08
REAL ESTATEc
DID YOU KNOW? REITs encounter risk when interest rates increase, leading to decreased demand for REITs. If interest rates are rising, investors generally will select safe-haven options like treasuries as they are government-guaranteed with most paying a fixed return. Consequently, when rates rise, REITs will be sold off and the bond market rallies as investment capital funds flow into bonds.
INTRODUCTION olds A Real Estate Investment Trust (or REIT) is a trust that holds om and manages real estate portfolios with pooled funds from investors. REITs construct property portfolios, and earn income on asset holdings through leasing, capex and development opportunities.c REITs offer investors a way to access investments in large commercial/property ot be investment opportunities which they would otherwise not able to access due to sheer scale required for such n investments. Typically, REITs tend to be more value than growth-oriented, as growth in the value of a REIT is tied to olio the underlying growth in the value of the property portfolio that the trust holds. REITs have an ability to pass taxdeferred income to investors: if all the trust’s income for the ay year is distributed to investors, the trust itself does not pay tax, so REITs will generally distribute all of their income to investors each year.c Within the REITs sector, there are specialist sub sector REITs which construct portfolios of real estate in particular industries, including commercial, retail and residential.
72
