REITrag ~ April 16, 2023

~ debut posting: I write on REITs, right here ~ announcing a new monthly publication

---

Welcome from Mark Kolke, Publisher

What are REITs for, who invests in them, why are they sound, and why are they not good - what risks do they present, and what opportunities and upsides do they offer in their own right, or compared to other forms of investing in real estate?

DISCLAIMER - NOTICE TO READERS:

Everything contained on this page and subsequent postings in R.E.I.T. rag is intended for information of our readers and sholld not be interpreted as investment advise in form. Information is, where noted, the author’s opinion, and data reported in monthly updates, breaking-news publications or anything else we publish under these headings is based on publicly disclosed and published information by issueing REIT companies and their brokers, advisors, publicists etc. We will, from time to time, publish commentary on already publicly circulated information and news stories about REITs generally and about individual REITs based on publicly distributed disclosures issued by REITs. Also, when we report on legal proceedings before courts, we will endeavour to provide ‘best source’ information, and when there is doubt (i.e., disclosured by REIT’s, lawyers, and media which are in conflict) we we endevour to present both/all sides of the story, or simply state ‘there is a story’ but due to conflicting accounts we cannot verify enough information to publish it in R.E.I.T. rag at this time … or words to that effect.

---

Readers should know I’m neither a lawyer nor an accountant - and definitely not a seller. The author/publisher of R.E.I.T. rag has no interest or investment of any REITs discussed in this publication (initial information on this page may be edited from time to time with additions and corrections).

- I am a reasonably well-informed observer, no more, no less. - Mark Kolke

What’s the magic of investing in a REIT?

• investors benefit from being small players - participants in the form of funds, deployed across many assets, and often across different asset types, and across jurisdictions (it gets tricky to follow sometimes, i.e. a Canadian domiciled REIT invests in US real estate or European assets - so the terminology and tax rules are literally ‘all over the map’), the protections investors see, are primarily:

  • A declaration of trust and/or prospectus sets out the boundaries and limitations of asset types and accountabilities (for instance, most REITs are not allowed to do new developments in the REIT entity [though some have related entities for development, and they sell completed assets into the REIT] so that the cash-flowing assets provide a more stable base for investors

---

Those are easy questions to answer very generally from the ‘30,000 ft. view’ but not so simple to explain because so many REITs are so different.

In the early days, a REIT might have a mixed bag of assets because the REIT was created via someone or some company selling a portfolio of assets into a newly formed REIT, or a single asset type when a shopping centre company sold its holdings into a Retail REIT, an industrial landlord sold a portfolio into a single-purpose REIT, and so on.

Over the history of REITS, the variety is now across every asset class of commercial and investment real estate, the common denominator being twofold: income-producing real estate and a ‘tax exempt’ structure, which doesn’t mean the income is free of income tax - but the income flows through the REIT to the unitholders - and those unitholders each report income and pay taxes (if applicable) on that income.

Capital gains and sales/losses on assets acquired and sold by REITs vary widely, so the answers are in two places for each REIT - in its Trust Declaration and/or Prospectus and the fine print footnotes of their financial statements. And, considering most REITs are public entities, that information is available to the Unitholders, the investment marketplace, prospective investors and the media ~ in much the same as the publicly traded shares of corporations are required to report and disclose information.

---

R.E.I.T.rag - is a new publication aimed at providing general information REITs, their history, their trends, and accurately produced periodic reports of information about specifice REITS whereby we have reliable information to curate and re-publish and/or produce partial details together with links on the websites of REITs themselves or other reliable sources.

---

Background of REITs generally …

Background on real estate investment trusts (REITs), or as we’ll refer to them, most often, REITs came onto the real estate landscape more than thirty years ago.

While some early ones were set up via an IPO (initial public offering), most REITs began when a simultaneous transaction occurred - someone with a portfolio of assets acted as a vendor (often with a related company as asset manager/property manager/REIT administrator too) and they sold those assets into a REIT corporation at or about the same time the floated a public issue of units (not shares), established a Board of Trustees (not directors) - all correctly done via stock exchanges, securities regulators in jurisdictions.

While pension funds were not initial primary targets for REITs as an investment vehicle, they were for individuals investing their after-tax funds or their pre-tax retirement account funds (self-directed RRSPs in Canada, self-directed IRAs in the United States).

---

Fast-forward a few decades; there became a wave, dare I say a flood, of interest in REITs for a variety of reasons.

Readers should know I’m neither a lawyer, accountant, REIT seller, or promoter. Still, as a real industry professional, I’ve seen this fledgling industry mature from what I would describe as ‘clever people monetizing, de-risking and/or exiting a portfolio of assets for more than they would realize by selling them’ and leveraging a market reality that soon evolved from the theory. If good people manage good real estate, the REIT structure allows a flow-through of all the net income to the unitholders of the REIT. The tax status varies with jurisdictions, but mostly what we’ve seen in significant assets and small, large REITs and small ones too has been: