- What SM REITs are (and aren’t)
- Ticket sizes & investor eligibility
- Yield waterfall: from rent to distributions
- Fee stack & how it hits returns
- Liquidity pathways, taxes, and key risks
The short
- Institutional wrapper for small assets. SM REITs pool one/few properties in a regulated trust.
- Yields are made, not promised. Vacancy, expenses, and fees can shave 150–300 bps off headline rent yields.
- Liquidity is designed, not assumed. Listing/market making, periodic auctions, or buyback windows matter more than brochures.
Who this applies to
Income-focused investors
Prefer distributed rent with lower operating hassle. Distribution
Sponsors/Managers
Aggregate stable assets; earn fees aligned to NOI, not hype. Alignment
Wealth Platforms
Offer regulated fractional exposure; standardise disclosures. Compliance
Tenants
Longer leases, clearer capex responsibilities, professional management. Stability
Ticket sizes & structure
- Denominations target accessibility while keeping KYC and suitability checks intact.
- Expect closed-end or semi-open structures around a single asset (office/warehousing/retail) or a micro-portfolio.
- Distributions typically flow quarterly or semi-annually from net distributable cash flows.
Yield waterfall — illustrative math
Start with contracted rent; subtract what actually erodes cash. Example (illustrative, not advice):
| Item | Assumption | Impact on yield |
|---|---|---|
| Gross rental yield | 9.0% on asset value | 9.00% |
| Vacancy/credit loss | 5% of rent | -0.45% |
| Operating expenses | Common area, insurance, statutory | -0.80% |
| Manager & trustee fees | Mgmt 0.8% + trustee/other 0.2% | -1.00% |
| Capex/maintenance reserve | Periodic refurbishments | -0.30% |
| Net distributable yield | Before leverage & taxes | 6.45% |
Add leverage carefully: debt can raise distributions if spreads are favourable, but amplifies downside.
Fee stack — what to watch
| Fee | Typical basis | Investor lens |
|---|---|---|
| Management fee | % of asset value or NOI | Prefer NOI-linked; aligns to operational performance. |
| Acquisition/disposition | One-time % of deal size | Cap or stagger; look for independent valuation. |
| Trustee & admin | Flat + small % | Should be transparent and predictable. |
| Performance fee (if any) | Over a benchmark hurdle | Hurdle > inflation + risk spread; crystal-clear calculation. |
Liquidity design
- Listing/market-making: Depth comes from market makers, not just listing status.
- Periodic windows: Auction or buyback windows provide exits in lean periods.
- Registrar experience: Transfers, payouts, and statements should be painless.
Taxes (high level)
- Distributions may mix interest, dividend, and amortisation; tax treatment differs by component.
- Capital gains depend on holding period and listing status; check latest rules before allocating.
Risk checklist
Concentration & lease
- Tenant concentration >50%? Demand longer lock-ins.
- Indexation clauses & step-ups documented?
- Fit-out and restoration responsibilities clear?
Valuation & liquidity
- Independent valuation frequency & methodology.
- Exit windows & market-making commitments.
- Debt covenants and LTV guardrails.
One-line takeaway
SM REITs work when fees align with NOI, leases are long, and liquidity is engineered—not just promised.