A REIT was a tax efficient company that owned income producing properties Three

A reit was a tax efficient company that owned income

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A REIT was a tax-efficient company that owned income-producing properties. Three main types of REITs in terms of investor access were: publicly listed, non-listed public and unlisted private REITs with limited owners. Publicly listed REITs were the most transparent and visible, whereas unlisted REITs were less transparent. Listed REITs shares were traded on the exchanges like other stocks, whereas unlisted REITs shares were not traded on exchanges and therefore lack liquidity. The key differences in these three categories were in terms of liquidity, transaction costs, management, minimum investment amount, independent directors, investor control, corporate governance, disclosure obligation and perfor- mance measurement. As of 2015, more than thirty-eight countries around the globe had introduced REIT regimes and their widespread acceptance improved the liquidity of investment in real estate. Globally, REIT regulatory requirements varied in terms of the minimum share capital requirement, allowed leverage and minimum profit distribution obligations. Figure 2. Growth of the US REIT Market Source: NAREIT (based on annual data).
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140 Asian Journal of Management Cases 15(2) Figure 3. Percentage Share in Global REIT Market Source: Based on data from British Land and the European Public Real Estate Association (EPRA). Figure 4. Total Return Index Comparision Source: NAREITs. The United States was the largest REIT market measured by market capitalization as of 2015, repre- senting 61 per cent of the global market (Figure 3). The FTSE NAREIT All REITs Index, a market capitalization-weighted index that included all tax-qualified REITs that were listed on the New York Stock Exchange, the American Stock Exchange and NASDAQ had a market capitalization of $890 billion. 4 As of November 2015, 198 REITs traded on the New York Stock Exchange. The twenty-year compound annual total return on the FTSE All REITs Index was 10.41 per cent, compared with 8.91 per cent for S&P 500. In addition, the low correlation of real estate with other asset classes had been a valuable source of portfolio diversification. REITs generally did not have a high leverage; the average debt ratio of the US Equity-only REITs was 32.3 per cent while that for Equity-and-Mortgage REITs was 43.5 per cent, showing low credit risk for these investment vehicles. 5 Figure 4 compares the total return on the FTSE NAREIT All Equity REITs Index, an index comprising top US Equity REITs with the S&P 500 and the Russell 2000 indices, from December 1989 to June 2015. REIT index clearly outperformed the equity indices, with 1,259.12 per cent total return over the period compared to 905.74 per cent for the S&P and 971.63 per cent for the Russell 2000 index.
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Seyyed et al. 141 Exhibit 2. Financial Statements for 2015 Balance Sheet As on 30 June 2015 2015 (PKR in ‘000) ASSETS Non-current assets Total non-current assets—Investment property 22,237,000 Current assets Rent receivables 34,514 Advances and other receivables 173 Interest accrued 97 Bank balances 912,718 Total current assets 981,502 Total assets 23,218,502 REPRESENTED BY: Unit holders’ fund Issued, subscribed and paid up (2,223,700,000 units of PKR 10 each) 22,237,000 Reserves:
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