Types and Structure of REITs – Millionaire Investor
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Types and Structure of REITs

Types and Structure of REITs

Equity REITs

Equity REITs are the most common form of REITs. All the REITs to-date in Singapore are Equity REITs. Equity REITs invest in and own physical properties of various types such as residential, retail, office, hotel, industrial and healthcare properties. Most of them are specialised and they own specific building types. Their incomes are primarily derived from collected rents from properties in their portfolios, as well as any capital gains in the sale of such properties that have appreciated in value. Equity REITs are generally less speculative than Mortgage REITs as the REITs own the real estate directly.

Mortgage REITs

Mortgage REITs invest in mortgages on real estate properties. They loan money for mortgages to owners of real estate, as well as purchase existing mortgages or mortgage-backed securities (MBS). As they do not own or manage any property, most of the incomes are generated by the interest earned on the mortgage loans. Mortgage REITs are more volatile than Equity REITs as they are exposed to greater and direct interest rate risks, mortgage servicing schedules and redemptions as well as the risk of defaulting by the borrowers. One advantage of Mortgage REITs is that they tend to perform better during times of low interest rate.

Hybrid REITs

Hybrid REITs combine the characteristics of Mortgage and Equity REITs together. They own and manage both physical real estate properties as well as real estate loans. Most typical Hybrid REITs focus more on either equity or debt and there are very few equally balanced Hybrid REITs in the market.

 

 Earning Disclaimer
“Please note that the material here is provided to you for general information and illustrative purposes only, or as descriptive case studies on how our value-investing principles may be applied. It is not intended to be and should not be construed as any form of general or specific financial advice. For the avoidance of doubt, we do not recommend or provide opinions on how or what you should or should not be investing in, and you should always do your own research and independent assessment before making any investment decisions, taking into account your own specific circumstances. If you require any financial advice on investments or any other financial matters, please consult the relevant professional financial advisers.”

About The Author

Attlee Hue
Resident REITs Expert

Attlue Hue is the author of the book Value Investing in REITs. A former lawyer, Attlee is now a full-time investor and particularly loves investing in REITs. Attlee also participated as an originator for the Allco Commercial REIT in 2006.

Number of Entries : 3

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