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13 Cards in this Set
- Front
- Back
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What are the general requirements regarding income, investments, and dividends with which a REIT must comply to maintain its tax-exempt status?
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In general, at least 75 percent of a REITs gross income must be from dividends, interest, rents, or gains from the sale of certain assets. At least 75 percent of gross income must be from rents, interest on obligations secured by mortgages, gains from the sale of certain assets, or income attributable to investments in other REITs. At least 75 percent of the value of a REIT’s assets must consist of real estate assets, cash, and government securities. A REIT must distribute 90 percent of its taxable income to shareholders as a dividend.
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What are the three principal types of REITs?
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The three principal types of REITs are mortgage, equity, and hybrid.
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List and characterize equity REITs based on their investment objectives.
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1. Blank or “blind pool” check trusts.
2. Purchasing, or Specified Trusts. 3. Mixed Trusts. 4. Leveraged REITs versus Unleveraged REITs. 5. Finite-Life versus NonFinite-Life REITs. 6. Closed-end versus Open-end REITs. 7. Exchange trusts. 8. Developmental-Joint Venture Equity REITs. 9. Health-Care REITs. |
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is the difference between earnings per share (EPS), funds from operation (FFO), and dividends per share?
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Earnings per share (EPS) is based on accounting income which is reduced by any depreciation and amortization which are non-cash deductions. FFO is calculated by adding back depreciation and amortization and other non-cash deductions to earnings. Dividends per share is what the REIT actual distributes to shareholders.
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Explain how an investor in an equity REIT may receive a current dividend, part of which may be tax-deferred.
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Part of the dividend paid by a REIT may represent “return of capital.” This can occur when the dividends per share exceeds earnings per share.
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What are some important lease provisions of which investors should be aware when analyzing the financial statements of REITs?
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When analyzing the financial statements of REITs, investors should consider the effect of lease provisions such as provisions for tenant improvements and free rents, leasing commissions and lease guarantees. The accounting treatment of these provisions can affect the reported FFO for one REIT versus another REIT.
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What is a mortgage REIT?
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A mortgage REIT is a REIT that primarily invests in mortgages rather than equity ownership.
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a monthly index based on ending market prices for shares owned by REIT investors
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REIT share price index
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are voluntarily contributed and based on the performance of properties managed by members of the national council of real estate investment fiduciaries (NCREIF)
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NCREIF index
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the most fundamental unit of measure used by portfolio managers to measure investment returns for individual securities, or a class of securities in a portfolio
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holding period return (HPR)
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HPR=
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Pt-Pt-1 + Dt/Pt-1
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are simple averages and are widely used in statistical studies spanning very long periods of time
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arithmetic mean returns
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the standard deviation of returns divided by the mean return
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coefficient of variation
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