REAL ESTATE INVESTMENT TRUST

WHAT IS REIT?

An acronym combining two terms together, It is an entity that buys, develops, manages and sells real estate assets and also lend to mortgage.

•REITs allow participants to invest in a professionally-managed portfolio of real estate properties.

•It can be an Open ended or Closed ended real estate investment trust

REIT as a Closed ended vehicle, can be quoted as an exchange traded fund to provide liquidity and secondary market window for investors.

It can also be an Open ended vehicle come under memorandum listing of the exchange

Equity REIT - Invest in, and own properties. Revenue comes principally from rents and capital gains from sales of properties owned in REIT portfolio.

Mortgage REIT – It loans money for mortgages to real estate owners or purchase existing mortgages or MBS. Their revenue comes principally from interest earned on their mortgage loans.

TYPES OF REIT

Equity REIT – Invest in, and own properties. Revenue comes principally from rents and capital gains from sales of properties owned in REIT portfolio

Mortgage REIT – It loans money for mortgages to real estate owners or purchase existing mortgages or MBS. Their revenue comes principally from interest earned on their mortgage loans.

Hybrid REIT - Combination of Equity REIT and Mortgage REIT. It invests in both properties and mortgages.

CONTEMPORARY REIT

The SPV may be a corporation or an Investment Trust Managed by a Board of Directors or Trustees. SPV has secondary market window for liquidity. The SPV has minimum of 100 shareholders. Not more than 50% of shares held by 5 or fewer individuals. Invest at least 75% of the total assets in real estate assets/Government Securities. Derive at least 75% of gross income from rents and Mortgages. 90-95% of income must come from rents, interest and capital gains on other securities. Pay dividends on at least 90-95% of REIT’s taxable income.

REGULATORY ISSUES ON REIT IN NIGERIA

In terms of financial disclosures and reporting rules, REIT will be regulated by  SEC guidelines integrating inputs of other professional bodies. Ahead of REIT debut, SEC may have to articulate definite guidelines for its operations.

Coverage may include:

·         Listing requirements for public REITS, by NSE reports,

·         Continuous disclosure (quarterly financial/ annual reports, annual returns, material changes etc.)

·         Fiscal and monetary policies as they affect REIT

·         Comply with statutory filling with the CAC

·         Functions of relevant professional parties

·         Cost of Issue – Concessional/negotiable statutory fees

BENEFITS OF REIT TO INVESTORS

Access to Real Estate: Provides a way to invest in real estate without actively owning a property.

Current Income: Usually Stable and often provides an attractive return

Liquidity: Tradeable in the stock market to create liquidity.

Professional Management: REIT managers are skilled, experienced real estate professionals.

Portfolio Diversification: Minimizes Risk

Performance Monitoring: REIT’s Performance is monitored on a regular basis by analysts, auditors, the Securities and Exchange Commission, and the business and financial media. This scrutiny provides the investor a measure of protection and more than one barometer of the REITs financial condition.

Contact Cityworks Real Estate Solutions Limited on 08129461236 for further details.