What are REITs and why should you invest in them?
Amid the adverse effects of COVID on the economy, REITs (Real Estate Investment Trust) have managed to keep a steady flow of attracting investors. This office leasing market has so far survived the challenges posed by the pandemic.
So what makes this financial instrument so resilient? Basically, REITs are stock corporations established to generate earnings from real estate assets through rental income. These assets range from apartments, office buildings, medical facilities, hotels and resorts, highways, warehouses, shopping centers, and many more.
REITs allow people to easily invest in these assets so they can profit from the earnings made from owning, operating, leasing, and managing these real estate properties. In a nutshell, REITs let investors share a portion of their assets at affordable rates. Think of it as being a landlord without the actual stress and hassle of being one!
Since REITs bring an assurance of dividends, investors comfortably earn passive income higher than yields from most government bonds and other time deposits.
What’s in it for you?
Firstly, and most importantly, investors get regular income. As mandated by the law, 90 percent of REITs’ taxable earnings are required to be given to its shareholders. Best of all, its income is exempt from the 30 percent corporate tax.
Unlike purchasing physical property, buyers are no longer required to go through the rigorous process of contract-signings, formalities of transferring titles, paying monthly mortgages, and so on. All that famously demands more effort and time. But during a pandemic, there are added health risks in interacting with other people.
REITs are fuss-free and don’t require any contracts. Investors are also allowed to buy and sell their shares online!
Like any other asset in the property market, there is potential for growth in REITs. The property sector has always been more resilient than any other business and maintains its longterm positive outlook. While the pandemic did a number on real estate company stocks, the crisis also gave investors a chance to buy more stocks during the decline.
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New REIT offer from PH’s real estate giant
Diversifying your investment portfolio with REITs is a surefire way to receive steady income. With Megaworld’s MREITs, for example, investors get quarterly dividend payments. And at a competitive dividend yield of 5.65%, MREITs offers a comfortable longterm play that beats inflation.
With MREITs, investors immediately become part owners of one of the largest office real estate offerings in the country. And right now, it’s still very much affordable. MREIT’s IPO (initial public offering) is currently priced at P16.10 per share.
After pioneering the whole idea of townships, Megaworld created strategically-placed real estate projects that offer work-live-play components. The country’s young, active, and economically empowered population are immediately drawn to this.
At present, MREITs is the largest office REIT in Southeast Asia, with an aggregate gross leasable area of 224,430.8 square meters. The subsidiary of Megaworld Corporation leased a portfolio of ten Grade A, PEZA-accredited office and commercial spaces to various tenant bases all over the Philippines. It seeks to sell up to P27.3 billion worth of shares in its IPO.
The ten office assets are One World Square, Two World Square, Three World Square, 18/10 Upper McKinley Building, 18/20 Upper McKinley Building, 1800 Eastwood Avenue, 1880 Eastwood Avenue, E-Commerce Plaza, Richmonde Tower and Hotel, and One Techno Place Iloilo.
With MREITs’ long tenancy rates of an average of 4.7 years (or even five to ten years!), it gives investors a stable rental income in the years to come. Their offer period is only from September 14 to 20 with the listing date of September 30.
