REITs Around the Globe
Seeing the profit potential of the U.S.-based REIT approach, almost 40 other countries have adopted this investment vehicle , offering investors access to portfolios of income-producing property across the globe.
Here’s the list – so far – of where and when real estate investment trusts have taken hold…
(Disclaimer: Any stocks listed below are for informational purposes only. They are not iREIT-recommended opportunities unless otherwise stated elsewhere on this site.)
United States (1960): U.S. REITs were formed in 1960 as part of the Cigar Act (which contained within it the initial federal tax legislation authorizing them), a law purposely designed to create wealth for individual investors. This blueprint has since paved the way for millions of REIT investors – small and large – to invest capital into income-producing real estate. To qualify, a company must pay out at least 90% of its net income in the form of dividends.
Canada (1993): These REITs are very similar to those in the U.S., although they pay out their dividends on a monthly basis instead of the typical quarterly schedule their southern neighbors work off of. The first publicly traded REIT ever listed was Canadian Real Estate Trust, which began trading on the Toronto Stock Exchange in September 1993.
France (2003): French REITs are known as les societies d’investissments immobilier cotees, or SIICs. They’re exempt from taxes as long as they pay out 85% of their recurring income to shareholders.
Germany (2007): Germany is the largest real estate market in Europe, which opens up a large opportunity for REITs. There, they must pay out at least 90% of distributable profits to shareholders, and no one shareholder can own more than 10% of the stock. G-REITs must also blatantly state their identity, listing “REIT” somewhere in their company name.
Italy (2007): Italian REITs are called societa di investimento immobiliare quotate, or SIIQ, and must generate at least 80% of their income from rental properties while distributing at least 85% of it to shareholders. No shareholder may own more than 51% of the voting rights.
Japan (2000): J-REITs are required to pay out at least 90% of their income to shareholders and, since September 2008, can own global as well as nationally based property. Nippon Building Fund Inc. and Japan Real Estate Investment Corp. became the first Japanese REITs to list shares in 2001.
United Kingdom (2007): UK-REITs are limited to investing in the U.K. and cannot be open-ended investment companies. They must be listed on a recognized stock exchange such as the Main Market of the London Stock Exchange, and they have to distribute at least 90% of exempted rental income to shareholders to avoid owing income taxes.
Argentina (1995): Known as fideicomiso financiero inmobiliario, there simply aren’t very many of them in existence. The biggest one right now is Inversiones y Representaciones S.A., which owns offices, hotels, malls, apartments and land. It is also listed on the New York Stock Exchange.
Australia (1971): There are now over 60 REITs listed on the Melbourne exchange, making Australia second for most held. A-REITs can also be listed on the Bendigo Stock Exchange, Newcastle Stock Exchange, and Australia Pacific Exchange. Most of them contract out management duties to third parties, and they are allowed to invest globally.
Bahrain (2015): According to BahrainBourse.com, “… the dividend payout of a REIT has to be at least 90% of its net realized income [and] unitholders can expect to receive stable distributions.” In addition, REITs must be regulated and authorized by the Central Bank of Bahrain “before they can be listed on Bahrain Bourse.”
Belgium (1995): Unlike the 90% threshold held by the U.S. and many other countries, Belgian REITs are required to distribute at least 80% of their income – after debt reduction and excluding capital gains – in order to avoid paying corporate taxes. However, distributions are annual, not quarterly.
Brazil (1993): Fundo de investimento imobiliario, also known as FII, must have at least 50 investors before they can start operating with all the legally afforded benefits they aim for. They must also distribute at least 95% of capital gains and the same amount of operating earnings to shareholders twice a year.
Bulgaria (2005): Bulgaria’s special purpose investment companies, or SPICs, are restricted to only owning Bulgarian property and to keeping their headquarters within the country as well. They must distribute at least 90% of their net profits within 12 months of the end of that financial period.
Chile (1989): Known under the Spanish name of fondos de inversion inmobiliario, or FII, these entities must have at least fifty shareholders, with liabilities not exceeding 50% of their assets. They can be either public or private, but if the former, they have to be managed by a Chile-based corporation.
Costa Rica (2009): REI funds are collective instruments that invest in real estate and real estate-related opportunities to produce high fixed returns to investors through long-term leases. REI funds are managed by administrative corporations that are registered, licensed and supervised by the national securities regulator.
Dubai (2006): REITs here must be closed-ended. Other applicable rules include that they must be listed and traded on a recognized exchange, and they have to distribute no less than 80% of annual net income. They also cannot borrow more than 70% of their net asset value at a time. At last check, there were just two REITs listed on Nasdaq Dubai.
