A Real Estate
Investment Trust (or REIT) is a tax designation for a
corporation investing in real estate that reduces or eliminates corporate
income taxes. In return, REITs are required to distribute 90% of their
income, which may be taxable in the hands of the investors. The REIT
structure was designed to provide a similar structure for investment in real
estate as mutual funds provide for investment in stocks. Like other
corporations, REITs can be publicly or privately held. Public REITs may be
listed on public stock exchanges like shares of common stock in other firms.
REITs can be classified as equity, mortgage or hybrid. The key statistics to
look at in REIT are its NAV (Net Asset Value), AFFO (Adjusted Funds From
Operations) and CAD (Cash Available for Distribution).
The legislation laying out the rules for REITs in the United Kingdom was
enacted in the Finance Act 2006 and came into effect in January 2007 when
nine UK property companies converted to REIT status, including the five that
were FTSE 100 members at that time: British Land, Hammerson, Land
Securities, Liberty International and Slough Estates (now known as "SEGRO").
The other four were: Brixton, Great Portland Estates, Primary Health and
British REITS have to distribute 90% of their income. They must be a
close-ended investment trust and be UK resident and publicly listed on a
stock exchange recognised by the Financial Services Authority.
To support the introduction of REITs in the UK, the REITs and Quoted
Property Group was created by several commercial property and financial
services companies. Other key bodies involved are the London Stock Exchange
and the British Property Federation. The Reita campaign was launched on 16
August 2006 by the REITs and Quoted Property Group, in order to provide a
source of information on REITs, quoted property and related investments
funds. Reita's aim is to raise awareness and understanding of REITs and
investment in quoted property companies. It does this primarily through its
portal www.reita.org, providing knowledge, education and tools for financial
advisers and investors.