A recent Wall Street Journal article highlights the strong recent performance of the real estate investment trust market (link). The article is timely for CMC as members will have the opportunity to learn more about REIT investing during the Spring semester.
First a quick definition from a Barclay’s primer, REITs 101: An Introduction (available in the Research Readings section of the website):
A Real Estate Investment Trust (REIT) is essentially a corporate entity that owns, operates, acquires, develops, and manages real estate assets. However, REITs are differentiated from other corporate forms by a tax election that eliminates taxes at the corporate level. Most of the company’s taxable income is passed along to investors in the form of dividends; shareholders subsequently pay taxes on those dividends. Conceptually, a REIT can be viewed much like a mutual fund in that it allows investors to pool capital and invest in a larger, more diversified real estate portfolio. Both REITs, and mutual funds, are essentially pass-through vehicles, passing the cash flow from that portfolio to investors. Like a mutual fund, the original REIT structure created in the 1960s was a passive investment vehicle; it prohibited the operation and management of properties by the REIT itself. Over the years, however, legislative and tax code changes have enabled REITs to become actively managed, fully integrated operating companies.
Given member interest, Tim Pire, the Director of UW AREIT program agreed to give a talk on REIT investing as one of our training sessions this semester and mentor students interested in pitching REIT ideas to the club. A graduate of UW’s highly regarded Real Estate Program, Mr. Pire has extensive experience as a REIT analyst and portfolio manager. Look for more information about this session and in the meantime, if you are interested in learning more about REITs, check out the REIT primer here.