For Sale: Singapore REIT

Buying a listed Singapore REIT is similar to ownership of a property and renting it out for income.

Some may call REIT a poor man's property. I think REITs are the next best thing to wet tissue. Easy to dispose after it has served its purpose.

No need to deal with erratic tenants, collect rent or keep up with maintenance.

With REITs, you can even own a piece of your favourite shopping mall, hotel or hospital (God Bless You) without breaking the bank.

Buying a REIT versus a property for investment

Some people may not realise this but when you buy an investment property in Singapore, it is similar to buying stocks on margin.

You only need to put up a small initial capital (usually about 20%) to buy them. The rest of the money is financed by banks or brokerage firms.

Then, your financial well-being depends on the trend of the market.

REITs on the other hand allows you to pay in full, to own a part of the desired property. In times of recession, asset values may drop but no bank can foreclose your REITs because you failed to keep up with payments.

So, if you are interested to join the poor man's club, the information below might be useful to you.

Types of REIT listed in Singapore

The first Singapore REIT was launched and listed on the Singapore Stock Exchange in July 2002.

If you are looking to invest in a REIT, you are spoilt for choice as Singapore is the largest REIT market in Asia ex-Japan, with 19 listed REITs and a total market capitalization of more than S$23 billion as of September 2009.1

  • Industrial - warehouses

  • Healthcare - hospitals, nursing homes

  • Hospitality - hotels

  • Office - towers

  • Residential - serviced apartments

  • Retail - shopping malls

Singapore REIT Yield

Dividends or distributions from Singapore REITs are not taxable. Some other characteristics of REITs listed in Singapore include:

  • Payout 90% of taxable income as dividends to unit holders

  • At least 70 % of assets are invested in real estate

  • Debt does not exceed 35 per cent of the value of the deposited property

Some REITs may be a good alternative to income producing dividend stocks

Business Trust Yield

Singapore is the first Asian country to introduce the Business Trust regime in January 2004. 2

Business trusts are business enterprises structured as trusts, as opposed to a corporate structure.

Unlike a company, which can only pay dividends out of accounting profits, a business trust may declare and pay distributions to its unit holders out of its operating cash flows.

Business trusts may be an attractive structure for businesses with stable growth and cash flows.

Since the listing of the world’s first shipping trust in 2006, business trusts with various business interest are also listed on the Singapore stock exchange in recent years.

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References

1. MAS, MAS Introduces Requirement for REITS AGM, notes to editor, accessed 05/02/2010

2. MAS, MAS Annual Report 2006/2007, pg 38, accessed 01/02/2010