Due to the preferential tax treatment under Subchapter M of Chapter 1 of the Internal Revenue Code of 1986, as amended (the “Code”), REITs must comply with detailed requirements relating to their ownership structures, distributions and operations, all of which require careful planning.
Can a REIT be a corporation?
The net effect of these rules is that an entity formed as a trust, partnership, limited liability company or corporation can be a ReIT. Publicly traded ReITs are typically corporations or business trusts.
How are REITs registered?
Shares of publicly traded REITs are listed on a national securities exchange, where they are bought and sold by individual investors. They are regulated by the U.S. Securities and Exchange Commission (SEC).
Is a REIT a registered investment company?
A regulated investment company can be any type of investment entity including mutual funds, ETFs, and REITS. An RIC must derive a minimum of 90% of its income from capital gains, interest, or dividends earned on investments. … President Obama signed the Regulated Investment Company Modernization Act of 2010 into law Dec.
Which sources of REIT income are counted towards the 75 test required by Subchapter M?
The 75 percent test is comprised solely of real estate income. At least 75 percent of a REIT’s gross income must be derived from rents from real property, interest on obligations secured by mortgages on real property, dividends from other REITs, and gain from the sale or other disposition of real property.
Are REITs traded OTC?
When the stock market values fall, real estate usually maintains its value and acts as a counterbalance. Some REITs are non-listed, meaning they are not listed on national exchanges (like the NYSE). … When a security does not trade on an exchange, it solely trades in the over the counter (OTC) markets.
Are REITs regulated?
Real estate investment trusts (“REITS”) allow individuals to invest in large-scale, income-producing real estate. These trusts are regulated by the SEC. A REIT is a company that owns and typically operates income-producing real estate or related assets.
Can REITs be private?
Private REITs are real estate funds or companies that are exempt from SEC registration and whose shares do not trade on national stock exchanges. Private REITs generally can be sold only to institutional investors.
What is non traded REIT?
A non-traded REIT is a form of real estate investment method that is designed to reduce or eliminate tax while providing returns on real estate. … Despite not being listed on any national securities exchanges, non-traded REITs must still be registered with the Securities and Exchange Commission (SEC).
Can a REIT own another REIT?
A REIT cannot own, directly or indirectly, more than 10% of the voting securities of any corporation other than another REIT, a taxable REIT subsidiary (TRS) or a qualified REIT subsidiary (QRS).
Can REITs invest in government securities?
Real estate investment trust (REIT) companies must focus their business operations on one or more sectors of the real estate industry. So if a government-issued bond is related to real estate, the bond would be eligible to be a REIT holding.
Do REITs have to be registered under the Investment Company Act 1940?
Collective investment vehicles through which investors participate in the acquisition/origination, construction, (re)development, operation and appreciation of real estate-related assets. … Funds are exempt from registration as investment companies under the Investment Company Act of 1940.
What is a domestically controlled REIT?
A “domestically controlled” REIT is a REIT in which less than 50% of the fair market value of the shares have been held, directly or indirectly, by non-US persons during the five years preceding the date of the disposition or, if shorter, the period during which the REIT has existed.
Are REITs exempt from Securities Act of 1933?
Private REITs, sometimes called private placement REITs, are offerings that are exempt from SEC registration under Regulation D of the Securities Act of 1933 and whose shares intentionally do not trade on a national securities exchange.
Are REITs subject to Investment Company Act?
REITs rely on Section 3(c)(5)(C) of the Investment Company Act to qualify for exemption from regulation as “investment companies.” Exemption from the Investment Company Act is considered critical for REITs because the operations of most if not all mortgage REITs are incompatible with the Investment Company Act’s rules …
Do REITs have centralized management?
Both a REIT and a DPP are run by centralized management. A REIT may not pass through losses to its investors, and it is not a limited partnership. A DPP cannot be easily traded in the secondary market.