Why Did REITs Come into Existence?

What’s a REIT?

A REIT is a company that acquires, owns, and operates income-producing real estate assets. Some REITs are also involved in financing real estate. Assets owned by a REIT include apartments, office buildings, shopping malls, hotels, resorts, warehouses, self-storage facilities, mortgages, and loans.

Why Did REITs Come into Existence?

Why did REITs come into existence?

US REITs came into existence in 1960 when President Eisenhower signed the REIT Act contained in the Cigar Excise Tax Extension. REITs were created to provide access to individual investors to earn income through commercial real estate ownership. In order to achieve this, Congress decided to follow the equity structure of ownership. Just as the company shareholders benefit from an exposure in a stock, REIT shareholders earn proportionate income through owning a REIT unit.

Looking ahead

In this series, we’ll discuss the importance of REITs to average investors. We’ll provide a complete business overview of the REIT industry. We’ll explore key points that influence the industry. We’ll also run through a profile of major players like Simon Property Group (SPG), Public Storage (PSA), Equity Residential (EQR), Health Care REIT (HCN), Ventas (VTR), and Boston Properties (BXP). At the end of the series, we’re going to discuss REIT ETFs like the Vanguard REIT ETF (VNQ), the iShares U.S. Real Estate ETF (IYR), and the iShares Cohen & Steers REIT ETF (ICF).

Content

REITs basics

Sectoral REITs

Financial parameters

Valuation

Global REITs, indexes, and ETFs