Commercial Real Estate Vehicles

Real Estate Investment Trusts (REITs)

• Publicly traded entities that pool investor capital to own and manage income-producing properties.
• Their purpose was to help retail/small investors and ordinary people to invest in real estate.
• Offer liquidity (shares trade like stocks), diversification, and steady dividends from rental income.
• Types: Equity REITs (own properties), Mortgage REITs (invest in loans), Hybrid REITs (mix of both).

Restriction on REITs

• 75% of assets must be in real estate or cash
• 75% of income must be from real estate
• 95% of their income must be from real estate, dividend, interest and capital gains
• 95% of income must be paid out
• No more than 30% of income from sale of properties held less than 4 years
  • this prevents regular businesses from being REITs

Private Real Estate Funds

• Typically structured as private equity vehicles.
• Focus on acquiring, developing, or repositioning properties.
• Higher minimum investment, less liquidity, but potential for higher returns.
• Often used by institutional investors (pension funds, endowments).

Commercial Mortgage-Backed Securities (CMBS)

• Bonds backed by pools of commercial property loans.
• Provide exposure to real estate debt rather than equity.