What is a REIT

REITs pool the capital of citizens and institutions to invest in quality income-producing properties.

By giving everyone access to the wealth-creating benefits of top performing assets, REITs help democratise real estate ownership.

REITs blend the best features of equity and direct property investment along with these extra virtues:

  • REITs distribute virtually all their income, unlike most equity investments.
  • Equity REIT securities are highly liquid – they are easily bought and sold, unlike most property assets.

REITS offer investors SIX main benefits:

1. Performance – REITs outperform bonds and general equities over most time horizons. [more]

2. Diversification and risk management  REITs offer an ideal means of balancing risk as they march to a different economic beat to most other commodities. [more]

3. Liquidity  it’s easy to buy and sell REITs listed on stock exchanges and to scale your exposure up or down. [more]

4. Attractive and stable dividends – REITs pay-out virtually all their income, which results in higher yields. [more]

5. Transparency – REITs are ‘true to label’ and conform to stringent disclosure rules that are easy to understand. [more]

6. Inflation-protection – REITs offer a natural hedge against inflation and consistently outpace cost of living increases. [more]

Please click the links in each section to see more facts on these benefits.

REITs finance, own and manage many types of assets, including:

  • Commercial real estate  such as, offices, retail, industrial & logistics premises, hotels, tourism & leisure facilities, data centres, rural property and mixed-use development….
  • Social assets – such as, housing, senior living, health and aged care, child care, student accommodation…..
  • Economic assets – such as, infrastructure that connects cities and drives economic returns – for instance, airports and maritime facilities, utilities, such as water, electricity and gas transmission, transport networks….
  • Green assets – such as, renewables (solar, wind), carbon sinks, such as timber plantations, desalination plants and eco-efficient utilities…

REITs come in several styles of which public equity REITs are by far the most significant.

Public Equity REITs – these REITs are registered with a government regulator and traded on a stock exchange. They distribute dividends based on leasing income earned from a wide-range of real estate or real assets, such as infrastructure.

Mortgage REITs – these REITs are also registered and regulated; however, they earn their income from investments in debt: mortgages or mortgage-backed securities.

Public Unlisted REITs – REITS that are registered with a regulator but which are not exchange-traded.

Private REITs – real estate securities that are generally unregulated, although this is not the case in some countries

It’s worth noting that, in addition to REITs, many property and development companies can be listed on stock exchanges and regulated under corporations law.

However, these companies are not REITs unless they meet the key criteria of REITs – that is, distribute all their income which is primarily derived from passive sources (such as leases). In most countries, REITs will also pass-through untaxed income to their unit holders.   

Infrastructure and Real Assets

Some countries distinguish between real estate and infrastructure REITs.

For instance, India offers InvITs – infrastructure investment trusts, which are also publicly listed but which can contain a private equity component. Please click our guide for more detail.

However, the world’s biggest REIT market in the United States includes virtually all “real assets” within its REIT regime.

If you are interested in learning more about evolving REIT frameworks in different AsiaPac countries, please visit the advocacy section of this website [link].

The difference between mortgage and equity REITs

If you are interested in comparing global REIT frameworks, please check out this excellent analysis from our friends at EPRA.

Please click here from our friends at NAREIT to watch videos on the difference between equity and mortgage REITs in the USA.

REITs and Governments - how do REITs boost economic growth and living standards?

REITs help finance, develop and manage the infrastructure that drives growth and productivity.

As such, modern REITs are linked to every aspect of the economy and community.

REITs can also help deliver large-scale housing, both for key workers and the less advantaged.

In addition, REITs are effective mechanisms for delivering social infrastructure, such as child care centres, student accommodation, health care, and retirement facilities.

Increasingly, REITs are used to pay for roads, vital community utilities and transport systems, to name a few.

REITs are very successful channels for building the retirement wealth of ordinary citizens.

REITs would help Filipino seniors enjoy greater independence and peace of mind in older age.

This also means retirees would be more self-sufficient and less reliant on government support.

Apart from wealth creation, here are some benefits that communities can share:

REITs foster greater transparency across the entire marketplace.

REITs encourage equity over debt.

REITs are proven to be greener and more sustainable than other property investments.

REITs help unlock underutilized assets on balance sheets – they help deliver ‘asset light’ strategies.

REITs invigorate markets by providing more choice between investment style ‘food groups’.

REITs provide exit vehicles for private investors, developers, governments and pension funds.

REITs can help better channel worker remittances into attractive investments.

REITs offer a smart approach to packaging infrastructure partner arrangements, such as PPPs.

REITs spread wealth amongst citizens.

REITs increase buying power for poorer citizens and decrease risk through strength of numbers.

REITs promote professional management and new industries to serve a deeper property marketplace.

REITs are a globally recognised brand that offer a powerful assurance of quality to international investors – this helps attract patient foreign capital into local cities.

REITs help build better communities to live, work and play.

REITs help turbocharge the economic activity that lifts tax revenues.

REITs are constantly evolving into even more powerful and beneficial investment platforms.

Please click here to view our discussion on ‘state of the art’ REITs.