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Real Estate Investment Trust (REIT)

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Real Estate Investment Trust (REIT)What is a Real Estate Investment Trust (REIT)

A Real Estate Investment Trust (“REIT”) is a complex investment that is generally only suitable for sophisticated high-net worth investors, and then only in certain circumstances. A REIT is an entity that owns, and may also manage, income producing real estate. The REIT’s pools capital from multiple investors and uses it to purchase properties, similar to mutual funds and other pooled investment vehicles.

A Real Estate Investment Trust can be offered in several different forms. A Public Exchange Listed REIT is registered with the U.S. Securities and Exchange Commission (“SEC”) and is publicly traded on a national securities exchange. A Public Non-Listed REIT is registered with the SEC, but does not trade on a major securities exchange. Finally, a Private REIT, also known as a private-placement REIT, is not registered with the SEC and does not trade on a national securities exchange.

Real Estate Investment Trust Forms

A Real Estate Investment Trust can be offered is several forms. A Public Exchange Listed REIT is registered with the SEC and is publicly traded on a national securities exchange. A Public Non-Listed REIT is registered with the SEC, but does not trade on a major securities exchange. The investor will buy a rental property, find a tenant to rent it, using this real estate investment strategies. Finally, a Private REIT, also known as a private-placement REIT, is not registered with the SEC and does not trade on a national securities exchange.

Real Estate Investment Trust Sectors

A Real Estate Investment Trust typically focus on a specific sector. Here are some examples of common sectors:

OfficeRetain
IndustrialResidential
Healthcare PropertyRetirement Property
StorageMortgage
TimberVineyard
Data CenterPrison
Death (cemeteries and funeral parlors)Waste Management (facilities and land-fills)
Electricity InfrastructureGas Infrastructure

Some Public Non-Traded Real Estate Investment Trust Risks

  • Distributions are not guaranteed and are at the discretion of the Board of Directors
  • Lack of public trading makes them illiquid
  • Early redemption of shares is often restricted, expensive, at the discretion of the Board of Directors, and can change at any time
  • They typically have very high fees and pay high commissions to the brokers who sell them
  • Distributions to investors can have tax consequences
  • The underlying properties may not be specified or disclosed
  • They offer only limited diversification because they are completely concentrated in the real estate sector
  • They are fully exposed to real estate risk

Real Estate Investment Trust (REIT) Investments Under Investigation By Galvin Legal, PLLC

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