What is a REIT?
- REITs are funds that invest in a portfolio of income-generating real estate assets such as shopping malls, offices, hotels and industrial properties with the aim of generating income for unit holders of the REIT.
- Assets of REITs are professionally managed and revenues generated from assets (primarily rental income) are normally distributed at regular intervals to investors. REITs allow investors to access real property assets, and share in the benefits and risks of owning a portfolio of properties.
- Units of REITs are bought and sold on the stock exchange like other listed securities at market driven prices.
- The Distribution per Unit (DPU) is an important metric for REITs as the primary objective of owning a REIT is for a stable, sustainable dividend yield.
- In addition to the DPU, investors also stand to benefit or lose when the unit price of a REIT moves higher or lower than their purchase price. The sum of a REIT’s distribution yield and unit price appreciation or loss is the total return and is a more holistic measure of investment performance compared to the DPU.
You can read more about the basics of REITs here.