What is REITs Fund?

REITs is a kind of trust fund, whose full name is real estate investment trust fund. It is an important means of real estate securitization, and it is a trust fund managed by a specialized investment institution to distribute the comprehensive investment income to investors in proportion.

To put it simply, a fund manager found a group of investors and used the raised funds to invest in real estate or infrastructure projects. These projects will generate certain returns, such as rent. After deducting the management fee of the fund manager, the money earned will be distributed to everyone. The fund manager is REITs management company, whose job is to manage real estate trust funds, collect management fees from its shareholders, and pay dividends to shareholders regularly after deducting related expenses. If properly managed, these real estate investment projects can obtain considerable fixed income.

The purpose of REITs is to transform commercial real estate with weak liquidity into securities assets with strong liquidity, and the main income sources of REITs are cash flow generated by real estate: rent and future asset appreciation. However, real estate investment trusts are not limited to investing in real estate. The first public offering of REITs in China focused on infrastructure, covering four major areas: toll roads, industrial parks, garbage and sewage treatment and warehousing and logistics.

What are the characteristics of REITs?

1. Strong liquidity: REITs divide complete property assets into relatively small investment units, which lowers the threshold for investors and broadens the exit mechanism of real estate investment.

2. Portfolio: Most of REITs' funds are used to manage property asset portfolios that can generate stable cash flow, such as office buildings, commercial retail, hotels, apartments, industrial real estate, etc.

3. Tax neutrality: Because the structure of REITs itself does not bring new tax burden, some regions give REITs certain tax incentives.

4. Active management and perfect corporate governance structure: Most publicly traded REITs are actively managed companies and actively participate in the whole process of property management; At the same time, it has a complete corporate governance structure like a listed company.

5. Income distribution: REITs generally distribute most of the income (usually more than 90%) to investors, with high long-term yield and low correlation with the stock market and bond market.

6. Low leverage: Like real estate listed companies, REITs also have leverage, but the leverage is moderate. The asset-liability ratio of American REITs has been below 55% for a long time.