REIT Sectors

REIT Sectors include: Industrial, Office, Retail, & Debt. The Retail sector has a variety of sub-sectors that include: Regional Malls, Shopping centers, Free standing, Residential, Mortgage, Diversified, Hotel, Healthcare, Self-storage, & Specialty. While not a REIT, a Business Development Corporation shares many of the same structural characteristics and we have included BDC investment opportunities on our platform.

Retail Sub-Sectors

We have included a brief summary of the various sub-sectors (that relate to our investment offerings).

Healthcare

Healthcare REITs are real estate investment trusts that own health care properties. Like all REITs, Healthcare REITs are required to pay out 90% of their taxable income in dividends.

Healthcare REITs typically own the following four types of properties:

  • Senior Housing: These include both assisted living and independent living communities for seniors, which provide access to health care on the premises.
  • Hospitals: Many health care REITs operate acute care hospitals, which cater to the elderly and patients that require long term, continuing care.
  • Skilled Nursing Facilities: These facilities provide long term care, primarily for elderly patients that do not require the extra services of an acute care hospital.

Medical Office Buildings: These properties lease office space directly to physicians and hospitals.

Grocery Centers

The Retail grocery-anchored shopping center REITs generally have two types of tenants, “Anchors” and “Inline Tenants.” Anchors are large name brand grocery stores that take up a large share of space and draw customers to the retail shopping center. These grocery-anchor stores sell consumer staples, which are a necessity despite the economic cycle. Anchor stores typically pay lower rents than inline tenants, and sign longer term leases. Inline tenants are smaller tenants who pay higher rental rates and sign shorter leases, and these stores benefit from the foot traffic anchor tenants bring to a retail center and account for the majority of rents at a retail center.

Free Standing

Free standing REITs are single tenant commercial properties that are often net leased, long-term, to preferably credit-rated investment grade tenants and to other creditworthy businesses. An example would be Walgreens, CVS pharmacy, or a bank branch.

Residential

Residential REITs most commonly own Apartment buildings, or the more marketable term, “multi-family” buildings. They make money by renting apartments, which they own and manage. The market for multi-family housing is highly fragmented, and the top 7 publicly traded REITs account for less than 4% of the overall share. Apartment REITs compete for tenants not only with other apartment operators, but they also compete on the relative attractiveness of owning a home versus renting an apartment.

Office

Office REITs are Real estate investment trusts that own and operate office properties. Office REITs earn revenue by leasing those properties to office tenants. Many office REITs also operate office buildings owned by third parties, for which they receive a percentage of the buildings’ rents called a management fee. Like all REITs, office REITs are required to pay out 90% of their taxable income in dividends. Office space is generally classified as one of the following three grades:

  • Class A Office Buildings: These are buildings with excellent location and access, in city centers or other very prestigious and desirable locations. The buildings are top quality and are managed by professionals. In practical terms, the buildings you see in the city centers of major metropolitan areas like New York, San Francisco or Washington D.C. with large, expensive lobby’s and lots of brass and glass fixtures are class A office buildings.
  • Class B Office Buildings: These are buildings with good locations, either just outside the city center or in desirable suburban markets. They are usually older, wood framed office buildings with no functional obsolescence or former Class A office buildings that due to age and wear can no longer command the same rents. Class B office usually also lack covered parking. Wood framed office buildings are usually three stories or less.
  • Class C Office Buildings: Class C office buildings are typically 15-25 year old buildings that continue to maintain steady occupancy. They are primarily located in areas outside a city’s central business district or in less desirable suburban markets. Many Class C office buildings are not actually dedicated office buildings, but spaces above retail stores or service businesses the owner has converted into office space.

Debt & Financing

Debt: A Debt REIT originates loans, invests in and manages a diversified portfolio of commercial real estate debt. When traditional lending sources are unable to make loans or they must restrict their debt to equity ratios, alternative lending becomes an option for many businesses.

Business Development Corporation: In 1980, the U.S. Congress created a class of corporation called a business development company (BDC) to encourage the flow of public equity capital to private businesses. BDCs make loans to small and mid-sized companies. To qualify, a BDC must invest at least 70% of its assets in private or thinly traded, public U.S. corporations, and must distribute at least 90% of its taxable income to shareholders in the form of dividends. They frequently take ownership positions (equity interest) in their client companies.

Offerings may Include:

Industrial, Office, Retail, & Debt. The Retail sector has a variety of sub-sectors that include: Regional Malls, Shopping centers, Free standing, Residential, Mortgage, Diversified, Hotel, Healthcare, Self-storage, & Specialty. While not a REIT, a Business Development Corporation shares many of the same structural characteristics and we have included BDC investment opportunities on our platform.  Private Placements offer access to a variety of private and direct opportunities (businesses, natural resources, and more).