S-REITs: Real Estate Investment Trusts Listed in Singapore

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The first Real Estate Investment Trust in Singapore, known as S-REIT, was CapitaMall Trust in 2002. They're regulated as Collective Investment Schemes or Business Trusts under the Monetary Authority of Singapore's Code on Collective Investment Schemes, and are structured as unit trusts. They're called an S-REIT to distinquish them from other countries.

The manager of an S-REIT should be a corporation with a physical location in Singapore and a capitalization of at least $1 million (Singapore dollars). REIT trustees must be approved by the Monetary Authority of Singapore. At least 25% of their units must be held by at least 500 public shareowners.

The Singapore government is hoping to make it a major Asian Real Estate Investments Trusts, including cross-border REITs. Foreign S-REIT investors are subject to only 10% withholding on their dividends. When an S-REIT buys a building in Singapore, it's not subject to stamp duty.

Many S-REITs invest in property outside of Singapore. As of June 2007, 21% of S-REIT property value was in real estate outside of Singapore - in a total of ten other countries. This is relatively high. In many countries, the REIT laws encourage these property companies to invest within their own country. However, while Singapore is a major city it's a very small country, so it may not want REITs bidding up real estate property values when bargains are available in other places.

S-REITs are Legal Trusts

Singapore is the only REIT country in the world having REITs pay unit holders 100% of cash flows. In the United States and most other countries, it's 90%.

The structure of S-REITs reminds me of Master Limited Partnerships in the United States. That's because they are externally managed by a company which is a wholly owned subsidiary of a real estate corporation. This leads me to conclude S-REITs give these corporations a business structure for a large tax break.

In 2007 they passed legislation enacted by Monetary Authority of Singapore (MAS) which enhances disclosure on short-term yield enhancing arrangements - financial engineering. It discourages arrangements to entrench a manager's position and disallows discounts to institutional investors at IPO. It also increases the minimum threshold for investment in real estate -- an S-REIT must have at least 75% of its assets in income-producing real estate.

And no more than 10% of a REIT's revenue can come from nonrental income.

Singapore's Securities Industry Council (SIC) extended the takeover and merger code to make it easier for one REIT to buy up another.

S-REITs are sector specific, focusing on retail, office, industrial, hotels, residental and medical properties.

Therefore, S-REITs (Singapore Real Estate Investment Trusts) are a great way to profit from economic activity in much of Asia.

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