REITS

What is a REIT?

REIT is the acronym for Real Estate Investment Trust. A REIT is a vehicle through which investment in real estate is packaged as tradable securities into which individual investors can subscribe.

REIT = Real Estate + Investment Trust

Types of REITs

Objectives of a REIT

• To enable the Originator to use the REIT structure to access long-term funds that can be profitably invested in real estate assets.
• To use the REIT structure to enable investors attain higher investment returns than would be received from other available investments in the financial marketplace.
• To utilise the long term funds that have been created within the framework of the Pension Scheme.
• To meet a need in the Nigerian economy by developing the real estate and mortgage sectors to the next level.

Benefits of a REIT

To The Originators

• The REIT will make available cheaper long term funds for real estate investment purposes.
• The REIT will allow the originator access to its sunken cost, whilst remaining a part-owner of the original real estate.
• The creation of a REIT provides the originator an opportunity to be co-investor and also enjoy future income.
• The REIT makes it possible to capitalise on investment opportunities.
• SPV will reduce funding cost as opposed to floating a new company.

To the Investors

• Attractive Yield from rental income (Equity REIT) and interest income (Mortgage REIT) will increase total returns.
• Liquidity resulting from being quoted on the Nigerian Stock Exchange.

To the Country

• Boost National Image — inclusion in the league of countries operating REITs like USA, Dubai, Australia and the UK.
• Improved and affordable housing for Nigerians.
• A good and continuous source of revenue.
• Increased depth of the Capital Market.
• Increased Home Ownership.
• Expansion of the real estate sector and the economy as a whole.

Parties to a REIT

Two groups of parties are required: Life Parties and Non-Life Parties: