Are you considering investing in a Real Estate Investment Trust (REIT) in Nigeria? Then, you must know the REITs that are currently in Nigeria and be sure they are managed by experienced fund managers who are familiar with both the stock and real estate markets.
Real estate investment has long been classified as a lucrative business that is attractive to a lot of investors because of its profitability.
Prior to the development of real estate investment trusts, investors could only participate in real estate by purchasing houses or building from scratch which most times involved a long process.
But, with the creation of REITs, investing in real estate has been made easy. You can now buy any real estate shares in the stock market and enjoy the benefits associated with investment trusts.
In this article, we’ll be sharing the REITs in Nigeria based on their total assets and market capitalization and what each of them has to offer. But first, let’s have a look at what Real Estate Investment Trusts really are.
What is a Real Estate Investment Trust?
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate across various property sectors.
They allow individuals to invest in a portfolio of real estate assets like apartments, office buildings, hospitals, and more, similar to how you would invest in stocks.
By investing in a REIT, you benefit from the rental income generated by the properties without the burden of directly managing them.
In Nigeria, REITs are traded on the Nigerian Stock Exchange (NSE) and are bought and sold through authorized stockbrokers in the form of stocks and shares.
A REIT’s portfolio of properties could include housing units, data centers, hospitals, hotels, office buildings, and warehouses. There are three top REITs in Nigeria, and each offers its unique benefits.
Benefits of Investing in REITs:
- Diversification: REITs offer a way to diversify your investment portfolio by including real estate alongside stocks and bonds.
- Liquidity: Unlike directly owning property, REITs are traded on stock exchanges, allowing you to buy and sell shares easily.
- High Returns: REITs typically offer attractive dividend yields, often exceeding 10%.
- Price Stability: Compared to stocks and bonds, REITs tend to experience less fluctuation in value.
- Convenience: Investing in REITs is a convenient way to gain exposure to real estate. You can research and buy them through a brokerage firm.
Some of The Top REITs in Nigeria
1. UPDC REITs
This REIT is one of the largest Nigerian investment trusts based on its net asset value. It is a close-ended investment regulated by the Securities and Exchange Commission (SEC).
It distributes at least 90% of the fund’s net income twice a year. Also, UPDC offers ownership of a piece of investment-grade real estate, tax exemption on income, portfolio diversification, and stable cash distributions to unitholders.
2. Skye Shelter Fund REITs
This is another close-ended real estate investment trust that is listed on the Nigerian Stock Exchange. It was established in July 2007 and completed its N2bn IPO on the NSE in February 2008.
In this REIT, the fund managers make opportunist investments in joint venture developments and are responsible for acquiring stocks. They invest in several high-quality properties— malls, residential houses, and warehouses.
Skye Shelter Fund invests 75% of its assets in real estate and 25% in real estate-related investments—mortgages, real estate-backed securities, and stocks that are closely tied to the real estate industry.
3. Union Homes REITs
This REIT was established in 2008 by Union Homes Savings & Loans Plc, a subsidiary of Union Bank of Nigeria.
It’s a closed-end trust scheme designed to generate long-term capital growth through real estate. It is a hybrid investment that gives unitholders access to investments in an approved portfolio of properties.
Why Invest in A Real Estate Investment Trust?
As a real estate investor, you may have wondered if it’s worth investing in a Real Estate Investment Trust (REIT). The answer is yes.
Here are some key reasons why you should consider a REIT:
1. Diversification
REITs provide room for diversification, which is key for any investment portfolio.
You can invest in different properties such as hotels, residential houses, and many more. And it is less risky than investing in a single property.
2. Liquidity
This type of investment allows you to sell your shares whenever you want, without having to wait for the traditional six-month lock-up period. However, the prices you sell your shares at will be solely determined by the market.
3. High Returns
It offers high returns compared to other investment vehicles. Most REITs offer yields of 10% or more.
4. Price Stability
Unlike stocks and bonds, the value of a REIT usually doesn’t fluctuate as much as these other investments do. This makes them a more stable option.
5. Convenience
The process of investing in REITs is quite simple; all you have to do is look at the publicly available data to pick what to buy at your convenience. A brokerage firm can then be used to acquire REITs on your behalf.
Conclusion
Investing in REITs is a great way to get into the real estate market without having to buy or manage a property yourself. They offer both substantial dividend yields and modest long-term capital growth, and their dividends are generated from the rents paid by the tenants of their properties.
When you invest in a REIT, you become a part of a larger group of people who own income-producing real estate, which is everyone’s dream. You can also read our business on real estate business in Nigeria.
