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Finance: Rising interest rates won’t kill REITs

Legacy Phuket Gazette

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Finance: Rising interest rates won’t kill REITs | The Thaiger

PHUKET: Many investors looking for yields and exposure to real estate have piled into Real Estate Income Trusts (REITs) despite the prevailing investment wisdom being any eventual rise in interest rates will be a disaster for the sector. After all, REITs rely heavily on borrowing to acquire real estate with interest payments on this debt usually being their biggest expense.

However, before you consider dumping your REITs when interest rates eventually rise, consider the following reasons not to:

Historical Performance

Using historical data, Deutsche Bank published research earlier this year that showed while REIT performance is interest rate sensitive, they only underperformed stocks by a small margin over periods when interest rates rose. In the period afterwards, they actually tended to outperform the broader markets.

Tempting Dividends

REITs typically pay out all of their taxable income as dividends. Given the low yields on other investments, some investors have gone so far as to substitute REITs for bond investments with this substitution proving to be a shrewd [albeit risky] move since the end of the financial crisis. This could be a problem should these investors have a knee-jerk reaction and dump their REITs when interest rates do rise.

Biggest Risks

Rising interest rates are not the biggest risk for REITs. Actually, the biggest risks come with recessions when vacancy rates rise and occupancy rates along with property values fall. Likewise, any decrease in credit quality at any point in time can prevent weaker REITs from refinancing their debts or force them to pay higher interest rates with this hitting the bottom line or their ability to maintain strong dividend payouts to investors.

Debt Refinancing

Normally, only a small portion [perhaps 10 per cent] of a REIT’s debt needs to be refinanced in any given year. In fact, REITs will most likely save on interest payments when they refinance since most of the expiring debts are still above the cost of new financing.

Stronger Underlying Businesses

Interest rates should only rise if it is clear the economy is growing on a sustained basis with a good economy ultimately leading to more operating income and higher occupancy rates, rents and property values. Moreover, any rise in interest expense in an improving economy is a good excuse to raise rents on tenants in order to offset any increase in interest payments.

Privatization Trends

Large investors like sovereign wealth funds and pension funds have noticed that REITs offer a much more favorable yield than anything available in the bond market. That has led to a number of REITs being acquired or moved private by such investors.

Commercial Property Exposure

REITs are the primary and easiest way for retail investors to gain exposure to a commercial property recovery. And while many Americans remain “underwater” on their home mortgages as values are still below their pre-financial crisis peak, commercial real estate values and rents for non-retail properties in the US have largely improved with office vacancies declining and industrial properties benefiting from strong demand for warehouse space. In addition, multifamily housing vacancies are near historic lows as rents continue to rise in many parts of the country.

International Real Estate Exposure

More than 30 countries around the world have adopted REIT legislation largely modeled on US legislation. This means international investors can look for REITs in other real estate markets [including both developed and emerging markets] where interest rates may not be set to rise just yet.

It is still unclear when interest rates will begin to rise in most developed economies and what impact any rise will have on the overall economy and especially on real estate.

What is clear is that rising interest rates will lead to more volatility of REITs and more risk for investors as weaker players or those in certain real estate niches could be hit harder than stronger players. For those reasons, you and your investment advisor will want to take a much closer look at any individual REITs in your portfolio along with any funds that might hold them or other real estate related investments.

Don Freeman,BSME is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket. He has over 15 years of experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Call for a free portfolio review. Don can be reached at 089-970-5795 or email: freemancapital@gmail.com.

— Don Freeman

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Thailand

Facebook removes “information-influencing” pages linked to Thai military

Maya Taylor

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Facebook removes “information-influencing” pages linked to Thai military | The Thaiger
PHOTO: Facebook

Facebook has confirmed the removal of 185 accounts run by the Thai military and allegedly involved in information-influencing. The social media giant says the accounts were deleted for engaging in what it calls, “coordinated inauthentic behaviour”. In total, 77 accounts, 72 pages, and 18 groups have been removed from the platform, in addition to 18 Instagram accounts. It’s the first time Facebook has taken such action against accounts linked to the Thai government.

