We will now take a look at how REITs are presented in the financials. In a typical equity REIT balance sheet, you will see two broad categories of operating assets, real estate holdings and co-investments. Real estate holdings are the revenue-generating assets where the REIT holds a controlling stake. Controlling stakes are generally defined as owning a 50% stake or greater in the assets. Sometimes, however, a controlling stake in a building is not available, especially if the building has been owned by many different partners. There are also instances where a REIT will co-own a building or property with another REIT or ownership entity. In those cases, the ownership stakes will be non-controlling, or less than 50%. These assets are still considered to be operating in nature and generate operating earnings, but the accounting and modeling treatment is slightly different, as we will see. In addition, REITs will have traditional asset categories, such as accounts receivables, prepaid assets, and property plant and equipment as well, which are generally the property plant and equipment that the REIT uses to run its business. REITs are capital-intensive and require significant leverage to operate. You will often see many types of debt appearing on a REIT balance sheet. Unsecured debt are loans not secured by real estate but rather by cash flow. Mortgage notes are backed by the buildings or properties themselves. Accounts payable and other liabilities are traditional liability categories. Construction notes payable are the short-term obligations to fund ongoing construction and renovation. Distributions payable are dividends declared but not yet paid. REITs can have two kinds of NCI. The redeemable NCI represents the put options that the property contributors hold which can be exercised at any time. Those options require a REIT to buy in cash the shares in the operating company which a property holder owns. The second NCI is the ownership interest in a building that the REIT has a controlling stake but not 100% ownership. Although 100% of the building is shown in the REIT's consolidated financials, it must account for the percentage not owned which is shown as a non-controlling stake. The common stock and APIC are the equity funding at book value, just like a traditional corporation. The distribution in excess are the retained earnings of the corporation. But as we know, REITs retain very little of their earnings so they can avoid taxes. Therefore, it is very common in a REIT to see distribution in excess of earnings, or retained earnings, as a negative. The cash flow statement works very similarly to a traditional corporate. The operating section is primarily concerned with reconciling the net income to cash by unwinding some of the non-cash expenses like depreciation, gains on losses of asset sales which are very common in REITs, and adjusting for the income or loss that is attributable to the NCI shareholders. Again, this is a portion of the revenue from a building that the REIT controls but does not own 100% stake. It also adjusts for accrual accounting items like the changes in operating assets and liabilities. The investing section is much more detailed and robust due to the asset-intensive nature of real estate companies. We have expenditures for new buildings to develop or renovate existing buildings, as well as traditional CapEx which is primarily maintenance in nature. In the financing cash flows, we see that REITs require a lot of funding and are typically always raising and repaying debt, as well as raising equity when needed. We can also track the dividends paid out in cash to existing shareholders, as well as the dividends paid to the non-controlling interests.