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What is a REIT? A real estate investment trust (REIT) is a company that owns, and typically operates, commercial real estate, such as industrial warehouses, apartments, retail centers, offices and hotels. Some REITs focus on specific property sectors, while others invest across multiple property types. Created by Congress in 1960 with the introduction of legislation that allowed the offering of securities backed by pooled real estate assets, REITs enable individuals to make an investment in a diversified, professionally managed portfolio of real estate assets. Publicly traded REITs are listed on a stock exchange and trade similarly to other public companies. Conversely, non-traded (or private) REITs offer securities to investors through financial advisors, in order to generate the capital required to purchase a portfolio of real estate assets. Regardless of whether the REIT is publicly traded or non-traded, investors who purchase REIT stock gain ownership of the REIT proportionate to the number of shares purchased, as well as the opportunity to receive income in the form of dividends. Shareholders of non-traded REITs also have the potential to realize capital appreciation upon: the listing of the REIT’s stock on a national exchange, a sale of the company or merger transaction, or liquidation of the REIT’s portfolio. However, non-traded REITs offer limited liquidity as compared to publicly traded REITs. As with any investment, there's no assurance that investment in a REIT will be profitable or that it will realize growth in value. For more information on the risks of investing in real estate, please refer to our current prospectus. What Makes a REIT Unique? REIT stocks are different from other types of equity securities because of the way REIT companies are structured. Typically, a REIT does not have to pay corporate income tax, provided that it distributes at least 90% of its taxable income to its shareholders annually in the form of dividends. As a result of this mandate, a REIT has the potential to offer its shareholders stable, consistent income streams.
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