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What is a REIT?

REITs are a form of security that trades like stock, yet gives the investor the advantage of participating in multi-million square foot commercial real estate projects.

Congress created REITs in 1960 to give average investors the opportunity to invest in commercial property developments far larger than their own net worth or experience might otherwise allow them to, such as apartment complexes, big box shopping centers, office complexes and other commercial projects. Most REITs specialize in a specific product whether it's multi-tenant industrial complexes, office buildings or high rise apartment buildings and planned communities

The advantages in REIT investing are that Income from rents is passed through to shareholders; As the real estate values rise, so may the REIT and its share price; long-term lease agreements tend to offer REITs predictable income streams; REITs are easy to get into and easy to get out of, compared with the ownership of property as a partnership or individual.

However, because most REITs focus on particular types of commercial development, theycan be vulnerable to downturns in particular sectors of the real estate market, such as a ,""flat,"" office leasing market. If the REIT is located in one area, they REIT is vulnerable to a regional economic downturn. Some of the other drawbacks of REITs are emotional. There isn't the pride of ownership that a singular Landlord or partnership gains from owning property and REIT stockholders don't have the opportunity to determine the future of the project, so active entrepenurial types may be less interested in a REIT. But, as a small portion of an investment portfolio, they can offer higher returns on investment than other investments because they are inherently riskier than something such as a bond

"
"Tuesday, September 06, 2005","Where is the commercial real estate market going?","Where is the commercial real estate market going? Not just New Haven, but all of Connecticut

Connecticut declared its recovery from the recession, but at the same time lagged behind the other 49 states in jobs creation. Everyone in the state, from the utility companies to town economic developers, is working nearly tirelessly to bring employers into the state and keep existing employers in state. Retailers hear the call. Towns such as Hamden, Branford, Danbury, Milford continue to grow their retail sectors. Manufacturers, however, are not as easily wooed. But distributors are. Whole Foods is building a large distribution center in Cheshire to serve the Northeast as the grocery chain expands through Connecticut and its surrounding market area.

While the retail section of the commercial market is going stong and the service end of the market: electricians, contractors, plumbers...seem to be busier than ever, where is the commercial real estate market headed in our state?

November 30, 1999


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