A real estate investment trust, or REIT, is a company that owns and operates in most cases income-producing real estate. Some REITs also engage in financing real estate.
To qualify as a REIT, a company must have most of its assets and income tied to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends. A company that qualifies as a REIT is permitted to deduct dividends paid to its shareholders from its corporate taxable income. As a result, most REITs historically remit at least 100 percent of their taxable income to their shareholders and therefore owe no corporate tax. Taxes are paid by shareholders on the dividends received and any capital gains. Most states honor this federal treatment and also do not require REITs to pay state income tax. Like other businesses, but unlike partnerships, a REIT cannot pass any tax losses through to its investors.
The shares of many REITs are traded on major stock exchanges.
Following the lead of the United States, many countries around the world have established REIT regimes during the last 40-plus years. The same attributes that have driven the growth of REITs in the U.S.‑diversification, dividends, transparency, liquidity and performance‑are fueling the growth of publicly traded real estate throughout the world.
Countries that have adopted REIT-like structures range from established financial environments, such as the United Kingdom and Japan, to emerging markets like Taiwan and Malaysia. The most comprehensive index for the REIT and global listed property market is the FTSE EPRA/NAREIT Global Real Estate Index Series, which was created jointly by the index provider FTSE Group, NAREIT and the European Public Real Estate Association (EPRA). The index is used by a variety of institutional investors, money managers and funds to manage real estate investment on a global basis. The Global Index Series contains the Developed Markets indices and the Emerging Markets indices (launched in Jan 2009).
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