REITs
How does a REIT turn rent into my distribution?
A REIT is a trust that owns income-producing property — malls, offices, warehouses, data centres — and passes the rent on to unitholders. To keep its tax transparency, an S-REIT must distribute at least 90% of its taxable income, which is why REITs pay out most of what they earn rather than hoarding it. What reaches you is the distribution per unit, or DPU.
From rent to DPU
Illustrative figures for an imaginary REIT, not any particular trust.
- Gross rental incomeS$100.0m
- Property operating expenses−S$25.0m
- Net property incomeS$75.0m
- Manager's fees−S$6.0m
- Finance costs (interest on debt)−S$12.0m
- Trustee and other expenses−S$2.0m
- Distributable incomeS$55.0m
Spread over 1,000 million units, S$55m of distributable income is a DPU of 5.5 cents. The yield depends on what you pay: at S$1.00 a unit that is 5.5%; at S$0.80 the same DPU is 6.9%. A rising yield is often just a falling price.
Five figures to check
Reasons to dig deeper, not verdicts. The screener shows all five for every S-REIT.
| Figure | What it is | Worth a closer look when |
|---|---|---|
| Distribution yield | Twelve months of DPU divided by the unit price. | A yield far above peers often means the market expects the DPU to fall, not that money is free. |
| Gearing | Total debt over total assets. MAS caps it at 50%. | The closer to the cap, the less room to refinance through trouble or buy anything new. |
| Interest cover | Earnings against the interest bill. The MAS floor is 1.5 times. | Cover sliding towards the floor as old cheap debt reprices at today's rates. |
| Price to NAV | Unit price against the appraised value of the properties. | A deep discount can mean the market doubts the appraisals, not that units are cheap. |
| Occupancy and WALE | How full the buildings are, and the weighted average lease expiry in years. | Short leases plus falling occupancy means much of the rent is up for renegotiation soon. |
Why the debt rules exist
Property is bought with borrowed money, so a REIT is a property portfolio and a loan book in one wrapper. Since 28 Nov 2024, MAS holds every S-REIT to a single 50% leverage cap and a minimum interest cover of 1.5 times — a floor under how stretched the loan book may get. Gearing tells you how much of the building is paid for with borrowed money; interest cover tells you how comfortably the rent carries it.
How to read the result
Technical
An S-REIT keeps tax transparency by distributing at least 90% of its taxable income, so rent flows through to unitholders as DPU after property expenses, fees and interest.
Plain English
A REIT's yield is rent passed on to you. The waterfall shows what gets taken out on the way.
Technical
Gearing is total debt over total assets, capped by MAS at 50% with a minimum interest cover of 1.5 times since 28 Nov 2024. Price-to-NAV below 1.0x means units trade below the appraised value of the properties.
Plain English
Before trusting a high yield, check how much debt sits behind it and whether the rent carries the interest comfortably.
Technical
Distribution yield is DPU over price, so the same DPU yields more at a lower price: 5.5 cents is 5.5% at S$1.00 and 6.9% at S$0.80.
Plain English
A rising yield isn't free money. Often it's the price falling because the market expects the DPU to be cut.
A worked example
In the guide's illustration, S$100m of rent becomes S$75m of net property income after property costs, then S$55m of distributable income after fees and interest. Over 1,000 million units that's a DPU of 5.5 cents — a 5.5% yield at S$1.00 a unit. The screener shows the same figures for real S-REITs.
What it can't tell you
- The waterfall is an illustration in round numbers, not any particular REIT.
- NAV depends on property valuations, which are appraisals, not prices.
- A high yield can mean the market expects a cut.
Source: MAS Code on Collective Investment Schemes, property funds: the 50% aggregate leverage limit and 1.5x minimum interest coverage ratio, in effect since 28 Nov 2024. Checked 29 Oct 2026.
Source: IRAS: tax transparency for S-REITs requires distributing at least 90% of taxable income. Checked 29 Oct 2026.
For education only. Not financial advice.