NAREIT: Understanding Real Estate Investment Trusts (REITs)

The National Association of Real Estate Investment Trusts – more commonly known as NAREIT – acts as the voice for equity and mortgage REITs, REITs traded on all major stock exchangesStock ExchangeA stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold. Stock exchanges allow companies to raise capital and investors to make informed decisions using real-time price information. Exchanges can be a physical location or an electronic trading platform., as well as non-listed and private REITs. NAREIT’s primary focus is to act as a representative for trusts in both real estate and capital markets.

Additionally, NAREIT seeks to offer its information and assistance to countries worldwide that are interested in introducing REITs. NAREIT is recognized around the world as the authority on REITs and the REIT industry.

To be as effective as possible, NAREIT advocates heavily for REIT-based investing – working with policymakers, investors, and the global investment community as a whole. The group’s ultimate goal is to help individuals, companies, and organizations earn income through real estate investments.

Summary

• The National Association of Real Estate Investment Trusts (NAREIT) acts as an advocate, promoter, and representative for REITs – working with individuals and organizations that work in the real estate industry or who are seeking to invest in the industry.
• NAREIT was formed in 1960 and was initially incorporated as the National Association of Real Estate.
• NAREIT is focused on helping promote the earning of income from real estate investments.

What is a REIT?

A REIT – real estate investment trust – is actually a company. The company is required to meet various requirements to qualify and earn the REIT status. All REITs must either operate, own, or provide financing to real estate that produces some form of income.

REIT investors gain significant opportunities. They can eventually own an equity interest in lucrative pieces of real estate and earn access to total returns and income based on dividends. REITs afford anyone the chance to invest in portfolios focused on real estate assets. Investors can do it through mutual funds, exchange-traded funds (ETFs)Exchange Traded Fund (ETF)An Exchange Traded Fund (ETF) is a popular investment vehicle where portfolios can be more flexible and diversified across a broad range of all the available asset classes. Learn about various types of ETFs by reading this guide., or simply through the purchase of a REIT stock.

Once invested in a REIT, investors earn a portion of all income generated by the real estate investments that the REIT holds. Investors get to participate without actually purchasing any properties, managing them, or financing them in any way.

REITs are historically good investments. Because they provide notably high dividend income – which comes in on a regular basis – and long-term capital appreciation, they offer total returns that are competitive with other investments. They are also excellent at diversifying portfolios because they are not closely correlated to other assets.

By diversifying a portfolio, they help reduce a portfolio’s overall risk. To date, nearly 87 million individuals in the United States have invested in REITs, typically through their 401(k) plans401(k) PlanThe 401(k) plan is a retirement savings plan that enables employees to save a portion of their salary before taxes throguh contributing to a retirement fund.

History and Composition of NAREIT

NAREIT was formed in 1960 after former U.S. President Dwight Eisenhower signed legislation that allowed for a different approach to earning income from real estate investments. The organization was initially incorporated as the National Association of Real Estate, later evolving into the organization that it is today.

NAREIT is more similar to a community, composed of individuals and companies that work together to promote the real estate industry as a whole, with a specific focus on investment in properties that generate income. It includes academics, individual investors, real estate agentsCommercial Real Estate BrokerA commercial real estate broker is a middleman between sellers and buyers of commercial real estate, helping clients sell, lease, or purchase them., and organizations. NAREIT acts as a representative for some 200 member organizations, which collaborate to further the popularity, reach, and effectiveness of REITs.

NAREIT also works with several foreign bodies to further its political reach and efficacy in terms of REIT promotion. The most notable partnerships include the one with the British FTSE Group and the European Public Real Estate Association (EPRA). The trio’s partnership established the FTSE EPRA/NAREIT Global Real Estate Index Series, a system that offers investors highlights of basic trends in potentially lucrative real estate equities around the globe.

Real Estate Sustainability Council

NAREIT created the Real Estate Sustainability Council (RESC) in October 2016. The subcommittee of the association was formed to increase focus on the promotion of environmental, social, and governance (ESG) best practices when it comes to investing in the real estate industry.

The RESC is currently comprised of 50 active corporate NAREIT members whose organizations are focused specifically on sustainability when it comes to REITs.

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