Types of investment vehicles
Legal forms of typical investment vehicles
Apart from individuals, there are three main types of investment entities in Singapore:
- Private Limited Companies;
- Limited Liability Partnerships (LLP); and
- Real Estate Investment Trusts (REITs).
Real estate investment trusts (REITs)
A REIT established as a unit trust is regulated as a collective investment scheme under the Securities and Futures Act (Cap. 289).
Furthermore, there are additional regulations under the Code on Collective Investment Schemes, which governs the administration, supervision and control of REITs.
REITs have to be either authorised or recognised by the Monetary Authority of Singapore (MAS) as a collective investment scheme.
MAS may authorise a collective investment scheme which is constituted as a unit trust if the Authority is satisfied that:
- There is a manager for the scheme which satisfies the prescribed requirements;
- There is an approved trustee for the scheme;
- There is a trust deed in respect of the scheme entered into by the manager and the trustee for the scheme that complies with prescribed requirements; and
- The scheme, the manager for the scheme and the trustee for the scheme comply with the Securities and Futures Act (Cap. 289) and the Code on Collective Investment Schemes.
MAS may also recognise a collective investment scheme which is constituted outside Singapore, subject to the satisfaction of requirements prescribed in the Securities and Futures Act (Cap. 289).
Subject to the terms of its trust deed, a REIT may invest in real estate, whether freehold or leasehold, in or outside Singapore. Such investment may be made by way of direct ownership or a shareholding in an unlisted special purpose vehicle constituted to hold or own real estates.
When investing in a foreign real estate asset, the manager should ensure the compliance of all applicable laws and requirements in that foreign jurisdiction.
At least 75% of the REIT’s deposited property should be invested in income-producing real estate. Generally, the total contract value of property development activities undertaken and investments in uncompleted property developments where separate title has not been issued, should not exceed 10% of the REIT’s deposited property.
Valuation of the Real Estate Investments
A full valuation of each of the REIT’s real estate assets should be conducted by an independent valuer at least once every financial year.
Aggregate Leverage Limit
Borrowings may be used by REITs for investment purposes and assets may be mortgaged to secure such borrowings.
However, the total borrowings and deferred payments should not exceed 45% of the REIT’s deposited property.
The manager should prepare an annual report at the end of each financial year disclosing, amongst others, the following:
- Details of all real estate transactions entered into during the financial year;
- Details of all the REIT’s real estate assets;
- The profile of the tenants of the real estate assets; and
- Details of all borrowings.