ch 7 - real estate investment trusts (REITs)
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)