BUDGET ON MAINTENANCE WORKS FOR REAL ESTATE INVESTMENT TRUST (REITS) PROPERTIES

Abstract

Singapore is a step closer to becoming a regional Reits hub with recent changes in guidelines, a move expected to attract even more property funds. With more Reit operators in the market and the lifting of the borrowing limit from 35 per cent to 60 per cent, the level of acquisition is expected to accelerate. (Source: Article from Business Time dated 29 November 2005). Before investing in a Reit, investors should be focused on the quality of management and be aware of how aggressive the Reit companies are in making acquisitions. Investors should also scrutinise the quality of asset, structure of their leaseback agreements, rental yields and type of tenants. The level of disclosure and corporate governance must be high to be attractive to investors, The combination of these factors may, therefore, mean more challenges for the Reits market. While most Reits have performed well since inception, they are unlikely to exhibit the same sizzling growth as the market matures. The maintenance costs of buildings owned by Reits must be transparent and justified. A well researched and prepared budget will aid management in its functions and the professional skills involved in its preparation are consequently well sought after. The estimation of budget is to ensure that resources are available for maintenance and unforeseen repair works to keep the building at its optimum functional capacity. The budget can be prepared when a building is under construction but the projected costs may not go far enough to serve its purpose.