Real Estate Investment Trust Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Real Estate Investment Trust, written in plain English, along with examples of how it is used.
What is Real Estate Investment Trust?
(n) A ‘Real Estate Investment Trust’ is a trust formed with an objective of investing in real estates by joining the individual investors who either gets percentage of interest in the property or benefit from the profit of the trust.
History and Meaning of Real Estate Investment Trust
Real Estate Investment Trust (REIT) is a form of collective investment scheme that enables investors to invest in income-generating real estate properties. REITs were first introduced in the United States in the 1960s by the U.S. Congress with the intention of making investment in real estate accessible to individual investors who may not have large amounts of capital required to directly purchase commercial properties. To qualify for the tax benefits of being a REIT, a trust must invest at least 75% of its total assets in real estate, derive at least 75% of its gross income from real estate, and distribute at least 90% of its taxable income to shareholders as dividends.
Examples of Real Estate Investment Trust
- ABC REIT invests in and manages a portfolio of office buildings and retail centers across the United States. The trust's investors receive annual dividends based on the rental income generated by the properties.
- XYZ REIT specializes in investing in industrial warehouses and logistics centers in Europe. It is publicly traded on a major stock exchange.
- DEF REIT is a mortgage REIT that invests in and manages a portfolio of mortgage-backed securities. Its investors receive dividends based on the interest earned from borrowers who pay off their mortgage loans.
Legal Terms Similar to Real Estate Investment Trust
- Collective Investment Scheme - A pooled investment that enables investors to invest in a diversified portfolio of assets such as stocks, bonds, or real estate.
- Limited Partnership - A business structure that enables investors to participate in the profits and losses of a partnership but limits their liability for the partnership's debts.
- Equity Investment - An investment in which an investor purchases ownership in a company or property with the expectation of earning a return on the investment through appreciation or dividends.