REITS - What are they?

REITS - Real Estate Investment Trusts started in 1960s in the USA under specific REITS legislation. This form of investment vehicle has been gaining popularity in recent years. But really, just what is the main impact of REITs to a property???

Now REIT is a generic term for entities with the following characteristics:
-Ownership and management of income-producing real estate is the primary business of a REIT
-Most of its profits are distributed as dividends to investors
-Generally exempted from company tax
-Typically offer investors high yields as well as liquidity

Now, if you guys remember the Golden Shoe in Raffles Place, it used to be an old building with some old shops. Now that this building is under a REITS, there are renovations going on to improve the building. Tenants are also changing. We don't know who are the future tenants yet but its definitely going to be more high end with some key anchor tenants to improve the building rental yields. Another eg is Market Street Carpark along Cross Street, the makeover has just been completed, from what used to be building housing some old shops and cafeterias (the coffee shop kind), it is now housing tenants such as 7-eleven, coffee club, coffee bean, Soup Spoon and some more upmarket hair saloons. One other example is Raffles City, the work done on expanding the basement shopping area has been completed recently and has added more space and introduced high profile tenants like Ding Tai Fung Restaurant which will draw in crowds and improve rental income.

I will snap some pictures which you can see the impact of securitisation on commercial properties. But I strongly suggest go to market street carpark to see for yourself the impact.

What to look for in REITS?
Rental yield, Type of property in the REITS, Occupancy Rate, Weighted average lease term to expiry of lease.