REIT

1
REIT

• Real Estate Investment Trust

2
What is a REIT?

• They are entities that consolidate the capital of
  a large number of investors in order to invest in
  and manage a diversified portfolio of real estate
• A company that buys, develops, manages and sells
  real estate assets

3
Elements of a REIT

• Structured as a Corporation or business trust
• Managed by board of directors or trustees
• Sold in units over an exchange
• Minimum 100 shareholders
• Pays dividends of at least 90 of taxable income
• At least 75 of total investment assets in real
  estate
• Derive 75 of gross income from rents and
  Mortgages

4
Why invest in a REIT?

• Pass through entities (distribute most of their
  cash flow to investors without Corp. taxation)
• Liquidity
• Professional management

5
Investment objectives

• Steady flow of income (high dividend yield)
• Long-term appreciation

6
REITS in the Market

• Accounts for 8.3 of the 1.3 trillion dollar
  commercial real estate market
• There are over 300 publicly traded REITS
  operating in the US
• Average daily dollar volume of 260 million dollars

7
Who owns REITS?

• The public
• Pension Funds
• Insurance companies
• Mutual Funds

8
Evaluating REITS

• Management
• Earnings (FFO is used as a metric for measuring
  the performance of REITS it is the earnings with
  depreciation and amortization added back)
• -excluding historical depreciation costs
• Capital Sources (FFO/Interest)
• Dividend Yield

9
Types of REITS

• Equity REITS Properties (96.1)
• Mortgage REITS ownership of property mortgages
  (1.6)
• Hybrid REITS mortgages and properties (2.3)

10
Where do REITS Invest?

11
Risks

• Quality of properties
• Rental markets
• Tenant leases
• Debt financing (50-60)
• Liquidity
• No limited liability for environmental harm

12
The Benefits

• Characteristics of small-cap stocks and bond-like
  investment
• High dividend payout
• No double Taxation
• Monitored on a regular basis by analysts auditors
  and financial media
• Diversification