20(a) Provide the name and full description of the community that the applicant is committing to serve
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|.REIT||National Association of Real Estate Investment Trusts, Inc.||nareit.com||View|
The applicant, the National Association of Real Estate Investment Trusts® (NAREIT), is committing to serve the community of real estate investment trusts (REITs) around the world. REITs (pronounced “reets”) are companies that own, operate and finance commercial and residential real estate and play an important role in all facets of the real estate economy. NAREIT is the worldwide representative voice for REITs and listed real estate companies with an interest in U.S. real estate and capital markets, and its members primarily are REITs and other real estate businesses throughout the world.
Today, REITs operate in more than twenty developed and developing countries around the world. Viewing the world’s major economies through the prism of the Group of Twenty Finance Ministers and Central Bank Governors (G-20), 12 of the 19 member countries now embrace REITs through local laws, with several more, including China and India, expected to do so in coming years.
REITs worldwide have a large and growing footprint. The industry-leading global benchmark for listed REITs and real estate investment is the FTSE EPRA⁄NAREIT Global Real Estate Index, which is produced and managed by FTSE Group in partnership with NAREIT and the European Public Real Estate Association (EPRA). The index includes 391 listed REITs and real estate companies in 38 developed and emerging countries with a total equity market capitalization of $940 billion. Of these totals, REITs account for 67 percent of the equity market capitalization of the index, while non-REIT real estate companies account for the remaining 33 percent.
In the United States, REITs today are an appreciable segment of the commercial real estate marketplace. At the end of 2011, 273 REITs were registered in the United States with the Securities and Exchange Commission, with 176 listed on established United States stock exchanges (predominantly the New York Stock Exchange). Listed REITs in the U.S. have an equity market capitalization of more than $500 billion.
REITs in the U.S. own approximately 40,000 properties in all fifty states with a book value of about $800 billion comprising roughly 15-20 percent of all investment-grade commercial real estate. Properties include all types of commercial real estate, including, among others, retail, office, multifamily, health care, lodging, timber, industrial, self-storage and infrastructure.
REITs were first created by an act of the U.S. Congress in 1960 for the purpose of democratizing the ownership of large-scale, income-producing commercial real estate. Until REITs were created, typically only large institutional investors or wealthy individuals could afford to own such properties.
What the U.S Congress understood in 1960 and has endorsed through its consistent support for, and amendment of, the laws governing REITs for over 50 years is that, without such a model for commercial real estate investment, it would be far more problematic to make three key benefits of real estate investment available to individual investors from all walks of life: 1) dependable income; 2) long-term capital appreciation; and, 3) investment diversification.
Investment-grade, income-producing commercial real estate is one of a number of widely recognized and distinct core investment asset classes, which include, among others, equities, bonds, real estate, commodities and cash. As such, commercial real estate investment through REITs is a widely followed and researched component of a well-diversified, long-term investment portfolio of publicly traded securities.
Until REITs were created, only large institutional investors and very wealthy individuals could reap the economic benefits of commercial real estate investment, which they did by directly buying properties and leasing space in those properties to their tenants. REITs, however, offer all investors the opportunity to gain the same economic advantages by investing in the equities of these companies. By offering the opportunity to invest in real estate in securitized form, REITs have democratized this key asset class, providing access to all investors. Equity investment channeled into commercial real estate through REITs also fuels economic growth and provides the space a growing economy demands.
REITs worldwide are delineated from Internet users generally because they are, first, companies that own, operate and finance income-producing commercial real estate. Second, they are companies resident in nations that have adopted a REIT regime – a set of rules governing the operations of a REIT – and that are organized and operating under the requirements of that regime.
A REIT regime consists of four primary elements:
1) ownership must be widely held;
2) a majority of assets and income are real estate related;
3) a majority of income is distributed annually to shareholders (pursuant to applicable law; regulatory or stock exchange requirements or customs; or in order that its distributions be deductible from entity-level income tax); and,
4) there is only one level of tax on income distributed by the REIT.
This definition of a REIT is consistent with that of the Commentary on the OECD Model Tax Convention, which states: “A REIT may be loosely described as a widely held company, trust or contractual or fiduciary arrangement that derives its income primarily from long-term investment in immovable property, distributes most of that income annually and does not pay tax on that income related to the immoveable property that is so distributed.” See OECD, Tax Treaty Issues Related to REITs; Public Discussion Draft, available at www.oecd.org⁄dataoecd⁄23⁄44⁄39554788.pdf (Oct. 30, 2007).
As a supplemental delineation, REITs may be identified as companies that are classified as REIT constituents of well-established investment benchmarks of publicly traded real estate companies (such as the FTSE NAREIT All U.S. REIT Index; the Dow Jones Composite All REIT Index; MSCI US REIT Index; or the FTSE EPRA⁄NAREIT Global REIT Index, Dow Jones Global Select REIT Index, Wilshire Global REIT Index, S&P Global REIT Index).
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