THE IMPACT OF NEW TECHNOLOGIES ON SPACE, OPERATIONS AND REVENUES
2. REIT Industry
Congress created REITs in 1960 to enable small investors to make investments in large- scale, income-producing real estate, similar to that of a mutual fund. REITs allow investors to investment in significant commercial properties through pooling arrangements and securitization. Congress designed REITs to pool capital from many investors into a single entity. This entity is organized to develop and manage income streams through commercial real estate ownership and finance (NAREIT). REITs are dedicated to owning and operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. REITs are also engaged in financing real estate. To be a REIT a company is legally required to pay virtually all of its taxable income (95 percent) to its shareholders every year, have at least 100 investors, generate over 70% of its revenues from rent and not sell properties within 4 years of purchase. The main benefit to REITs is one level of taxation (corporate); therefore, more income is paid out as dividends, increasing dividend yields, and making the stocks attractive to income oriented investors. For REITs to grow, capital must be raised in the equity and debt markets as well as money generated internally. REITs are carefully watched by institutional and individual investors and the SEC. REITs have independent directors, independent auditors, and are monitored closely by the business and financial media.
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