REIT (real estate investment trust)

A REIT owns property such as offices, warehouses, shops, flats or data centres, or lends against it, and usually lists its shares on a stock exchange. Countries with a REIT regime, including the US, the UK and many European and Asian markets, largely exempt the REIT from corporate tax on its qualifying rental profits. In exchange, it must meet conditions, the central one being that it distributes most of those profits each year, commonly at least 90%. Shareholders are then taxed on what they receive, often as ordinary income rather than at dividend rates.

REITs let investors own a slice of large property portfolios with the liquidity of a listed share and without the work of being a landlord. But a listed REIT behaves partly like any other share: its price moves with the stock market day to day and can fall well below the value of its buildings in a downturn. Because REITs typically borrow and pay out most of their income, they tend to be sensitive to interest rates. A high yield is not a guarantee, since payouts fall when rents or occupancy do.