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Is it finally the end of the tunnel for REITs

General Mood

Market is expecting interest rates to hold after US CPI data came out on 14 November and pointed to softening prices across the board. Oil has also retreated nearly 20% since its recent peak in Sep 2023. 

Are we finally reaching the end of the tunnel for battered REIT assets? 

My gut tells me that we are at early stages of recovery although we may possibly still see a couple more rate hikes in 2024.  Nonetheless, barring further escalation of global military conflicts and an unmitigated collapse of the Chinese housing market, both of which seem unlikely but can never be completely ruled out, we may start to see a gradual recovery in DPU for REITs (as rental reversions go up but interest expenses stay constant or go down).   

What I did in 2023

(Not to be construed as recommendations or investment advice.)

Throughout 2023, I have continued to load up on REITs which (i feel) have:

    i. Good sponsors (Capland, Frasers, Maple family)

    ii. Comparatively lower gearing (below 35% is preferred)

    iii.  Yield above 6%

Some of my purchases include: Capland Ascendas REIT, AIMS APAC REIT (a darling of our legendary AK), MPACT, DAIWA Logistic Trust (mainly for its low gearing and because I expect JPY to reverse its decline against the SGD and normalize in 2024). 

I also dabbled in some gambling and bought a teeny chunk of KORE REIT. Given that my previous foray into an "undervalued", "unfairly sold down" US REIT (Eagle Hospitality) ended disastrously, I was far more circumspect about sizing the buy this time round. 

FIRE Progress

Older readers of this blog may recall that I had originally intended to retire in 2020 on a passive income of 100k (~6% yield on a 1.8M portfolio). 

Of course, that did not come to pass. 

COVID hit my portfolio like a truck and I was spooked hard into continuing to slave away in order to reinforce my portfolio for recession-proofing.

Three years later, my portfolio is still reeling in the red (-300k). The only silver lining being that I may end the year with a total dividend income of 150k. 

At 12.5k per month, I can finally declare that I am financially independent. I no longer have to spend a single dime from my earned salary income. My passive income fully pays IRAS (4k/month), my mortgage (4k/month), car (1k), familial support (1k) and personal expenses (2k).  Every cent of my salary goes straight into portfolio building.

Once I stop working (and IRAS ceases to leech off the fruits of my labor), I should immediately regain an excess of 4k a month, which can then be reinvested or used to upgrade my lifestyle. 

That said, it never hurts to build even more buffer. Hence, I foresee continued employment at least until the end of 2024 before I further re-evaluate my life plans.  By Dec 2024, I expect to have accumulated a portfolio in excess of 3.2M and which should provide me close to 190k a year in passive dividend income. 

Hopefully, that would grant me sufficient courage to move into a new phase of life at age 42, a bona fide uncle but not too old yet to enjoy life. 

Keep eye on prize. Onward to FIRE my friends. 






Comments

  1. ^_^November 21, 2023 at 7:16 PM

    nowadays too much hype on the FIRE thing already, LOL

    ReplyDelete

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