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Real Estate Investment Trusts (REITs) Industry Profile Excerpt
| SIC Codes: 6798 NAICS Codes: 52593, 52599 Page Length: 10-12 Last Quarterly Update: 12/22/2008 View Sample Industry Profile |
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The roughly 600 REIT companies in the US have combined annual revenue of $25 billion. Large companies include Equity Office Properties, Equity Residential Properties, Simon Property Group, and Vornado Realty Trust. Following strong consolidation, the industry has become highly concentrated at the top. The largest 50 REITs hold over 80 percent of the market. The larger REITs are publicly traded, but many smaller ones are privately held.
COMPETITIVE LANDSCAPE
The health of the economy drives demand for REITs as investment vehicles. Profitability depends on the value of the properties in the portfolio, which in turn highly depends on real estate vacancy rates. Large companies have advantages in deal-making, and economies of scale in marketing, computer and infrastructure investment, and operations. Smaller companies can compete by specializing not only in real estate type, but by geography, though geographic focus can increase risks.
PRODUCTS, OPERATIONS & TECHNOLOGY
REITs are corporations that derive most of their revenue from owning or managing real estate, or from mortgages secured by real estate. The value of all real estate owned by REITs is close to $500 billion. A company organized as a REIT under IRS regulations can avoid paying income taxes if it pays out at least 90 percent of its net income (excluding capital gains) as dividends to shareholders. The benefit of being a REIT is that corporate income isn't taxed; the disadvantage is that the company can't fund growth with retained earnings. ...
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