Real Estate Investment Trust (REIT)

Real estate investment trusts, or REITs, are entities that invest in different kinds of real estate or real estate related assets — e.g., shopping centers, office buildings, hotels, and mortgages secured by real estate. There are basically three categories of REITS:

• Equity REITs – This is the most common type of REITs. These REITs invest in or own real estate and make money for investors from the rents they collect;
• Mortgage REITs — This type of REITs lend money to owners and developers or invest in financial instruments secured by mortgages on real estate; and
• Hybrid REITs — These REITs are a combination of equity and mortgage REITS.

There are a number of conditions a company must meet to qualify as a REIT. According to the Internal Revenue Code, the company must:

• pay 90% of its taxable income to shareholders every year,
• invest at least 75% of its total assets in real estate, and
• generate 75% or more of its gross income from investments in or mortgages on real property.

For more information, please visit U.S. Securities and Exchange Commission, Real Estate Investment Trusts web page.