REITs are the real deal for investors aiming to generate stable income.

If you are looking for investment tools that offer better returns than savings accounts but do not want to invest directly in real estate, REITs are the answer that might suit you. Real Estate Investment Trust – REIT( is a financial instrument introduced to the Thai stock market since 2018, and to this day, REITs remain an attractive option for investors at all levels.

What is a REIT? Get to Know the Real Deal of Financial Instruments

Real Estate Investment Trust )REIT( is a fund managed and operated by professional REIT managers. They raise funds by selling units to investors, then use that capital to invest in income-generating properties continuously.

A REIT is a tool that holds various types of assets, whether it’s houses, land, warehouses, hotels, shopping malls, or even communication networks. When these assets generate income from rent or usage, the management distributes that income as dividends to unit holders, providing a steady return on investment in REITs.

Why Do You Need REIT?

) Benefits for Property Owners

Property owners can put income-generating assets under the REIT structure to efficiently raise funds for developing new projects.

Benefits for Investors

No need for huge capital; investors can easily hold a part of large properties by purchasing units. Additionally, there are experts managing and allocating benefits reliably to investors, all under the supervision of relevant authorities.

What Types of REITs Are There?

REITs by Property Rights

Freehold Type ###Ownership Rights(: These REITs own the properties outright. The managers earn rental income and pay it out to investors. The unit value fluctuates with the property’s market value.

Leasehold Type )Lease Rights(: These REITs do not own the properties but have rights to income from operations. When the lease expires, this type of REIT will no longer generate income, so the unit value gradually decreases over time.

) REITs by Investment Format

Direct Investment: REITs that hold ownership or direct rights in real estate.

Indirect Investment: REITs that hold shares in other companies, which in turn invest in real estate.

REITs by Business Type

• Retail REIT: Manages income from shopping malls, retail stores, outlets.
• Residential REIT: Collects income from condos, hotels, apartments, dormitories.
• Healthcare REIT: Manages health-related properties such as hospitals, senior living centers.
• Office REIT: Manages office space rentals.
• Infrastructure REIT: Collects income from communication networks, energy pipelines.

REIT vs Property Fund: What’s the Difference?

Although both REITs and Property Funds invest in real estate, there are key differences:

General Characteristics: Property Funds are mutual funds, while REITs are trusts regulated by the SEC and require approval from the Stock Exchange of Thailand.

Investment Format: Property Funds are limited to investments on the SEC’s Positive List and cannot invest abroad. REITs are more flexible and can invest up to 10% of their assets internationally.

Distribution: Property Funds are offered as typical mutual funds, whereas REITs are offered like listed stocks and must have a free float of at least 15%.

What Determines the Value of a REIT?

The value of a REIT depends mainly on two factors:

Asset Value: Influenced by the type of rights held, economic conditions, location, and infrastructure development. Better conditions increase property value.

Projected Income Stream: The income that can be collected from the assets depends on economic conditions and tenant demand. For example, if office tenants grow, Office REITs can generate higher income and dividends.

Strengths and Weaknesses of Investing in REIT

Strengths

• High liquidity; can be bought and sold conveniently on the SET market.
• Helps diversify investment portfolios.
• Transparent, as they are under the supervision of relevant authorities.
• Generates relatively consistent cash flow through dividends.

Weaknesses

• Dividends are subject to 10% withholding tax or included in annual income.
• Sensitive to changes in interest rates.
• Leasehold REITs’ value decreases over time.

Examples of REITs Operating in Thailand

CPN Retail Growth ###CPNREIT( - Leasehold REIT managing Central projects and office buildings, with an annual dividend yield of 8.35% )from 9.85 THB(

IMPACT - Freehold REIT on land, buildings, and Impact Muang Thong Thani conference center, with a dividend yield of 4.69% )from 12.80 THB(

WHART - A trust combining Freehold and Leasehold rights, managing warehouses, with a dividend yield of 7.63% )from 9.50 THB(

JASIF - Infrastructure fund holding 1,680,500 fiber kilometers, earning rental income, with a dividend yield of 13.73% )from 6.70 THB(

Summary

REITs are tools for investors seeking more stable income than fixed deposits, with dividends derived from rent and income from properties held by the REIT. However, investing in REITs requires understanding both their strengths and weaknesses, as well as studying each fund’s details thoroughly to make informed decisions aligned with your goals and capabilities.