AmFirst REIT : REIT


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		REIT

What Is Real Estate Investment Trust

Real Estate Investment Trust (REIT) is an investment vehicle that invests primarily in income producing real estate, real estate related assets and/or a single purpose company whose principal assets comprise real estates, and uses the income from the properties, net of expenses, to provide returns to its unit holders. A portion of a REIT’s funds can also be invested in other asset classes, such as cash or deposits. In purchasing a unit in a REIT, you share the benefits and risks of owning the real estate assets held by the REIT. REITs are an attractive asset class for investors seeking strong dividend yields as REITs tend to distribute most of their distributable income (net of expenses) to unitholders in the form of dividends at regular intervals. A REIT may be listed or unlisted.

Objective of REITs

The key objective of a REIT is to provide unitholders with stable distributions per unit with the potential for sustainable long-term growth of such distributions. The manager of a REIT aims to achieve this objective by optimizing the performance and enhancing the overall quality of a large and geographically diversified portfolio of real estate assets through various investment and business strategies. Any material changes to the objective of a REIT will need the approval of Unitholders.

Structure and Organizations of REITs

A REIT is constituted by a deed entered into between the manager and the trustee. The deed sets out the general administration of the REIT and regulates the actions of the manager and trustee within the guiding principle of protecting the interests of the unitholders. In this regard, the deed is an embodiment of rules and conditions for the valuation and pricing of units, the keeping of proper accounts and records of the REIT, the collection and distribution of income, among other things. The deed also spells out the rights and obligations of unitholders, and the duties and responsibilities of the manager and trustee as they relate to the operations of the REIT.

General Benefits of Investing in REITs
1.	Mixed portfolio of assets
	REITs enable investors to diversify their risk profile by participating in a range of real estate and real estate-related assets, which would otherwise not be achievable by the investment in a single physical property. In addition, as a REIT is structured in units, unitholders will be able to tailor the exact amount of funds of their portfolio which they wish to devote to real estate investment.
2.	Professional management
	REITs provide investors with the opportunity to buy into real estate that is maintained and managed by experienced and professional property manager(s) whose primary role is to maximize the operating income of the properties in the REIT. Further, such manager(s) are overseen by an independent trustee and the property management profession is regulated actively by the Securities Commission.
3.	Liquidity
	REITs are often more tradable than physical properties especially if they are listed. This feature make it easier for investors to quickly and efficiently adjust their portfolio’s desired exposure to real property as compared to the buying and selling of real estate which can be a cumbersome and lengthy process.
4.	High dividend distribution to unitholders
	The tax incentives accorded by the regulatory guidelines encourage REITs to distribute most of their distributable income to unitholders as dividend, which makes REITs an attractive asset class for investors who seek stable dividend yields. This is because the income that is distributed by a REIT to its unitholders in the same basis period will not be subject to tax at the REIT level.
5.	Stable returns
	A REIT is physically able to generate stable, sustainable income, which can be used to continually pay regular dividends. This is particularly true for REITs which qualify for listing on the stock exchange, as they normally own investment grade assets which generate recurring cash flows through profitable tenancy agreements for specific durations.
6.	Affordability
	REITs allow investors to participate in the real estate market with a smaller capital outlay as compared to the outright purchase of real estate.
7.	Potential capital appreciation
	REITs have a potential for capital appreciation via an increase in the values of the underlying properties held in its portfolio.
8.	Ownership of high quality real estate
	A REIT is also an effective means of gaining investment exposure to large, commercial properties. Depending on the quality of the real estate, holding REIT units is akin to holding stakes in high-grade real estate, which may otherwise have been difficult or impossible for a retail investor to hold.
9.	Inflation hedge
	The value of real estate is expected to generally increase in tandem with inflation rate. Thus, as real estate is the underlying assets in a REIT, investment in REIT thus provides a hedge against inflation.