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This term refers to a ratio by which to measure a company's financial strength (or weakness). The ratio is calculated by taking current assets less inventories, divided by current liabilities. This ratio provides information regarding the firm's liquidity and ability to meet its obligations.
Real Estate Investment Trust (REIT)
A REIT is a company dedicated to owning, and in most cases, operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. Some REITs also engage in financing real estate.
Real Estate Investment Trust Act of 1960
This term refers to the Federal law authorizing REITs. Its purpose was to allow small investors to pool their investments in real estate in order to get the same benefits as might be obtained by direct ownership, while also diversifying their risks and obtaining professional management.
Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on March 1, payable April 15 to holders of record March 31.
REIT Modernization Act of 1999
Federal tax law change allowing a REIT to own up to 100% of stock of a taxable REIT subsidiary providing services to REIT tenants and others. The law also changed the minimum distribution requirement from 95 percent to 90 percent of a REIT's taxable income -- consistent with the rules for REITs from 1960 to 1980.
The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period.
Return of Capital
The portion of a REIT’s distribution in excess of taxable income. For a tax-paying stockholder, a return of capital does not create taxable ordinary income but does reduce the stockholders’ tax basis.
Return on Assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage.
Return on Equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage.
Return on Investment (ROI)
Generally, book income as a proportion of net book value.
Return on Total Assets
The ratio of earnings available to common stockholders to total assets.
Sale and Lease-Back
Sale of an existing asset to a financial institution that then leases it back to the user.
Scheduled Cash Flows
The mortgage principal and interest payments due to be paid under the terms of the mortgage not including possible prepayments.
The Securities and Exchange Commission, the primary federal regulatory agency of the securities industry.
The market where securities are traded after they are initially offered in the primary market.
This term refers to a group of securities similar with respect to maturity, type, rating, industry.
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 was created to provide governance of securities transactions on the secondary market (after issue) and regulate the exchanges and broker-dealers in order to protect the investing public.
Securitization is the process of financing a pool of similar but unrelated financial assets (usually loans or other debt instruments) by issuing investors security interests representing claims against the cash flow and other economic benefits generated by the pool of assets.
This term refers to a program by which a corporation buys back its own shares in the open market.
This term refers to a company's total assets minus total liabilities.
This term refers to certificates or book entries representing ownership in a corporation or similar entity. There are generally two classes of shares; common shares and preferred shares.
Statement of Cash Flows
This term refers to a financial statement showing a firm's cash receipts and cash payments during a specified period.
Ownership of a corporation which is represented by shares. Each share represents a piece of the corporation's assets and earnings.
This term refers to payment of a dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
This term refers to a balance sheet item including the book value of ownership in the corporation. It includes capital stock, paid in surplus, and retained earnings.
Straight Line Depreciation
This term refers to an equal dollar amount of depreciation in each accounting period.
Real estate companies such as REITs "straight line" rents because generally accepted accounting principles require it. Straight lining averages the tenant's rent payments over the life of the lease.
This term refers to brokers, dealers, underwriters, and other knowledgeable members of the financial community; from Wall Street financial community.
This term describes securities held by a broker on behalf of a client but registered in the name of the Wall Street firm.
This refers to an asset whose value depends on particular physical properties. These include reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art.
Tax Reform Act of 1986
This term refers to a Federal law substantially altering the real estate investment landscape by permitting REITs not only to own, but also to operate and manage, most types of income-producing commercial properties. It also stopped real estate "tax shelters" attracting capital from investors based on the amount of losses created.
Total Debt to Equity Ratio
This term refers to a capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity.
Total Market Cap
This term refers to the total market value of a REIT's (or other company's) outstanding common stock and indebtedness.
This term refers to a stock's dividend income plus capital appreciation, before taxes and commissions.
This term refers to the time, effort, and money necessary, including such things as commission fees and the cost of physically moving the asset from seller to buyer.
This term refers to common stock repurchased by the company and held in the company's treasury.
A lease agreement designating the lessee (the tenant) as being solely responsible for all of the costs relating to the asset being leased in addition to the rent fee applied under the lease. The structure of this type of lease requires the lessee to pay for net real estate taxes on the leased asset, net building insurance and net common area maintenance. The lessee has to pay the net amount of three types of costs, which how this term got its name.
An Umbrella Partnership REIT (UPREIT), under IRC §721, provides tax deferral benefits to commercial property owners who contribute their property into a new tiered ownership structure including an operating partnership (OP) and the REIT who is a partner in the OP. In exchange for the commercial property contributed to the UPREIT, the investor receives units in the operating partnerships (OP Units). The capital gain taxes remain deferred as long as the UPREIT holds the property and the investor holds the OP Units. The advantage is this structure provides a viable exit strategy to commercial property owners who otherwise might have significant capital gain tax liabilities on the sale of appreciated property. In addition, the investor benefits from additional diversification because they have an interest in a portfolio of commercial properties instead of just one property. This structure is not appropriate for every investor as they must have property the REIT wants to add to their portfolio and typically this will be a larger commercial property.
The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.