Understanding real estate investment trusts. Real estate investment trusts, also known as REITs, are corporations that own, acquire, and develop real estate assets. The corporation is specifically structured for tax purposes in what is known as a pass-through entity. There are three classes of REITs: public, those whose ownership shares trade on public exchanges; non-public, those whose shares do not trade on public exchanges but who can seek additional investment from other accredited investors in a sort of private placement manner; and private, those whose shares are privately held and privately owned and do not trade on a public exchange. There are about 1100 REITs in the US, although only 225 or so are publicly traded. There are over 600 non-US or global REITs with particularly large markets in Canada, Japan, the UK, Australia, Singapore, and India. As REITs operate all over the world, there are different tax laws that must be followed to maintain reclassification, but in general, the major classifications are: REITs are required to distribute to shareholders 75 to 100% of net profits. In the US, that's set at 90%. At least 75% of total REIT assets must be held in real estate, mortgage loans, and/or shares of other REITs. At least 75% of gross income must come from rental properties or investments in real estate. There is a minimum number of shareholders required, in the US, it's 100, and no more than 50% of the shares can be owned by five or fewer investors. And REITs must be managed by trustees or board of directors. There are two types of REITs: Mortgage REITs or debt REITs, which provide financing for income-producing real estate and profit from the interest. And then there are equity REITs, which invest in income-producing real estate. Mortgage REITs are better viewed as trading vehicles given their sensitivities to interest rate changes. Most of the discussion in this course will focus on equity REITs. REITs are then broken down into sectors and many REITs specialize in one sector or another. Although many do diversify in many sectors. Each sector of REITs has its own trends and its own drivers which make analyzing REITs complex and often very specialized.