ch 7 - real estate investment trusts (REITs)

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non-traded REITs

- aka nonlisted REITS - reg w/ SEC but not listed on exchanged or traded publicly

dividends of an equity REIT that provides income to investors

- div to investors comes from the income generated from the property (leases) - investor gets div immediately

what to REITs do with losses?

- do not distribute to investors - takes losses at trust level

types of REITs

- equity - mortgage - hybrid

how are nontraded REITs managed?

- externally - they don't have their own employees

broker costs for REITs may include...

- formation fees - annual management fees - % of profits (promoted interest)

REITS are not

- investment co or regulated by Inv Co Act of 1940 - direct participation program (DPP)

publicly traded REITs

- registered w/ SEC & required to file reports w/ SEC - trade on NYSE or OTC on NASDAQ (secondary mkt) - typically liquid: investor can readily buy/sell

REITs enjoy (tax)

- tax-advantaged income without double taxation - pay tax only on income they keep

REITs invest at least ____ of their investment portfolios in real estate or products related to real estate

75%

private REITs fall under

Reg D & Rule 144A

private REITS are exempt when sold to...

accredited investors (Reg D) & QIB such as large pension funds (Rule 144A)

REITS have no

active trading

income from hybrid REIT

can be income & potential capital appreciation (more diverse)

REITs have

centralized bookeeping & professional management

hybrid REIT

combo of mortgage REIT & equity REIT

when a REIT sells a property, the profit is...

considered a capital gain

real estate investment trusts (REITs)

corporations, trusts, or associations that own, & usually operate income-producing real estate or products relating to real estate

to enjoy a pass-through taxation (only investors are taxed) & to avoid paying taxes, the REIT must...

distribute 90%+ of its income in dividends to investors

publicly traded REITs are also known as...

exchange traded REITs or listed RIETs

how are private REITs managed?

externally advised/managed

a private REIT investment is usually ____ & ___ may be limited

illiquid ; share redemption programs

when does investor get income from mortgage REITs?

immediately

rule to be qualified as a REIT when distributing shares in IPO

in second half of the yr, no more than 50% of shares may be owned by 5 or less people

where are REITs traded?

in secondary market as prem or discount to NAV

only REIT ____ passes through to investors

income

an equity REIT that provides income to investors invests in...

income-producing properties (apt, shopping centers, office building: things with leases)

REITs provide an opportunity for...

individuals to invest in large-scale, income-producing real estate

REITs have a finite

life & # of shares

which are risker? listed or non listed REITs? why?

non listed ; lack of liquidity, high fees, not publicly traded

____ REITs have higher distributions/dividend yields

non traded

____ REITs typically have high upfront fees, which can be up to ____

nontraded ; 15% of offering price

finite life of REIT

on date designated in prospectus, REIT will liquidate portfolio holdings & pay each investor a share

share valuation of nontraded REIT is determined by...

periodic appraisals of real estate properties (no public market to determine value of shares)

who selects assets in REIT?

portfolio manger

what do non traded REITs use to pay distributions

proceeds from offering/borrowing

each share of REIT represents

proportionate ownership interest in all of the investments in the trust

private REITs

real estate funds or co that are exempt from SEC reg & whose shares don't trade on national stock exchange

mortgage REITs invest in...

real estate mortgages (typically commercial)

equity REITs invest in...

real estate, either for income or capital appreciation

what are portfolio holdings in REIT

real estate, mortgages, combo NOT SECURITIES

hybrid REIT invests in...

real property & mortgages

private REITs aren't subject to...

same disclosure req as stock exchange listed or public non listed REITS

capital appreciation REITs invest in...

vacant land to develop then sell (usually commercial: office, retail, apt)


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