Real-Estate Investment Trusts

Abstract

This technical note provides a thorough overview of real-estate investment trusts (REITs). Created to promote and facilitate widespread public ownership of commercial real estate, REITs are companies that own real-estate properties or mortgages and that operate within certain guidelines, allowing them to qualify for REIT status. Focusing primarily on equity REITs, the note covers a broad range of issues, including valuation and its many drivers, and also examines the advantages of REIT ownership versus property ownership. The note concludes with a discussion of the future of REITs.

Excerpt

UVA-G-0524

REAL-ESTATE INVESTMENT TRUSTS

General Description

Real-estate investment trusts, commonly referred to as REITs (pronounced “reets”), are companies that own real-estate properties or mortgages and that operate within certain guidelines, allowing them to qualify for REIT status. REITs were created to promote and facilitate widespread public ownership of commercial real estate. If a company qualifies for REIT status, its earnings are not subject to corporate income taxes. Thus, earnings distributed by REITs to shareholders avoid the double taxation to which corporate dividends are usually subject.

Below are a few of the many rules with which REITs must comply to maintain their REIT status:

· Pay out at least 95 percent of net income in the form of dividends

. . .

Keywords: communication process, communication strategy