Finland (2009): No single shareholder can own more than 10% of these businesses, and 90% of funds must be distributed to shareholders. However, for some reason, the REIT structure is just not a popular one for real estate companies to take advantage of in Finland. As of 2018, there was only one business that has taken up the mantle.
Greece (1999): The idea of Greek real estate investment companies started out slow thanks to problems with the initial law, but changes have since been made. REICs must be listed on the Athens Stock Exchange and invest over 80% of their assets in real estate. In addition, no single property investment can exceed 25% of the trust’s total asset value.
Hong Kong (2003): After Hong Kong published its REIT rules, its first listing was Link REIT from the Hong Kong Housing Authority, now one of the world’s largest real estate entities. Hong Kong REITs must pay out at least 90% of their net profits in dividends, and have three or more properties in their portfolio. Also, management must be external.
Hungary (2011): Under certain conditions, these REITs can be set up as special forms of corporations that are then listed with limited shares. Real properties or investments must account for at least 70% of their total assets per balance sheet, and at least 25% of shares representing their registered capital must be traded in a controlled financial market.
India (2014): According to Cushman and Wakefield, between $43 billion and $54 billion worth of Indian property within the commercial markets could be open as “investment opportunities for REITs.” In March 2019, India saw its first REIT IPO, which garnered a very positive response that will hopefully build up further confidence in this regard.
Ireland (2013): Though they don’t have to hold Irish assets, Irish REITs must be listed on an EU stock exchange, pay out at least 85% of their property income (minus capital gains), and maintain a loan-to-market-value ratio up to 50%. They also need to derive at least 75% of their aggregate income and market value from property rental businesses.
Israel (2006): At least 75% of Israeli REITs’ assets must be profitable, and the same amount must be invested in real estate located within Israel. In addition, at least 90% of income must be distributed to shareholders on an annual basis by April 30 of each year. The first listed REIT in Israel was simply called REIT, put out by Excellence Nessuah.
Kenya (2014): Kenya, the fourth Africa country to launch real estate investment trusts, regulated them through the Capital Markets Authority (CMA) under the Capital Markets Regulations of 2013. They are divided into three categories: income REITs (also referred to as I-REITs), development REITs (also referred to as D-REITs) and Islamic REITs.
Malaysia (2005): The first country in Asia to adopt such laws, Malaysia’s REITs are known as “listed property trusts” and formed as Malaysian registered trusts. Right now, Malaysia is revising its laws to be more in line with international standards, such as raising development limits and increasing corporate governance provisions.
Mexico (2010): Mexican fideicomisos de infraestructura y bienes raices, or FIBRAs, must pay out 95% of their taxable income to investors. While they have no minimum number of shareholders and no restrictions on how many shares any one individual can own, they do have to pay out at least 95% of their taxable income to shareholders.
Netherlands (1969): The first country in Europe to pass REIT laws, the Netherlands’ real estate investment trust rules are especially stringent. Companies must pay out 100% of their taxable profits to qualify and are not allowed to engage in land and property development. REITs here are called Fiscale Beleggingsinstelling, or FBIs.
New Zealand (1969): This nation’s REITs are confusing, to say the least, since they both exist and don’t exist at the same time. Referred to as portfolio investment entities, or PIEs, they use non-REIT laws to operate like REITs. That’s their only available option since there are no legally-structured REIT laws per se in New Zealand.
Oman (2018): REITs here must have a minimum paid-up capital of OMR10 million, offer at least 40% of their units to the public (if publicly traded), and no less than 90% of their net annual profits out as dividends. In contrast to other jurisdictions, which limit foreign ownership to 49%, international investors can own all of an Omani REIT.
Pakistan (2008): These REITs are required to adhere to a trustee structure and must be managed by the REIT management company, or RMC. The RMC must have at least a 20% to 50% stake in the company and cannot receive fees for management. As usual, REITs do not pay taxes as long as they distribute 90% of their profits to shareholders.
Philippines (2010): P-REITs can exist legally, but none exist yet due to onerous burdens such as a 12% tax on any real estate owners who want to convert their businesses. Other stipulations include a listing on the Philippine Stock Exchange (PSE), and no less than 1,000 public shareholders who own no less than 50 shares each.
Puerto Rico (1972): These REITs must have at least 50 shareholders or partners in order to exist. And at least 50% of the total value of outstanding shares must be owned by more than five people. Right now, due to current legislation that makes the formation of REITs unattractive for most businesses, there are only eight currently in existence here.
