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News Of The Week: What is Ailing First Real Estate Investment Trust?

First Real Estate Investment Trust (SGX: AW9U) or First REIT is a healthcare-focused real estate investment trust.

Currently, the REIT’s portfolio has 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsor is Indonesia’s largest listed property company, PT Lippo Karawaci Tbk.

The REIT is in the limelight after its share price fell from around S$1.20 to a low of S$0.922 last Tuesday, before recouping some of those losses to close at S$1.03 on Friday. Here are three things investors should know about First REIT now.

What did the company say about the stock price decline

Bowsprit Capital (manager of First Real Estate Investment Trust) has recently made an announcement in responding to the decline in share price. My colleague, Sudhan P, shared the announcement in his article here.

Here’s a quick summary of the announcement:

“The Manager is not aware of any material information which has not previously been announced or otherwise made known in the public domain from any source that could have caused the volatility in the unit price of First REIT.”

In short, the manager is saying that it has no information that can explain the recent decline in share price. To get a full picture of the latest update, you can catch up Sudhan P’s article here.

A potential reason for the decline

Although First REIT has not provided any explanation for the decline in share price, my colleague Jeremy Chia (in his article here) has suggested that the decline might be due to the trouble that Lippo Karawaci, First REIT’s sponsor, key tenant, and main revenue contributor, is facing.

Lippo Karawaci (which contributes about 82.4% of First REIT’s 2017 rental income) has seen its rating downgraded by Fitch (one of the three major credit rating agencies) by two notches. The company’s long-term foreign and local currency issuer default ratings was reduced from B to CCC+, as Fitch cited liquidity risks over uncertainty in the company’s asset sales. To learn more about Lippo Karawaci problems, please click here for Jeremy’s article.

What investors should do now

If you are an existing investor, or potential investor thinking of buying into First REIT stocks, you might be confused at to what you should do now given the recent sell-off. The good news is, my colleague Sudhan P has shared his thoughts here about the actions that investor can take.

In his article, Sudhan gave a few options to investors depending on which stage you are in the investment process. Overall, the idea is to stay calm and make rational choices rather than reacting emotionally to the situation. Sound good? Click here to find out more.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool contributor does not own shares in the companies mentioned above. Motley Fool Singapore has a recommendation for First Real Estate Investment Trust.