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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

A listed REIT's net distributable cash flows for a year are Rs 120 crore. The Regulations require distribution of at least 90% of net distributable cash flows to unitholders. The REIT has 10 crore units and, on the record date, Mr. Iyer holds 25,000 units. What is the minimum amount Mr. Iyer is entitled to receive in aggregate, assuming equal per-unit distribution of the minimum required?

Minimum distribution is 90% of Rs 120 crore, which is Rs 108 crore. Dividing by 10 crore units gives Rs 10.80 per unit, so 25,000 units receive Rs 2,70,000. Using the full Rs 120 crore would wrongly give Rs 3,00,000.

  1. ARs 2,70,000Correct
  2. BRs 3,00,000
  3. CRs 2,40,000
  4. DRs 27,000

Explanation

Minimum distribution = 90% of 120 crore = Rs 108 crore. Per unit = 108 crore / 10 crore = Rs 10.80. For 25,000 units: 25,000 x 10.80 = Rs 2,70,000. Check: 25,000/10 crore = 0.025% of 108 crore = Rs 2,70,000. Rs 3,00,000 uses 100% of cash flows, which is not the minimum.

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