Business and Personal Finance Dictionary

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• REIT (REAL ESTATE INVESTMENT TRUST)
  
  A Real Estate Investment Trust is a corporation whose primary business is owning and managing real estate properties, such as apartment buildings, office buildings, hotels, warehouses, health care facilities, shopping malls or golf courses. While many REITs invest directly in these properties, some types of REITS can also invest in real estate related loans, such as mortgages. A hybrid type of REIT can invest in a combination of real properties and mortgages. Structurally, a REIT is set up as a company, shares of which may be purchased by investors. The management of the REIT company uses those pooled investment dollars to buy and manage an array of properties. Collectively, all shareholders indirectly own small pieces of each of the properties that the REIT owns and operates. Real Estate Investment Trusts (REITs) were created by Congress in 1960 to provide smaller investors with the opportunity to invest in real estate, an important component of a well-balanced investment portfolio. Prior to the creation of REITs, real estate investing was only available to the institutional investor community because of the large amount of capital that is required for such investments. REITs are companies that are dedicated to owning, and in many cases managing, income-producing real estate, such as apartments, shopping centers, office buildings and industrial buildings. REITs do not pay corporate income taxes, as most other companies are required to do, and therefore shareholders are able to enjoy the benefit of eliminating “double-taxation”. In order to qualify as a REIT, the corporation is legally obligated to pay at least 90% of its taxable net income to its shareholders.
  
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