REITs (Real Estate Investment Trusts)
REITs are companies that own, operate, or finance income-producing real estate, offering investors exposure to real estate without direct property ownership.
Concept map
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Definition
REITs are companies that own, operate, or finance income-producing real estate, offering investors exposure to real estate without direct property ownership.
Use case
Used in alternative investments workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about REITs (Real Estate Investment Trusts)
REITs must distribute 90%+ of taxable income to shareholders, resulting in high dividend yields (3-5%+). Types: Equity REITs (own properties), Mortgage REITs (financing), Hybrid REITs (both). REITs trade on exchanges providing liquidity, but share prices can diverge from underlying NAV. Sectors include residential, retail, office, industrial, data centers.
Example: Simon Property Group (SPG) is a retail REIT owning premium shopping malls. It trades at $150/share with $6 annual dividend = 4% yield. Investors gain exposure to commercial real estate performance without buying malls directly.