A REIT is a capital market institution that can invest in real estate and capital market instruments based on real estate, real estate projects, real estate-based rights and capital market instruments, establish ordinary partnerships to realize certain projects, and other activities permitted in the relevant Communiqué of the Capital Markets Board.
Moreover, the main goal of a REIT is to ensure the realization of qualified and large projects by providing corporate capital inflows to the real estate sector.
How a Real Estate Investment Trust Works in Turkey
According to the provisions of the Turkish Code of Commerce, real estate investment trusts can be established as a new joint-stock company, as well as transforming them into real estate investment trusts by amending the articles of association of companies established for another purpose in accordance with the CMB regulations. In either case, the partnership must obtain approval from the Capital Markets Board.
After that, partnerships apply to the Ministry of Trade. Real estate investment trusts must invest at least 50% of the portfolio value in real estate, real estate rights and real estate projects. If the partnerships cannot achieve this ratio, the CMB may grant one year to the partnership as a result of its evaluation.
Real estate investment partnerships, which offer solutions to the liquidity problem frequently experienced in the real estate sector, ensure the continuity of large projects by collecting the savings of individual and institutional investors in a common pool.
These partnerships regulated by the Capital Markets Board may invest in real estate and property rights and engage in other permitted activities.
The Types of Real Estate Investment Trusts
The purpose of the real estate investment trust is to invest in real estate and projects offering high return potential, to get rental income and real estate trading income from the real estate.
The types of REIT;
- Equity REITs
- Mortgage REITs
- Hybrid REITs
Each category can also be divided into three types on how to buy the investment.
- Publicly Traded REITs
- Non-Traded REITs
- Private REITs
The Risks of REITs
Every investor needs carefully monitor the profitability of the partnership he wants to invest in, the financing structure, and the knowledge of the investment projects.
It is also beneficial for the company to follow the material event disclosures on the Public Disclosure Platform (KAP).
Besides, investors can find basic information about real estate investment trusts through the articles of association, prospectus, circular, financial statements.
The Benefits of REITs
Real estate investment trusts provide financing for large-scale projects such as business centers, shopping malls and hotels. Companies with insufficient capital can often finance the realization of such large projects by paying high-interest rates through loans. So that companies take on risky financial burdens.
- In real estate investment trusts, on the other hand, issues such as reducing risk through diversification, financing the investment through borrowing and depreciation are the factors that make real estate investment trusts attractive for investors.
- Investors can sell their partnership shares on the stock exchange, and can also benefit from the opportunity of valuation of the shares in the stock market.
- Furthermore, international organizations prefer to buy real estate investment partnership shares, which are traded in secondary markets that operate in an organized manner, rather than direct real estate investments.
- Besides, earnings of real estate investment trusts are exempt from corporate tax.
The Real Estate Investment Trusts in Turkey
- Alarko REIT
- Akis REIT
- Dogus REIT
- Emlak Konut REIT
- Idealist REIT
- Kiler REIT
- Mistral REIT
- Nurol REIT
- Panora REIT
- Sinpas REIT
- Torunlar REIT
- Vakif REIT
- Ziraat REIT
Should You Consider REITs?
It is possible to invest in real estate investment trusts in two ways. Investors can buy the shares of any real estate investment trust they want from the stock market. Undoubtedly, it is possible to invest in the investment partnership in the initial public offering. The value of the shares of the investment partnership is determined within the supply and demand relationship within the free market.
Real estate investment trusts are established as joint-stock companies in accordance with the provisions of the Turkish Code of Commerce. For this reason, investors investing in real estate investment trusts have many rights arising from the TCC. For instance, the right to receive a share of the profits of the partnership.
