A keynote report by the Centre for Liveable Cities (CLC) Singapore in 2017 outlined the intricacies of Bala’s Table. Bala was a colonial-era official who devised a method to standardise leasehold valuations in relation to freehold valuations.
When investors buy into S-REITs, they might do well to take a second look at the property portfolio they are investing in, just as they would with any physical property they purchase. S-REITs are structured to resemble physical properties. They are effectively rental income minus expenses, including fees and interest costs. Factor in decaying land tenures, discount rates, forex gains and losses, working capital and, from time to time, capex, and you arrive at your distributions.
There is an argument that S-REITs pay out their depreciation, including the time decay of land tenures. The counterargument is that JTC and the Singapore Land Authority (SLA) are very transparent, and managers should construct the portfolio to replace the decaying land tenures.
