REITs - Glossary

Most important rules for REITs
1. A minimum of 75% of the REIT's total assets must be in qualifying real estate investments.
2. At least 90% of the REIT's taxable income must be paid out through dividends each year.
3. Maximum gearing allowed: 60% (Singapore's context)

The profitability of a property REIT is a function of 2 factors:
1. Economic moat
2. Capital allocation (whether management consistently generate good returns from its asset base)

Capitalization rate: property's net operating income / purchase price

Funds from Operations (FFO)
Net Income (after preferred dividends)
+ Depreciation
+ JV adjustments
- Gains on real estates sold
= Funds from operations

FFO payout ratio = DPU / FFO per unit

Adjusted FFO
AFFO = FFO - capital expenditures - other amortization
A more precise measure of residual cash flow available to unitholders and better predictor of the REIT's future capacity to pay dividends.

Evaluating REITs
1. Type of properties
2. Geography
3. Occupancy trends
4. Tenants concentration
5. Credit rating
6. Lease duration
7. Fee-based income
8. Interest cover

Sources:
"The Ultimate Dividend Playbook" by Josh Peters
http://www.investinreits.com/learn/glossary.cfm