Real Estate Investment Trust (REITs)

A listed REIT is a vehicle for investment in a portfolio of real estate assets, usually established with a view to generating income for unit holders. REITs assets are professionally managed and revenues generated from assets (primarily rental income) are normally distributed to you, as a unit holder at regular intervals. Units of listed REITs are bought and sold like other securities listed on SGX at market-driven prices.

• Portfolio Diversification REITs typically own multi-property portfolios with diversified tenant pools, which reduce the risks of reliance on a single property and tenant in the case of directly owning a real estate asset.
• Income Distribution REITs normally have regular cash flows since in most cases, most of the revenues are derived from rental payments under contractually-binding lease agreements with specific tenure.
• Participation in the Property Market Most REITs are structured around large properties. With REITs, you can own stakes in such properties.
• Professional Management REITs allow investors the opportunity to buy into properties managed by professional property management companies.

You may buy and sell listed REITs on the SGX securities market through your broker or your online trading account. Listed REITs units are traded during the normal trading hours of SGX, which is from 9am to 12.30pm, and 2pm to 5pm. There is an Opening Routine from 8.30am – 9.00am and a Closing Routine from 5pm – 5.06pm.

You need to have the following accounts:
• A securities account maintained with the Central Depository (Pte) Limited (“CDP”) or a sub-account maintained with a CDP Depository Agent;and
• A trading account maintained with a SGX Securities Trading Member Company.

REITs listed on SGX market may be purchased on margin, and on terms similar to those for other securities traded on SGX.

Returns vary for different REITs. A REIT typically distributes dividends regularly based on income generated by the properties in its portfolio. Most REITs have annual managers’ fees, property management fees, trustees’ fees and other expenses that will be deducted from their cash yields before distributions are made.

Similar to securities trading, the transaction costs include :
• prevailing brokerage commissions;
• clearing fee of 0.05% on the value of the contract (subject to a maximum of S$200); and
• Goods and Services Tax of 3% on brokerage commissions and clearing fees.

How Are Transactions In REITs Cleared And Settled?
Transactions in REITs are cleared and settled by CDP in the same manner as other securities listed on SGX, i.e. on the third business day after trade date, or T+3.

Different risk profile (investor/co)

Way for developer to:
– Raise funds
– Free up balance sheet Unlock value of ‘discounted assets’
– Capture value – bring forward profits & reduce risks

Recurring fee income

Property in

– “Bite-sized chunks”
– Liquid form (trades on SGX)
– Less concentration risk
– Ability to narrow focus to target sub-sector/region
– With professional management

Income

– Tax-exempt income for individuals
– Stability and visibility of distributions

External controls & monitoring

– Transparency / Governance