What does reversion mean in property?

returning or reverting something
In property law, the term ‘reversion’ (returning or reverting something to its previous state) refers to the interest a party to whom a property will revert at the expiry of an agreement has in that property. When a leasehold expires, legal title to the property reverts back to the freeholder.

What is negative reversion?

Negative rental reversion rates mean that new tenants are paying less than older tenants. The implication for the REIT is that gross revenue will gradually decline if the reversion does not turn positive. Ultimately, net property income, AAFD and DPU will turn negative which is not good for investors.

What does it mean when an acquisition of property by a REIT is said to be yield accretive?

It is also sometimes referred to as a yield-accretive acquisition. In the context of REITs, a yield-accretive acquisition involves the purchase of a property that increases the REIT’s distribution. The opposite of an accretive acquisition is a dilutive acquisition.

What is REIT gearing?

Gearing ratio, also known as leverage, is the ratio of a REIT’s debt against total assets. A REIT with a low gearing ratio has a greater capacity to undertake more debt for future yield accretive acquisitions. Furthermore, the REIT’s interest expense is likely to be lower, resulting in higher NPI.

What does reversion mean?

1a : the part of a simple estate remaining in the control of its owner after the owner has granted therefrom a lesser particular estate. b : a future interest in property left in the control of a grantor or the grantor’s successor.

What are reversion rights?

A right of reversion is a contractual provision that permits authors to work with their publishers to regain some or all of the rights in their books when certain conditions are met. Reversion can be a powerful tool for authors, but many authors do not know where to start.

What causes reversion?

Mean reversion, or reversion to the mean, is a theory used in finance that suggests that asset price volatility and historical returns eventually will revert to the long-run mean or average level of the entire dataset.

What is mean reversion speed?

Mean reversion is a financial term for the assumption that an asset’s price will tend to converge to the average price over time. When the current market price is above the average past price, the market price is expected to fall. In other words, deviations from the average price are expected to revert to the average.

Is Cap rate same as yield?

The cap rate is a real estate metric that measures the relationship between a property’s net operating income and its value. The key difference between the cap rate and yield is that cap rate is calculated using a property’s value and yield is calculated using a property’s cost.

How is DPU yield calculated?

It’s found by dividing the total number of defects found by the number of units. For example, if 30 units are produced and a total of 60 defects have been found, the DPU equals 2.

What is a good or bad gearing ratio?

Good and Bad Gearing Ratios A gearing ratio higher than 50% is typically considered highly levered or geared. A gearing ratio lower than 25% is typically considered low-risk by both investors and lenders. A gearing ratio between 25% and 50% is typically considered optimal or normal for well-established companies.

Is leverage and gearing the same?

Leverage refers to the amount of debt incurred for the purpose of investing and obtaining a higher return, while gearing refers to debt along with total equity—or an expression of the percentage of company funding through borrowing. Gearing and leverage can often be used interchangeably.

How are reversion and term rent related in real estate?

Thus, the contract rent of the existing contracts differs from the current market rent or open market rent. If that’s the case, the property is said to have reversionary potential. If that’s the case, we need to separate the term rent from the reversion and value them separately.

What is the legal definition of reversion 2?

Legal Definition of reversion. 2 a : the present vested interest in the residue of an estate that remains in its owner after the grant therefrom of a lesser estate (as a life estate) and that will commence in possession by operation of law upon termination of the lesser estate b : the future interest in property left in a grantor or his…

How does rent reversion affect the dividend per unit?

Rent reversion therefore depends on the demand and supply environment, the quality of the property, managers ability and other factors. The impact to the investors is that this affect the dividends per unit you will receive going forward, whether for the better or worse.

Why are there inconsistencies in rent reversion computation?

Inconsistencies in rental revision computation may give investor an over-optimistic or pessimistic impression of the property situation as well as manager’s ability. Recently, Prime Grade A focused commercial REIT Keppel REIT ( dividend yield 6.3%) made an annoucement regarding the way they compute their rent reversion.