I live in Singapore and I am looking at investing my money on listed Real Estate Investment Trusts(REITS). These are trusts that hold real estate which are rented out and earn rental returns.
Typically I would be screening the REIT for its tenant base to see if they are from a Shariah Compliant industry and secondly see if their total conventional debt to total assets is less than 33%.
However most REITs exceed the 33% conventional debt to assets ratio in Singapore.
Given this situation, could I get a dispensation on this leverage ratio screen? There are very little safe Shariah compliant investment alternatives in Singapore’s and these REITs give us a chance to invest directly in good quality real-estate which earn rental income and are relatively safe.
There is one shariah compliant REIT called Sabana Shariah Compliant REIT. However due to its poor performance this REIT is merging with conventional REIT called ESR REIT once it merges the merged entity will not maintain its Shariah compliant status.
Sabana Shariah Compliant REIT performed very poorly… I bought it close to a $1 and now it’s trading at $0.36; 70% drop in value, whereas the other well managed REITs peers in the same period saw their share price increase.
Hence the reason I had requested some leeway so that we can invest in a well diversified portfolio of REITs which can hold value as REiTs are typically long term investments for dividend yield and gradual share price appreciation.