FAQs

Glossary

How to Invest

Links to REITs

Q. What is a REIT?
A. A real estate investment trust (REIT) is an entity that:

• combines the capital of many investors to, among other things, acquire or invest in commercial real estate;
• allows individual investors to invest in a real estate portfolio under professional management through the purchase of interests, typically shares;
• must pay distributions to its stockholders equal to at least ninety percent (90.0%) of its “REIT” taxable income;
• is not typically subject to federal corporate income taxes, thus eliminating the double taxation (both corporate and stockholder level taxes) generally applicable to a corporation.

Q. Why Should I Invest in REITs?
A. REITs provide:

• Regular distributions and long-term, risk-adjusted returns to stockholders;
• Portfolio diversification with an investment that has low correlation to the returns of other market sectors;
• An investment in professionally managed real estate assets.

Q. What is the difference between a traded and non-traded REIT?
A. Traded REITs are registered with the Securities and Exchange Commission, and trade on a national stock exchange, such at the New York Stock Exchange. The non-traded REITs sponsored by Inland Real Estate Investment Corporation are also registered with the Securities and Exchange Commission; they are not traded on a national stock exchange. Investments in non-traded REITs can be made through a financial advisor who is licensed and able to sell non-traded REITs.

Q. How are REITs Managed?
A. The senior management and corporate officers that manage the day to day operations are highly skilled and trained professionals. They are responsible to manage the REIT in a manner that is fair and competitive, while managing costs and increasing income. They are accountable to the board of directors and the stockholders of the REIT. The interests of the senior management and officers of the company are aligned with the interests of the stockholders.

Q. How is Performance Measured in REITs?
A. Like other public companies, REITs use net income as defined under Generally Accepted Accounting Principles (GAAP) as the primary operating performance.
REITs also use Funds From Operations (FFO) as a measure of a REIT’s operating performance. The National Association of Real Estate Investment Trusts defines FFO as net income (computed in accordance with GAAP) excluding gains or losses from sales of most property and depreciation of real estate.

Q: Are distributions taxable?
A: Yes, distributions are considered ordinary income to the extent they come from current and accumulated earnings and profits. However, because depreciation expense reduces taxable income but does not reduce cash available for distribution, typically a portion of the distributions are considered a return of capital for tax purposes. These amounts are not subject to tax immediately but will instead reduce the tax basis of the investment, in effect deferring a portion of the tax until a stockholder sells their shares or the REIT is liquidated. Because each investor’s tax implications are different, stockholders should consult with their tax advisor.

Q: When is tax information distributed?
A: 1099 tax information is mailed to stockholders by January 31st of each year.

This is neither an offer to sell nor a solicitation of an offer to buy any security, which can be made only by a prospectus which has been filed or registered with appropriate state and federal regulatory agencies and sold only by broker/dealers authorized to do so.