REITs & Property Funds

A Real Estate Investment Trust (REIT) is a collective investment scheme that pools money from many investors to buy, own and manage a portfolio of income-producing real estate — for example shopping malls, office buildings, industrial and logistics space, hotels, or data centres.

Investors do not own the buildings directly; they hold UNITS in the trust and, through those units, a proportionate interest in the underlying property portfolio and the income it generates.

A REIT is typically constituted as a TRUST and its units are LISTED and traded on a stock exchange, so an investor buys and sells units the same way they would trade a share — during market hours, at a market price.

The defining economic feature is INCOME: REITs earn rent from tenants and pass the bulk of that net rental income back to unitholders as regular distributions, making them a popular vehicle for investors seeking a steady income stream from property without the cost and effort of buying a building outright.

The core appeal of a REIT is its distribution policy. A REIT collects rent from its tenants, deducts property expenses, management fees, financing costs and taxes, and pays out most of the remaining income to unitholders — usually quarterly or half-yearly.

To qualify for favourable tax treatment, REIT regimes generally require the trust to distribute a HIGH PROPORTION of its taxable income to unitholders (in many jurisdictions a large majority of it). In return, income distributed to unitholders is typically not taxed again at the trust level, avoiding the double taxation that can apply to an ordinary company's dividends.

Because so much income is paid out rather than retained, a REIT has little internal cash to fund new acquisitions or major asset improvements. It therefore tends to raise fresh capital externally — by issuing new units (equity) or by borrowing — when it wants to grow.

Distributions are commonly quoted as a distribution per unit (DPU) and as a distribution yield (annual distribution divided by the unit price), which investors use to compare income across REITs.