REITs originated in the United States in the 1960s, but it wasn’t until 2005 that Axis REIT became the first property trust to be listed on Bursa Malaysia.

In Malaysia, there are now 14 REITs to choose from on the Main Market, offering investors a choice to own stakes in commercial, industrial, plantation and office real estate.

Aside from being more liquid than investing in real estate, one of the reasons why REITs are more appealing than investing in actual real estate is because of its high yield.

Gross dividend yield in the FTSE Bursa Malaysia index is about 2.9%, while the average yield for a REIT in Malaysia is about 8%.

REITs yield higher returns because commercial real estate generates a huge amount of cash flow from rentals.

If one invests in real estate though, it may be hard to charge the most preferred rental rate, even if the property had been purchased for a hefty price, simply due to market forces.

As for REIT prices on the stock market, they generally tend to be “low risk” because their prices are sustained by the yield factor, hence the volatility element is reduced.

Even so, REITs are not immune to economic difficulties.

REITs such as AmFirst, Hektar, UOA and Axis hit their lowest point in the middle of the financial crisis in 2008 but have since recovered to their pre-crisis prices, if not better.

Part of their recovery, says an analyst, is due to good management, good investor relations and a proven track record when it comes to acquisitions.

Still, one critic of REITs says it is probably more worthwhile to purchase stocks of established companies if they want to play safe.

Advocates of the property trust point to the fact that REITs are a different investment class altogether, choosing to view them as an investment that bridges the gap between a fixed deposit and the stock market.

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The China District Energy Fund has already made its first investment in a combined heat and power plant in Sichuan Province capital Chengdu, and received more than €84.2m in commitments.

A Luxembourg SICAR investment vehicle, its core strategy is to buy and expand brownfield district energy assets in China, with the aim of exiting investments through listings or trade sales.

The fund manager plans to hold funds for between seven and ten years, with a target internal rate of return of 18 per cent, or three times cash returns.

Swiss-Asia founder and CEO Olivier Mivelaz said, ‘District energy is the most universal answer to energy efficiency in cities and industrial parks.

‘Cogeneration, renewable energy and energy recovery can all be plugged into the urban heating networks to maximise energy efficiency and improve the local environmental footprint.’

China has a favourable legislative climate for district energy projects, making close to $30bn in annual energy infrastructure investments.

District energy asset operators in the country receive specific government incentives and stimuli, as they are recognised by the Chinese authorities for being the backbone to sustainable cities.

Swiss-Asia’s head of infrastructure investments Pying-Huan Wang said, ‘Due to the steady cash-flow generative nature of district energy assets, the fund presents a relatively low level of uncertainty in the return drivers and offers an attractive investment proposition in an inflationary environment.

‘Investors will also be able to take advantage of the expected RMB appreciation in the medium term.’

The primary industrial partner for the fund is Dalkia, which has pledged to invest up to €75m in it, while financial service providers including Deutsche Bank and Ernst & Young were also engaged in its development.

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