For Diversified Asset Exposure

Real Estate Investment Trusts: An Open End Investment Solution

Real estate investment trusts (REITs) strive to achieve a balance between ongoing cash flow and property appreciation. REITs pool capital from multiple investors to acquire and manage income-generating commercial properties, making large-scale real estate easier to access while diversifying investment portfolios.

Non-Correlated Solutions for Investment Portfolios

Private real estate has historically demonstrated low correlation with publicly traded equities and fixed-income securities.
Incorporating non-correlated, low or negatively correlated assets can mitigate overall portfolio risk, particularly during periods of market volatility.
Non-correlated investments exhibit limited alignment with broader equity market movements, contributing to enhanced portfolio stability.
Allocating to private real estate within a diversified investment portfolio can help balance risk exposure and reinforce structural stability.

	Private Real Estate	Public Real Estate	S&P 500	Investment Grade Bonds	Municipal Bonds
Private Real Estate	1.0
Public Real Estate	0.2	1.0
S&P 500	(0.0)	0.6	1.0
Investment Grade Bonds	(0.1)	0.3	(0.0)	1.0
Municipal Bonds	(0.2)	0.5	0.2	0.8	1.0

REITs: A Foundation of Trust

A REIT is a company that owns, operates, or finances a portfolio of real estate properties. Subject to certain suitability standards, any investor can purchase shares of a REIT. Shares of a REIT can allow individual investors to indirectly own professionally managed, income-producing properties, typically earning a share of the income produced by the portfolio of properties through distributions or dividends.

Potential Benefits of REIT Allocations

There are approximately 170 million Americans invested in REITs through retirement savings plans and other investment funds with REITs owning more than 580,000 real estate assets across the U.S.¹

1 https://www.reit.com/

Inflation Hedge

Acquiring income-producing properties with the potential to increase rents gives investors a unique opportunity to keep up with inflation and participate in potential capital appreciation.

Tax Advantages

Structured as pass-through entities, REITs eliminate “double taxation” (taxation at both the corporate and stockholder level) if it distributes at least 90% of taxable income to its stockholders each year.

Diversification

REIT can be diversified by property type, location, tenant and/or lease term which can help smooth portfolio risk.

Passive Investing

REIT investors own interests in income-producing properties without the burden of management responsibilities.

Transparency

Traded and publicly registered non-listed REITs are required to file financial reports with the United States Securities and Exchange Commission (SEC).

REITs Offer Tax Relief

Investing in REITs not only offers exposure to income-generating real estate, but it also comes with a range of tax advantages that can enhance overall returns.

No Corporate-Level Tax

As long as a REIT distributes at least 90% of its taxable income to shareholders, it qualifies as a pass-through entity and avoids paying federal corporate income tax on those earnings. Some states also exempt REITs from state-level corporate taxes.

More Income Passed to Investors

Because REITs do not pay taxes on the income they distribute, more income goes directly to shareholders in the form of dividends. This can maximize the amount of income investors receive compared to traditional corporations, where profits are taxed at both the corporate and individual levels.

Lower Effective Tax Rate

Investors may also benefit from tax deductions like the Qualified Business Income (QBI) deduction, which allows up to 20% of REIT dividends to be deducted from taxable income, further reducing the effective tax rate.

Featured Resource

The Power of Preferential Tax Treatment in REIT Investments

This informative piece explains how REIT investors may receive preferential tax treatment on income distributions and includes a hypothetical example of how REITs compare to other investment vehicles on an after-tax yield basis.

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