Real Estate Investment Trust: REIT
A REIT is a type of “trust” where a trustee is determined its true owner on behalf of its beneficiary and does not have a juristic person status. The REIT settlor will eventually become the REIT Manager (RM) whom will offer trust units to the public. Once received capital from the sale of trust units, the RM will entrust the following fund with the REIT’s designated trustee in order to establish the REIT. The trust deed will assign the REIT Manager to manage the REIT and the trustee to supervise the performance of the REIT Manager and administer the REIT in the best interest of the beneficiary.
Differences between REIT and Property Fund
Both REIT and property fund have the same objective, which is to invest in and seek benefits from real estate. However, the investment, supervision, as well as benefits of REIT are different from those of property fund in certain aspects, as follow:
| Topic | Property Fund | REIT |
|---|---|---|
| General | ||
| Legal Structure | Mutual fund | Trust |
| Minimum Size | Not less than 500 million Baht | Same |
| Number of Unit holder | Upon establishment: ≥ 250 After establishment: ≥ 35 |
Same |
| Listing of Unit | Investment units must be listed | REIT units must be listed |
| Management | Asset management company | REIT Manager, namely an asset management company or a company with expertise in managing real estate and is qualified according to the criteria set by the SEC |
| Registrar | Not required to be TSD | Requires consent of the SET |
| Investment | ||
| Type of property in which investment can be made | Only ones listed on the SEC’s positive list | Not specified; however, the real estate shall not be used by the lessee to operate immoral or illegal business |
| Investment in real estate abroad | Not permitted | Permitted |
| Development of real estate (Green-field project) | Not permitted | Not exceeding 10% of the total assets |
| Leverage limit | Not exceeding 10% of the net asset value (NAV) | Not exceeding 35% of the total assets and not exceeding 60% in the case REIT has received an investment grade. |
| Distribution and allocation of units | ||
| Distribution | At least 25% must be offered to the public, and units must be allocated to all free float subscribers equally, one board lot at a time, until all subscribed units are allocated (Small Lot First) | Not specified; allocated to free float REIT unitholders in accordance with the criteria for listing (no less than 20% of the total trust units and of each tranche (if any) |
| Holding Restriction for Any Person or Group of Persons | No more than 1/3 of the total number of investment units | No more than 50% of the total number of REIT units and of each tranche (if any) |
| Disclosure | Similar to mutual funds | Similar to listed companies |
| Annual meeting of unitholders | Not specified | Annually, within four months from the end of the fiscal year |
| Codes concerning the acquisition and disposal of assets / related parties transactions | Resolution of unitholders not required | Resolution of unitholders required for transactions of a significant size, as prescribed |
| Maintaining listing status (free float) | Not specified | Having free float unitholders holding an aggregate of not less than 15% of the total REIT units and of each tranche (if any) |
| Tax | ||
| Fund is exempt from CIT. | In some cases, unitholders are not subject to tax levied on dividends such as a company holding units for three months prior and three months after the date of dividend payment. | |
| Trust is exempt from CIT. | REIT unitholders of all types are subject to tax. | |