Real Estate Investment Trusts (REITS): What Are They And How You Can Find The Best REITS In Singapore

By Clive Chng / RedBrick.sg | December 20, 2018 2:09 PM SGT
Want to expand your portfolio and invest in other asset classes such as the Real Estate Investment Trusts (REITs)? By investing in a variety of asset classes, a diversified portfolio not only helps you to reduce risk and volatility, but also to gain access to potentially higher returns. In this article, we will provide an overview of REITs as well as some of the key metrics that you can use to evaluate and select the best REITs to invest in.

Background and the Development of REITs in Singapore

In 1999, rules were introduced by the Monetary Authority of Singapore (MAS) to regulate Singapore REITs (S-REITs); three years later, CapitaMall Trust became the first REIT listed on Singapore Exchange Securities Trading Limited (SGX-ST) in July 2002. In the next five years, S-REITs experienced exponential growth and a total of 20 S-REITs had been listed and traded on the Singapore Exchange (SGX) Mainboard. Although the market was inactive during the global financial crisis between 2008 and 2009, it made a comeback in 2010 with three S-REITs being listed that year. Following which, there have also been several changes made to S-REIT regulations so as to enhance the regulatory regime governing S-REITs, hence further promoting the S-REIT market while at the same time, tightening regulatory requirements to protect S-REIT unitholders.

But… What Exactly Is a REIT and What Are the Main Benefits?

Typically, REITs are collective investment vehicles that invest in a diversified pool of professionally managed real estate assets. Without having to invest directly in the real estate market which requires a much larger capital outlay, REITs also provide investors with returns that closely replicate direct ownership, greater diversification and liquidity through the equity capital markets. The underlying assets in a REIT provide capital growth, and the steady rental cash flow provides investors with income via regular distributions — in Singapore, REITs are required to distribute at least 90% of taxable income yearly to unitholders but currently, most of the REITs are giving out 100%.
In summary, key features of a REIT include:
  • An investment in a diversified pool of income-producing real...