What are the REITs I can still buy in My Stock Portfolio? This is the question that I have been pondering on. Given the high interest rate environment, this is a disadvantage to all REITs as the interest expense eats into the distributable income.
Originally, I thought that I should increase my position in Mapletree Logistics Trust or Frasers Centrepoint Trust because these are the REITs that makes up a lesser percentage of my stock portfolio. However, after much consideration, I decided to hold back.
Instead, I decided to look at the gearing ratio of each REITs in my stock portfolio. This is because under the high interest rate environment, it makes sense to prioritize the gearing ratio as the most important indicators as compared to other stock indicators.
A lower gearing ratio could point to more capacity to take on more debt when needed, while a higher ratio could lead to credit concerns. If the current gearing is already above 40%, any 50 bps increase by the Fed will easily cause the gearing to rise nearer to the current regulatory limit of 50%.
REITs I Can Still Buy In My Stock Portfolio
Frasers Logistics and Commercial Trust (SGX:BUOU)
Gearing (As of 30th June 2023): 28.6%
Paragon REIT (SGX:SK6U)
Gearing (As of 30th June 2023): 29.8%
CapitaLand Integrated Commercial Trust (SGX:C38U)
Gearing (As of 30th June 2023): 40.4%
Mapletree Pan Asia Commercial Trust (SGX:N2IU)
Gearing (As of 30th June 2023): 40.7%
ParkwayLife REIT (SGX:C2PU)
Gearing (As of 30th June 2023): 35.3%
Mapletree Logistics Trust (SGX:M44U)
Gearing (As of 30th June 2023): 39.5%
OUE Commercial REIT (SGX:TS0U)
Gearing (As of 30th June 2023): 39.1%
Frasers Centrepoint Trust (SGX: J69U)
Gearing (As of 30th June 2023): 40.2%
Gearing (After Divestment of Changi City Point): 37.1%
Conclusion
Among the list of REITs in my stock portfolio, I can accumulate more of Frasers Logistics and Commercial Trust, Paragon REIT, ParkwayLife REIT and Frasers Centrepoint Trust. This is because their gearing is below 40%.
I should avoid adding more of CapitaLand Integrated Commercial Trust, Mapletree Pan Asia Commercial Trust, Mapletree Logistics Trust and OUE Commercial REIT because their gearing is either near the 40% or above.