How Singapore REITs Defend against Fed Rate Hike

Rising Interest Rates

I was curious on how the Singapore REITs I held in my portfolio will hold the fort against the recent Fed rate hike. Thus, I dig into the financial result releases by each REIT recently for more details. I learnt a new term known as “Interest Rate Swap”. REITs issue bonds or notes as a form of interest rate swap.

Below is the definition taken from Investopedia. There is a video where you can watch for easier understanding.

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.

Below are some statements extracted from the financial results which indicate fixed rate interest as a form of hedging or usage of interest rate swap to manage exposure to interest rate fluctuations.

Cambridge Industrial Trust

Cambridge Industrial Trust has 96.5% of interest rate exposure fixed for next 3.2 years. Borrowing costs significantly insulated against interest rate increases.

Frasers Commercial Trust

Frasers Commercial Trust has 81% of its debt hedged and 19% floating.

(Read more: Frasers Commercial Trust Achieves All Time High DPU of 9.71% for FY15)

Suntec REIT

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Suntec REIT DPU Rises for 3Q2015)

Soilbuild Business REIT

95% of debt hedged.

Far East Hospitality Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Far East Hospitality Trust DPU Fall for 3Q2015)

CapitaMall Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

Keppel REIT

Increased fixed-rate loans to over 70%, which will insulate against interest rate fluctuations, while allowing for financial and operational flexibility.

(Read more: Keppel REIT announces DPU of 1.70 cents for 3Q2015)

Mapletree Commercial Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Mapletree Commercial Trust DPU Rises 2.5% to 2.02 cents 2QFY15)

OUE Hospitality Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

ParkwayLife REIT

ParkwayLife REIT has hedged approximately 78% of its interest rate exposure.

(Read more: Parkway Life REIT DPU Increases for 3Q2015)

Conclusion

As a conclusion, we can see that most Singapore REITs are well defended against the Fed interest rate hike.

Book Review: Dark Horse How Challenger Companies Rise to Prominence

Dark Horse How Challenger Companies Rise to Prominence

This is another excellent book I read recently about entrepreneurship and how companies known as “Dark Horses” outshine in the current competitive market with their product or ideas.

The book has many case studies about great companies today which you may have heard of such as Whole Foods, Ricola and Dentek etc.

In this book, the author Dan Mack wrote about the main three drivers that govern the cultures of top emerging companies.

The three drivers are:

#1 Their corporate identify is fixed, and their business is an expression of their identity.

#2 Their business is very personal, purposeful, and it runs deep.

#3 They have created clarity of vision, and everyone chooses to operate with shared values and deals.

I picked up a few important concepts in this book and will like to share them here.

Consumers

For example, if we want to create a start up or invent something, here are some things to learn about consumers.

  1. Consumers are looking for new technologies to enable their lives.
  2. Consumers want products that simplify their lives.
  3. Most consumers don’t know what’s next or what they want.

Leadership

The last chapter is about leadership. “Grace” is the keyword used.

  1. Special leaders unite people.
  2. Great leaders are not afraid of vulnerability.
  3. The role of a leader is not to know it all.
  4. Leadership is very different than management.
  5. Leadership is about serving others.

An excellent read, I give it an above average rating of 4 stars out of 5.

Rating_AboveAverage

What was Bad wasn’t so Bad after all

Hotel

Recently, I took a short staycation with my family at one of the hotels in Sentosa. The official check in timing for the hotel was 3pm. We arrived at the hotel around 11.30am and I proceed to inquire at the reception if we could check in early. We were told there are currently no rooms available and was assured that we can have our room ready by 3pm. Thus we proceeded to Universal Studios to enjoy the rides first. When we went back to the hotel at 4.30pm to check in, we were told the rooms are still not ready and have to wait until 5.30pm. I was furious! The staff offered us complimentary buffet breakfast as a token of apology. That was over S$50 of savings! Well, what was bad didn’t turn out so bad after all! Read More