EHT, which has multiple master leases to basically the same entity — which is also its sponsor, Urban Commons — suffers from what can be described as a concentration risk. The term refers to the potential loss of an investment portfolio’s value when an individual or group of securities moves in an adverse direction.
The REITs universe here is getting bigger and is set to expand further in terms of size and diversity. Covid-19, however, has caused different REITs to react drastically differently in the event of financial difficulty. This has inspired the Singapore Exchange Regulation (SGX RegCo) to float tweaks to the listing rules applicable to this sector.
For example, data centre and logistics REITs may remain unscathed or even enjoyed a huge surge in interest. But it is a totally different story for hospitality REITs. In perhaps the most notorious case, Eagle Hospitality Trust — which owns a portfolio of US hotels — went under dramatically just a year after its listing. The pandemic has been cited as a catalyst for its loan defaults but authorities have also tackled the parties involved with a long litany of possible breaches that is now under investigation.
