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Paper 1 · Lesson 5 — Co-ownership, Trusts and Succession

Trust investment vehicles

Trust-based investment vehicles (REITs, business trusts) as holders of property.

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Question 1

Ms Faridah has $8,000 set aside and wants a stake in commercial buildings that she can turn back into cash quickly if she needs to. Rather than buy a small unit outright, her adviser suggests she put the money into units of a real estate investment trust listed on the exchange.

Which statement is correct?

  1. A. She may invest, as there is no minimum, holding as a beneficiary while the trustee holds the buildings.
  2. B. She cannot invest until she meets the minimum outlay that such trusts require of their unit holders.
  3. C. She would hold the legal title to a share of the buildings in proportion to the units she buys.
  4. D. She may invest only if she first obtains regulatory approval to hold a stake in commercial property.
Show the answer and full explanation

Answer: A

The rule. Units in a listed real estate investment trust trade on the exchange with no minimum investment. The unit holder is a beneficiary; the trustee holds the underlying property. The investor never takes legal title to the buildings.

Why A is correct. Ms Faridah can invest her $8,000 — there is no minimum — and she holds as a beneficiary while the trustee holds the buildings. That also gives her the liquidity she wants.

The other options.

  • B invents a minimum outlay. There is none for listed units.
  • C gives her legal title to a share of the buildings. She holds units; the trustee holds the property.
  • D requires approval to hold commercial property. Buying units is not acquiring the property itself.

Exam note. A unit holder is a beneficiary, not a titled owner, and there is no entry minimum. Liquidity is the point of the listed structure.

The investor never takes legal title to the buildings →

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