Lecture 19 Real Estate Investment Trusts - Mar 31 09

Lecture 19 Real Estate Investment Trusts - Mar 31 09 - Real...

Info iconThis preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style Real Estate Investment Trusts (REIT)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
22 Real Estate Investment Trusts Definition: A limited-liability single tax entity created by Congress in 1960 as a vehicle for pooling funds to make real estate investments. REITs typically hold real estate (Equity REITs), mortgages and mortgage backed securities (Mortgage REITs) or both (Hybrid REITs). Dividends: Dividends paid by REITs are deductible from its taxable income, so REITs usually pay no Federal income tax. They are therefore single tax entities because the tax liability falls only on the dividends paid to the shareholders
Background image of page 2
33 Four Restrictions on REIT organization and income dispersal
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
44 I. Asset Requirements At least 75 percent of the value of a REITs assets must consist of real estate assets, cash and government securities. Not more than 5 percent of the value of the assets may consist of the securities of any one issuer if the securities are not included under the 75 percent test. A REIT may not hold more than 10 percent of the outstanding voting securities of any one issuer if those are not includable under the 75 percent test. Not more than 20 percent of its assets can consist of stocks in taxable REIT subsidiaries.
Background image of page 4
55 II. Income Requirements At least 95 percent of the entity’s gross income must be derived from dividends, interest, rents, or gains from the sale of certain assets. At least 75 percent of gross income must be derived from rents, interest on obligations secured by mortgages, gains from the sale of certain assets, or income attributable to investments in other REITs.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
66 III. Distribution Requirements Distributions to shareholders must equal or exceed the sum of 90 percent of REIT taxable income.
Background image of page 6
77 IV. Stock and Ownership Requirements Be taxable as a corporation Be managed by a board of directors or trustees Have shares that are fully transferable Shares in a REIT must be transferable and must be held by a minimum of 100 persons No more than 50 percent of REIT shares may be held by five or fewer individuals during the last half of the taxable year.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
88 Prior to 1986 REITs were not a popular investment vehicle. WHY?
Background image of page 8
99 Answer: REITs were a passive investment vehicle. Outside management and independent boards managed the properties.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1010 What happened in 1986?
Background image of page 10
1111 Answer: Tax Reform Act of 1986 released the management of REITs. REIT managers could manage their own properties: Kimco, big shopping center owner, was first Followed by Taubman (UPREIT)
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1212 Market Capitalization of Publicly Traded REITs
Background image of page 12
1313 Organizational Structure and Control Step one: REIT activities are supervised by either a board of directors or trustees. Day-to day management of the REIT may be handled either internally (a self administered) REIT or contracted to an external advisor. 1986 Tax act. Umbrella Partnership REIT (UPREIT):
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/05/2009 for the course UGBA 137 taught by Professor Staff during the Spring '08 term at Berkeley.

Page1 / 36

Lecture 19 Real Estate Investment Trusts - Mar 31 09 - Real...

This preview shows document pages 1 - 14. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online