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Real Estate Investment Trust (REITs)

  • Updated

 

What are Real Estate Investment Trusts (REITs)?

A real estate investment trust (REIT) is a stock corporation which owns and operates large-scale, income-generating real estate assets such as hotels, apartment buildings, shopping centers, office buildings, hospitals, highways, airports, among others. With REITS, investors can earn a share of the regular stream of the real estate’s income on rentals, toll fees, user’s fees, and storage fees, among others, without having to buy the commercial real estate.

Through REITs, both small and large investors can participate in the direct ownership of a real estate. Some perks include:

  • Minimum capital;

  • Investors can receive at least 90% of the REIT’s distributable income as dividend per annum

  • REIT shares can be bought and sold easily, thus, readily convertible to cash;

  • Diversifies the investor’s portfolio; and

  • Transparent as REITs are subject to increased disclosure requirements.

 

How to Invest in REITs?

You can participate in the IPO online through a FirstMetroSec account and a PSE Easy account.

 

  1. Create a PSE Easy online account and choose FirstMetroSec as your trading participant. Verify your account using the link sent to your email. FirstMetroSec will also verify your status upon creation of account.

  2. Allow FirstMetroSec to create a Name-on-Central Depository (NoCD) account on your behalf, where your REIT shares will be maintained, as mandated by the SEC.

  3. Once available, search for REIT IPO and order your desired number of shares. Afterward, click the subscribe button.

  4. Pay your purchase via bank transfer/deposit. Payment instructions will be emailed to you by PSE Easy.

You can also trade REITs like common stocks in the secondary market using the FirstMetroSec trading platform.

 

Note: If your FirstMetroSec account was activated earlier than 2017, you will also need to submit a REIT Consent Form.

 

Are REIT Dividends Guaranteed?

Dividends are not guaranteed because they depend on the actual income of the REIT, even though the law requires them to distribute 90% of income.

What Are the Risks in Investing in REITs?

REITs face risks such as:

  • Market volatility

  • Income fluctuations

  • Property‑related risks (vacancies, lower rental rates) These impact dividends and REIT share prices.

How Do Interest Rates Affect REITs?

Higher interest rates can reduce REIT prices because:

  • Borrowing becomes more expensive

  • Investors shift to other fixed‑income options

When Can I Buy REITs?

You may buy:

  • During the IPO offering, or

  • Anytime in the secondary market during trading hours

What Is NoCD?

The Name‑on‑Central Depository (NoCD) account is where your REIT shares are held under your name. It is required by the SEC for REIT shareholders.