Part 1)

Considering the availability of Real Estate Investment Trusts in Singapore, we have an overview of S-REITs, with their valuations being fair and not compelling, however abundant liquidity should sustain interest in the sector. After a year of yield-compression, this has led to outperformance in share prices. While we believe the S-REITs are fairly valued at these levels, interest in the sector is likely to remain firm. This is because of the strong S$, a sustained low interest rate environment, and sector yields supported by yield spreads of 450bps above long bonds, which are still fairly decent. This could mean that capital allocations within the S-REITs sector are likely to remain high.[1]
Below shows a mapping of the different sectors in Singapore REITs.

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As one investor chooses between public (REIT) versus private (direct property) investment in real estate, we consider their advantages and disadvantages.

|Benefits |Disadvantages |
|( REITs provide more liquidity than private market investment for|( REITs depend on management of the |
|the average investor and the barrier of entry is much lower |company and maybe subjected to agency |
|where any investor with a brokerage account can get REIT |costs. It does not give control and |
|exposure. |ownership as compared to private |
| |investment. |
|( Private investment in real estate tend to be time-consuming and|( Private investments allow tax |
|need active management whereas owing REITS provides passive |deductions whilst leveraging REITs can |
|income source and yet allow investors to get exposure to real |negatively impact the tax deductibility |
|estate market. |of the investment loan. |
|( REITS provides greater diversification benefit. Instead of |( REITs tend to exhibit higher beta |
|having a large portion of your capital in a single property, you |during market downswings than during |
|can have them spread out over many properties across the country |upswings (( ( 0.8 in down-markets, 0.3 in|
|via a REIT. |up-markets – typical of value stocks); |
| |Your investment capital will be at the |
| |mercy of the volatility of market which |
| |can fluctuate significantly |

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[1] http://sreit.reitdata.com/, Refocusing on Growth, Singapore REITS