[Investment] Guide for REITs - Part 2

This is a continuing blog from Guide for REITs Part 1.

What kind of returns can be expected from REITs?

• Typically, the returns to unit holders of a REIT can be in the form of:

1. Income distribution based on the distribution policy stated in the REIT's deed; and/or
2. Capital gains which may arise from appreciation of the REIT's price.

What are the performance indicators of REITs?

• Distribution Yield (DY):
• DY = Income distribution paid to a REIT unit holder/ REIT's price paid by the unit holder

Other indicators include the following which are available in annual reports:

• Net Asset Value (NAV):
• The value of a REIT is based on its tangible real estate holdings. This is calculated by the total assets of a company after subtracting all its liabilities.
• Management expense ratio:
• The percentage of operating expenses (management fees, etc.) incurred to the NAV.
• Total return:
• The change in a REIT's price for the period under review plus any income distribution received during the period.