An article just came out today on Straits Times which I find quite interesting. Many people are drawn to the high dividend yields of business trusts like REITs, but don’t seem to understand the structure well. The article provides some basics of business trust as well as the difference between a REIT and a business trust.

One of the main differences between a business trust and a REIT is that REITs can only hold real estate assets while a business trust can hold pretty much any asset, including real estate and under development properties. REITs can only borrow up to 35% without a credit rating and maximum up to 60% with a credit rating while trusts do not have any leverage caps.

REITs are also required to pay out 90% of earnings and do not have to pay taxes on profits while there are no such requirements and benefits for business trusts. As a …