Real Estate Investment Trusts (REITs)
REITs typically comprise several or even hundreds of institutional-caliber investment properties or real estate-related debt instruments. REITs were developed to allow individual investors access to portfolios of large- scale, income-producing property while receiving a “pass-through” of real estate tax benefits. REIT types include apartments, warehouses, offices, shopping centers and healthcare facilities. Some REITs are diversified across multiple sectors, while others focus on a specialized niche.
In the 1960s, REITs were formed under a business trust structure—hence the “T” in REIT. But today most REITs are limited partnerships in which a corporation with public common shares is the general partner. To qualify as a REIT under IRS rules, a company must invest almost exclusively in real estate, and it must pass at least 90% of its taxable income to shareholders annually, usually as monthly or quarterly payments. Sometimes these payments are called “dividends,” though technically they are “distributions.”
A typical REIT structure:
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