Real Estate Investment Trusts (REITS)

A REIT has a well defined investment policy and invests primarily in income-generating properties, while a property company is not restricted to doing business in property investment and property development.

According to existing SFC regulations, the dividend payout ratio of a REIT has to be at least 90 per cent, while the dividend policy of a property company may change from time to time. A REIT may borrow up to 50 per cent of its gross asset value, while a property company may borrow more.

Besides, a property stock is essentially a company, while a REIT is a trust. To ensure proper checks and balances, a REIT must appoint an independent trustee to oversee its operation of the safekeeping of its assets for unit holders.

The total return of REIT is subject to the performance of the property market.  The unit price of a REIT may go down if its properties drop in value.  Also, dividends may not be paid if the REIT reports an operating loss.

When deciding to invest in a REIT, investors should not simply look at the expected yield but also consider the concentration, quality and length of its property leases.  In general, the fewer and smaller the properties in a REIT, the greater the investment risk.  Besides, a shorter lease may imply more rapid turnover of tenants and less stable rental income.

Investors should refer to individual REITs' listing documents and announcements for details. The documents can be found at the "Listed Company Information" section of the HKEXnews website. Investors may also consult their brokers or investment advisers for details.