Reits have appeal despite triple whammy from rising interest rates

VARIOUS real estate investment trusts (Reits) posted resilient financial results for 2021. Trusts that own malls, offices and hotels can look to brighter days if pandemic-related restrictions are relaxed.

But Reits face rising interest rates, especially as inflation may worsen amid the Russia-Ukraine conflict. The trusts face a triple whammy from higher borrowing costs that may lead to lower distributions per unit (DPUs), a narrower spread between DPU yield and the risk-free rate, and lower property valuations.

Cost of borrowing