Are Thai REITs better than property funds?

JLL provides a comparative analysis on key advantages and disadvantages of REITs over PFPOs

January 17, 2018

​First introduced in 2014 to replace the Property Funds for Public Offering (PFPO) scheme, REITs have gained popularity and played an increasingly important role in Thailand’s real estate industry. Since its introduction, the total REIT market capitalisation has reached THB 85 billion across two million square metres of assets. However, an open question remains -- Are REITs really a better vehicle than PFPOs?

JLL has made a comparative analysis to identify key advantages and disadvantages of REITs over PFPOs, focusing on not only the regulatory aspect but also performance of the two real estate investment vehicles. Following are some of the key findings from the analysis:

Regulatory Requirements

  • REITs require a minimum free float of 15 per cent of total units issued, offer higher gearing ratios and a wider range of investible asset classes than PFPO within a revised tax framework that de-emphasises using the vehicle as a tax shelter (which was common under the PFPO scheme). In theory these differences should support healthy liquidity and growth.
  • REIT guidelines are also more stringent with respect to valuations / asset pricing and good governance. Whereas PFPO acquisition pricing could be up to 10 per cent higher than the assessed value, REITs are limited to not more than 5 per cent of the assessed value.
  • In terms of governance, REITs are required to hold annual general meetings (of shareholders) whereas PFPO are not. That said, there are no discernable differences in terms the amount or detail of information disclosed.

Trading Performance

REITs have an average gearing of 20 per cent while the average gearing for PFPOs remains below 5 per cent; well below the 10 per cent regulatory limit.

Whilst REITs with higher market capitalisation and trading liquidity tend to trade better, they typically do so at tighter yields than funds, adjusting for size.

In the US$200-600 million market capitalisation range, REITs trade at a 5.6 per cent dividend yield, compared to 6.2 per cent for PFPOs. Potentially, the market expects REITs to acquire more assets that could be accretive to earnings.

It’s apparent that REITs are more flexible in terms of regulatory requirements, gear up more and trade better than PFPOs.

In a broader perspective, JLL expects REITs to benefit the Thai real estate industry better than PFPOs in the long run.  In the latest edition of JLL’s Global Real Estate Transparency Index, Thailand ranks 38th globally, showing a gradual improvement over the last 13 years since the index was first published. By providing periodic independent valuation, clarity into ownership structures, and most importantly, more accessible market and benchmarking data, REITs should help accelerate the improvement of country’s real estate market transparency.

About the author: Chawan Ratapana is assistant manager of research at JLL, focusing on Capital Markets and Investment research. For more insights, readers can contact him by email:

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit

About JLL Thailand

The firm’s operation in Thailand began in 1990 and today is the country’s largest international property service provider with 1,600 employees and more than five million square metres of property and corporate facilities managed. In Euromoney Real Estate Survey 2018, JLL was voted as Thailand’s number one overall real estate advisor for the 8th consecutive year and also won top votes for agency/letting, research and valuation in the same survey. The firm was also named Thailand’s five-star winner in the commercial property consultancy and commercial real estate agency categories at the International Property Awards Asia Pacific 2019/2020. For more information, visit

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