Saudi Arabia (2016): As of March 2019, four REITs are listed on Tadawul, the Saudi stock exchange, with a number of others that should have IPOs in the near future. They have to own at least 30% of their own shares, with at least 50% belonging to public investors. And no more than 25% of their total assets can be located outside the country.
Singapore (1999): At least 25% of a Singaporean REIT’s stock must be held by at least 500 public shareholders. Singapore (along with the Netherlands) is one of the only REIT countries in the world that makes REITs pay out 100% of cash flow. The first S-REIT was CapitaLand Mall Trust, established in 2002.
South Africa (2013): An SA REIT has to, by law, own at least R300 million worth of property, maintain a debt level less than 60% of its gross asset value, feature a committee that actively monitors risk, have 75% of its income deriving from rent checks, and offer a minimum 75% of its taxable earnings to shareholders.
South Korea (2001): There are three kinds of REITs in this nation: 1) Self-managed REITs, 2) Manager-entrusted REITs, which also act as advertised, and 3) Corporate restructuring REITs, which oversee real estate companies’ efforts to restructure. They all must be approved by the Ministry of Transport and Maritime Affairs.
Spain (2009): Spanish REITs are called sociedades anonimas cotizadas de inversion en el mercado inmobiliario (SOCIMIs). They have to have about 2 million euros in market value, are obligated to have at least 85% of their original 15 million euros invested in urban property, and must distribute at least 90% of rental income to shareholders.
Taiwan (1969): In return for the normal real estate investment trust benefit of paying no income taxes, these REITs must pay out the normal 90% of their income annually. At least 75% of their assets must be in real estate assets, and they can invest up to 20% in short-term commercial paper, bank deposits, government bonds, etc.
Turkey (1995): Set up as corporations and listed on the Istanbul Stock Exchange, Turkey’s real estate investment trusts must devote at least 50% of their capital to real estate. They cannot invest in development projects, distributions have to be paid annually, and need to be registered with the Bora Istanbul securities exchange.
Vietnam (2015): This country’s REITs must invest at least 90% of their taxable income into real estate and, as per usual, distribute no less than 90% of profits to investors. Though Vietnam only had one REIT as of April 8, 2019, it was actively looking to mainstream its legal model in order to encourage more to come.
Countries Considering REITs
China: China has yet to pass legislation that would set up a universal REIT framework in terms of taxation and rules. However, regulatory authorities have encouraged the development of various market prototypes – often referred to quasi-REITs – to test different securitization formats. These quasi-REITs have generally taken the form of structured financings or asset-backed securities, rather than equity instruments.
Other countries considering REIT implementation include:
What Global REITs Can Do for Your Portfolio
According to NAREIT, research done by the investment consulting firm Wilshire Associates showed that including global listed real estate in a diversified portfolio had a positive effect on returns.
While analyzing the risks and returns for various asset classes (stocks, bonds, real estate and cash) from 1976 to 2014, Wilshire tested out optimized portfolios – with and without an allocation to global listed REITs – for a variety of investment horizons.
What it found was this: Portfolios that included global listed REITs produced lower annualized risk and a 6.5% higher annualized return.
With that said, in his book, Investing in REITs, Ralph Block correctly points out that, “Managing a portfolio of global real estate securities comes with layers of risk compared to a portfolio drawn from securities representing only one country.” This includes hedging issues and the fact that these shares are denominated in currencies other than one’s own.
There are also different exchanges to consider. While some of the larger non-U.S. companies may have American depository receipts, or ADRs, most of the real action in this regard comes from these countries’ local exchanges.
To be effective, investors must consider using trade desks, where they can find order flows and execute the trades they want to make.
It’s either that or, as we recommend, buy into the closed-end funds (CEFs), mutual funds, and/or exchange-traded funds (ETFs) that center around these international REITs. The latter two especially offer easy and efficient ways for investors to add global listed real estate positions to their portfolios.
The most common index for the global listed property markets is the FTSE EPRA/Nareit Global Real Estate Index Series, which was created by index provider FTSE Russell, Nareit, and the European Public Real Estate Association, or EPREA.
This index is used by a variety of institutional investors, money managers and funds to manage real estate investments on a global basis. It contains both REITs and non-REIT listed property companies, and includes both the Developed Markets and Emerging Markets Indices.
Other sources: NAREIT and REITs Around The World (Richard Stooker)