The accounts were associated with the Thai military and were targeting people in the southern provinces, Facebook said its regular report on coordinated inauthentic behavior. The south of the country has been the scene of decades-long conflict, with insurgent groups in the majority-Muslim, Malay-speaking region calling for independence. To date, around 7,000 people have died in the ongoing struggle.

Facebook says the deleted accounts were most active last year and used both fake and real accounts to manage pages and groups, both openly military pages and pages that hid their links to the military. Some of the fake profiles pretended to be people from the southern provinces.

The report mentioned a post by the now-removed account named “comprehending the operation” in Thai. The page posted the logo for Amnesty International Thailand and wrote “The NGO never cares about ordinary citizens because they have no role in society. Normal people are not famous. Any case is not big news. They are not worth the investment of foreigners so they will not do anything to help. This is why we don’t see anything from the NGO.”

Facebook removes “information-influencing” pages linked to Thai military | News by The Thaiger

Image overlay translates to “The NGO never cares about ordinary citizens because they have no role nor money.”

On another now-removed account, named “truth about my home Pattani” in Thai, a post said “Muslim leader declares southern border is a peace zone. The southern separatists started a movement by spreading the idea that Thailand is under control by different believers so that people would come and fight for their religion. This was declared that the action clearly violates Islam faith.”

Facebook removes “information-influencing” pages linked to Thai military | News by The Thaiger

Image overlay translates to “Southern border is not Jihad zone.”

When contacted by Reuters, the military had no comment on the removal of the Facebook accounts, with a spokesman saying the organisation does not comment outside of official press conferences.

The head of Cybersecurity Policy at Facebook, Nathaniel Gleicher, has confirmed the reasons behind the platform’s decision.

“This is the first time that we’ve attributed one of our takedowns to links to the Thai military. We found clear links between this operation and the Internal Security Operations Command. We can see that all of these accounts and groups are tied together as part of this operation.”

He adds that the accounts had spent around US$350 on advertising on both Facebook and Instagram. One or more of the pages had about 700,000 followers and at least one of the groups had 100,000 members. Gleicher says the accounts were removed because of their misleading behaviour and not because of the content being posted. The content included support for the military and the monarchy, with allegations of violence and criticism of insurgent groups in the south.

It’s not the first time accounts linked to the Thai military have been removed by a social media platform. In October, Twitter removed 926 accounts it says had links to the army and posted pro-military and pro-government content. The Thai army has denied any involvement with the accounts in question. In November, Twitter also suspended an account posting pro-monarchy content that was found to have links to the palace and to thousands of other accounts posting similar content.

To read the February 2021 Coordinated Inauthentic Behavior Report, click HERE.

SOURCES: Reuters| Facebook

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Central Thailand

Airline executive arrested for failure to pay wages of 150 workers

Maya Taylor

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Airline executive arrested for failure to pay wages of 150 workers | The Thaiger
PHOTO: Wikimedia

An airline executive has been arrested in the central province of Samut Songkhram, after complaints from150 employees that they had not been paid. Chawengsak Noiprasan, who had a court warrant issued against him in October, was taken to Don Muang police station from a property in the Bang Khan Take sub-district. He is a board member of Siam Air Transport.

The airline began operations in October 2014 with services out of Don Mueang to Hong Kong, using 2 Boeing 737-300s. 2 Boeing 737-800s were added to its fleet in late 2015. It expanded by adding Zhengzhou and Guangzhou in China to its network in early 2015. In late 2015, the airline launched flights to Macau and Singapore. In 2017, the airline ceased all operations.

But according to an article in the Bangkok Post, the carrier operates a number of scheduled and charter flights from Bangkok’s Don Mueang Airport. The Post reports that, as Chawengsak signs the company’s legal paperwork, all legal matters concerning the airline fall to him.

The Metropolitan Police Bureau says the executive has admitted to ignoring a 30 day notice issued by the labour inspector and ordering the payment of wages to 150 workers. It’s understood he is also wanted in relation to 7 other cases.

The authorities sought Chawengsak’s arrest following complaints from employees who say they haven’t received their wages for 2 months. It’s understood the airline had previously deferred salary payments for over 8 months. 150 workers filed an official complaint with Don Mueang police and also approached media outlets, asking them to pressure the airline into paying the money owed.

SOURCE: Bangkok Post

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Business

Governments & old media versus social media – who will win? | VIDEO

The Thaiger

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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