Real Estate Investment Trusts, Should You Invest or Not?

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Real Estate Investment Trusts in Nigeria come from the The Investment and Securities Act defining REITs as a kind of Collective Investment Scheme (CIS). The Securities and Exchange Commission (SEC) of Nigeria released the first set of guidelines for Real Estate Investment Trusts in Nigeria (N-REITs) per the Investment and Securities Act (ISA) 2007. REITs in Nigeria can be either closed-end or open-end. They must have at least one hundred unitholders. Things to know about real estate investment trusts

  • At least 75% of a closed-end REIT’s assets must be in real estate. At least 70% of an open-end REIT’s assets must be in real estate or real estate-related. None of their assets may be outside Nigeria.
  • At least 75% of their income must come from rents, mortgages or sale of property.
  • At least 90% of net income must be distributed to unit holders. Real Estate Investment Trusts in Nigeria are regulated by the SEC and the Federal Inland Revenue Service (FIRS).
  • The first established REIT was SkyeShelter Fund, but it lacked tax exemption.
  • Real Estate Investment Trusts in Nigeria are structured to have a fund manager, a property manager, and trustees.

Equity real estate investment trusts investors can own commercial real estate without the hassles of managing it. REITs, through experienced management teams, purchase and manage commercial real estate. When you purchase shares in a REIT, you become a partial owner of those properties. From this perspective, you’re also a partial owner of an operating business that manages properties for profit. REITs are modeled after mutual funds, and are traded major stock exchanges; some REITs are privately held.

REIT share prices enjoy lower volatility than equity stocks. This is because rental income and management expenses are predictable over the short and long term. Analysts can predict the performance of REITs more easily than they can that of equity stocks because rental income is usually very predictable. Analysts can be very accurate in their predictions for the performance of REITs. This reduces share price volatility. Real estate investment trusts also have a low correlation to the performance of other asset classes. This means that they do not normally act the same as equity stocks or bonds.

 

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Adekemi is a Pastor by calling and Dentist by profession. She is the Co-founder of ‘Komplete Woman’ an organization whose aim is to inspire and mentor young women to discover their purpose early. She is an associate fellow of the Royal commonwealth society. She is passionate about God, writing, poetry and influencing the younger generation to fan the flame of their potential.