Differences between Ascendas REIT and Global Logistic Properties Ltd That You Need To Know

reit vs property

Ascendas Real Estate Investment Trust (SGX: A17U) is the newest addition to the Straits Times Index (SGX: ^STI). It is also the second index constituent after Global Logistic Properties Ltd (SGX: MC0) that focuses on owning industrial properties.

But, just because they own the same types of properties doesn’t mean they can present the same type of risks and rewards to investors. Here are some important differences between the two shares you must know.

Business structure

The most notable difference between the two is their business structure. Ascendas REIT, as its name suggests, is setup as an investment trust while Global Logistic Properties is simply a company.

Although both does essentially the same thing – develop and/or acquire industrial properties and then renting them out – Ascendas REIT is bounded by law to distribute at least 90% of its taxable income. There are pro and cons for using such a structure.

By being a REIT, Ascendas REIT is not able to retain most of its profits for future expansion. Each time it needs to expand by building or buying new properties, it has to either take on more debt or raise new equity for funding. The trust is also restricted by its mandate in the types of properties it can invest in. In exchange for all these restrictions, the trust is not subjected to any tax implication as all taxes are only payable at the investor level.

Global Logistic Properties on the other hand, is a corporation. That means to say that it has the right to retain all its earnings for future development. It is also free to go into other forms of investments in the future if management decides to do so. However, since it is an independent entity, it is subjected to tax.

Dividend yield

Due to the differences in business structure, Ascendas REIT is able to provide unitholders with a distribution yield of about 6.04% at its current price of S$2.34 per unit. Meanwhile, Global Logistic Properties only has a dividend yield of 1.6% as it continues to retain most of its earnings for future expansion.

Geographic reach

Ascendas REIT is still very much a play on Singapore’s industrial property market. Of the 105 properties it currently owns, 103 are located in Singapore with the other two seated in China.

Global Logistic Properties, despite being listed in Singapore, operates principally in China, Brazil, and Japan. In fact, the company is currently one of the largest providers of modern logistics facilities in the three countries. All told, it counts 704 properties under its portfolio and also has a fund management business which invests in logistical assets.

Foolish Summary

Although both shares seem to be doing very similar things on the surface, there are still very important differences between the two in terms of their business structure, dividend yield, and geographic reach.

There could also be a difference between how investors view the two shares. Global Logistic Properties might be seen as a growth play while Ascendas REIT’s main role for an investor would likely to be as a source of dividend income.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn't own any shares of companies mention above