds of increased exports owning to weak domestic production. Their fight to grow much larger is on, short-term demand problems
Aegis Logistics business analysis \u26fd\ufe0f (RT if beneficial)
— JST Investments (@JstInvestments) March 4, 2022
A PSU to Private play.
A Thread \U0001f9f5\U0001f447
3/ Varroc Engineering: An auto ancillary company that has propelled down under its own enterprising projects fueled by a ton of debt. Will the fortunes ever illuminate for this significant participant of the global automobile
Varroc Engineering: Business Analysis \U0001fa94
— JST Investments (@JstInvestments) December 22, 2021
2nd largest Indian auto ancillary company.
Hit the 'retweet' for max reach
A Thread \U0001f9f5\U0001f447 pic.twitter.com/Es86oTDoek
4/ Jubilant Ingrevia: A specialty chemical company that has redefined backward integration as it begins from the basic chemicals to achieving complex vitamins & many more. Their fight to outgrow commoditized parts of the business goes
Jubilant Ingrevia Business Analysis \U0001f331
— JST Investments (@JstInvestments) March 10, 2022
Ingrevia = \u201cIngre\u201d denoting Ingredients & \u201cvie\u201d in French meaning Life, ie. Ingredients for Life
A Thread \U0001f9f5\U0001f447 (RT if beneficial) pic.twitter.com/QmKpr9HFI7
More from Economy
1/OK, let's take a little break from Coup Twitter, and think about an economic issue:
How can we build up the wealth of the middle class?
2/The typical American has surprisingly little wealth compared to the typical resident of many other developed countries.
This is a fact that is not widely known or appreciated.
3/Now, some people argue that stuff like Social Security or social insurance programs should be included in wealth. But I chose to focus on private wealth because I think having assets you can sell whenever you want is important to
4/For many decades after World War 2, middle-class wealth in America was on a smooth upward trajectory.
Then the housing crash came, and all that changed. Suddenly the rich were still doing well but everyone else was seeing the end of their American Dream.
5/Why the divergence?
Because the American middle class has its wealth in houses -- specifically, in the houses they live in.
It's the rich who own stocks.
How can we build up the wealth of the middle class?
2/The typical American has surprisingly little wealth compared to the typical resident of many other developed countries.
This is a fact that is not widely known or appreciated.
3/Now, some people argue that stuff like Social Security or social insurance programs should be included in wealth. But I chose to focus on private wealth because I think having assets you can sell whenever you want is important to
Yes, these numbers don't include things like Social Security, just privately held wealth. They're not an attempt to capitalize every possible future income stream.
— Noahtogolpe \U0001f407 (@Noahpinion) January 10, 2021
4/For many decades after World War 2, middle-class wealth in America was on a smooth upward trajectory.
Then the housing crash came, and all that changed. Suddenly the rich were still doing well but everyone else was seeing the end of their American Dream.
5/Why the divergence?
Because the American middle class has its wealth in houses -- specifically, in the houses they live in.
It's the rich who own stocks.
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Krugman is, of course, right about this. BUT, note that universities can do a lot to revitalize declining and rural regions.
See this thing that @lymanstoneky wrote:
And see this thing that I wrote:
And see this book that @JamesFallows wrote:
And see this other thing that I wrote:
One thing I've been noticing about responses to today's column is that many people still don't get how strong the forces behind regional divergence are, and how hard to reverse 1/ https://t.co/Ft2aH1NcQt
— Paul Krugman (@paulkrugman) November 20, 2018
See this thing that @lymanstoneky wrote:
And see this thing that I wrote:
And see this book that @JamesFallows wrote:
And see this other thing that I wrote:
