Real Estate Investment Trust: REIT

A REIT is a type of “trust” where a trustee is determined its true owner on behalf of its beneficiary and does not have a juristic person status. The trust settlor will eventually become the REIT Manager (RM) whom will offer trust units to the public. Once received capital from the sale of trust units, the RM will entrust the following fund with the REIT’s designated trustee in order to establish the REIT. The trust deed will assign the REIT Manager to manage the REIT and the trustee to supervise the performance of the REIT Manager and administer the REIT in the best interest of the beneficiary.

Investment in REIT

The first group of investors of REIT consists of persons purchasing trust units in the initial public offering (IPO) through underwriters. The SEC does not specify the rules regarding allocation units, but the SEC permits any one investor or group of investors to invest in not more than 50% of the total trust units. After the IPO, the unit holders may trade the trust units on the SET by opening a trading account with a broker, similar to trading securities. A REIT is traded under the real estate and construction sector in the property fund section.

Benefits of REIT

Owners of Property

Owners may raise capital from real property that is already generating revenue and use that capital to invest and/or develop new projects.

Investors

  • Smaller investment is required than to directly invest in real property;
  • Greater confidence in management under the management of real estate experts;
  • Offer variety of ways to invest in real property.

REIT

  • Able to invest in varied types of real property, including real property abroad;
  • Able to use leverage to invest and/or develop real property for higher returns;
  • Able to partially develop its own real property;
  • Allow a company with expertise in managing real estate to become REIT Manager;
  • Adheres to international standard.

Source: The Stock Exchange of Thailand